## Reduction of Share Capital – Section 66
### Permissible Modes
A company limited by shares may reduce its share capital in any manner, and in particular by:
1. Extinguishing or reducing liability on any share capital not paid-up;
2. Paying off any paid-up share capital which is in excess of the wants of the company; or
3. Cancelling paid-up share capital which is lost or unrepresented by available assets.
### Conditions Precedent
1. Pass a Special Resolution in a general meeting;
2. Alter the MOA accordingly; and
3. No arrears in repayment of deposits accepted by the company or interest thereon.
### Procedure
1. Application to NCLT for confirmation of reduction.
2. NCLT issues notice of the application to:
- Central Government (powers delegated to the Regional Director);
- Registrar of Companies (ROC);
- SEBI (if listed company); and
- Creditors of the company.
3. NCLT considers their representations within 3 months of notice. If none received → presumed no objection.
4. NCLT may confirm the reduction on such terms it deems fit, if:
- Debts of creditors are discharged, determined, secured, or their consent obtained; and
- The proposed accounting treatment is in conformity with the Accounting Standards notified u/s 133 — a certificate from the company's auditor to this effect must be filed with NCLT.
5. NCLT's order must be published by the company as directed.
6. Within 30 days of receipt of the NCLT order, the company shall deliver to the ROC:
- A certified copy of the NCLT order; and
- Minutes containing the SR approved by NCLT.
7. ROC registers the same and issues a certificate to that effect.
### Important Notes
- Section 66 is not applicable to buy-back of securities under Section 68.
- Post-reduction liability of members: Maximum amount = difference between the amount paid-up and the nominal value of the reduced shares.
### Creditor Not Listed – Section 66(7)
If a creditor (entitled to object) was omitted from the list of creditors due to his ignorance of the proceedings or the nature of his interest, and the company defaults in payment:
| Scenario | Remedy Available |
|---|---|
| (a) Default by company | File application under Section 6 of IBC |
| (b) Company is running | Every person who was a member at registration of reduction is liable to contribute, but not exceeding the amount he would have been liable for if winding-up had commenced on the day before that day. |
| (c) Company is wound up | NCLT may settle the list of contributories and make and enforce calls as if they were ordinary contributories in winding up. |
### Punishment for Concealment
Any officer who knowingly conceals the name of a creditor entitled to object, or misrepresents the nature/amount of a debt, is liable under Section 447 (fraud).