A company limited by shares (or guarantee with share capital) may, subject to confirmation by the Tribunal, reduce its share capital in any manner including:
### (a) Extinguish or Reduce Liability on Shares
Extinguish or reduce liability on any of its shares in respect of share capital not paid-up.
### (b) Cancel Lost/Unrepresented Capital (With or Without Reducing Liability)
Cancel any paid-up share capital which is lost or unrepresented by available assets.
### (c) Pay Off Excess Capital (With or Without Reducing Liability)
Pay off any paid-up share capital (PUSC) which is in excess of the wants of the company.
## 2. Process of Reduction
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Step 1: Pass a Special Resolution (SR)
Step 2: Make application to Tribunal for confirmation
Step 3: Alter MOA by reducing the amount of share capital
Step 4: File order + minute with ROC
Step 5: ROC registers reduction and issues certificate
```
## 3. Pre-condition
No reduction is allowed if the company is in arrears in the repayment of deposits or interest thereon.
## 4. Tribunal Approval Process
### (a) Application
The company shall make an application to the Tribunal.
### (b) Tribunal Gives Notice To:
Central Government (CG)
Registrar of Companies (ROC)
Creditors
SEBI (if the company is listed)
These parties may make representation within 3 months. Failure to respond is presumed to be no objection.
### (c) Conditions for Tribunal's Order Confirming Reduction
The Tribunal shall make an order confirming reduction only when satisfied that:
1. Debt of every creditor has been:
Secured / Discharged / Consented to, AND
2. Accounting treatment proposed by the company complies with Section 133 (accounting standards). A certificate by the company's auditor to that effect must be filed with the Tribunal.
## 5. Filing with ROC
Within 30 days of the Tribunal's order, the company shall file a copy of the order and a minute approved by the Tribunal with the ROC.
The minute shall include:
Amount of share capital (e.g., Rs. 80,000)
Number of shares (e.g., 10,000)
Amount of each share (e.g., Rs. 8)
Amount deemed paid-up (e.g., Rs. 8)
ROC shall register such reduction and issue a certificate of registration.
## 6. Additional Notes
1. In case of buyback, Section 66 does not apply (separate code under Section 68).
2. Provisions of Section 66 also apply to reduction of Securities Premium Account (SPA) — treated as if SPA were PUSC.
Worked example
### Example 1
Example 1 — Excess Capital: A company has accumulated cash reserves and finds its PUSC is in excess of its needs. It wants to refund Rs. 5 per share on its 1,00,000 shares of Rs. 10 each. What route to follow?
Answer: This is a reduction under Section 66(1)(c) — pay off excess PUSC. Pass SR → apply to Tribunal → obtain confirmation order → file with ROC within 30 days.
### Example 2
Example 2 — Lost Capital: Company's balance sheet shows accumulated losses of Rs. 3,00,000 against PUSC of Rs. 10,00,000. It wants to write down its capital to reflect the lost portion. What kind of reduction is this?
Answer: Reduction under Section 66(1)(b) — cancellation of paid-up capital that is 'lost or unrepresented by available assets.' Procedure: SR + Tribunal approval + ROC filing.
### Example 3
Example 3 — Defaulting Company: A company has defaulted in repayment of public deposits. Can it reduce its share capital?
Answer: No. Section 66 specifically prohibits reduction if the company is in arrears in repayment of deposits or interest thereon.
⚠️ Common exam mistakes
Forgetting that Section 66 requires both Special Resolution AND Tribunal confirmation — passing SR alone is not enough.
Confusing reduction (Sec 66) with cancellation of unissued shares (Sec 61) — Sec 61(2) clarifies the latter is NOT a reduction.
Believing Section 66 applies to buyback — it does not; buyback is governed independently by Sections 68-70.
Forgetting that reduction of Securities Premium Account requires the same Section 66 process.
Missing the 3-month representation window for creditors/SEBI/CG/ROC.
Forgetting that an auditor's certificate confirming compliance with Section 133 must be filed with the Tribunal.
Missing the 30-day deadline for filing the Tribunal's order with the ROC.
Overlooking the bar on reduction when company is in arrears of deposits.
Bare-Act text Section 66 · Companies Act, 2013 · click to expand
(1) Subject to confirmation by the Tribunal on an application by the company, a company limited by shares or limited by guarantee and having a share capital may, by a special resolution, reduce the share capital in any manner and in particular, may — (a) extinguish or reduce the liability on any of its shares in respect of the share capital not paid-up; or (b) either with or without extinguishing or reducing liability on any of its shares — (i) cancel any paid-up share capital which is lost or is unrepresented by available assets; or (ii) pay off any paid-up share capital which is in excess of the wants of the company, alter its memorandum by reducing the amount of its share capital and of its shares accordingly: Provided that no such reduction shall be made if the company is in arrears in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon. (2) The Tribunal shall give notice of every application made to it under sub-section (1) to the Central Government, Registrar and to the SEBI, in the case of listed companies, and the creditors of the company and shall take into consideration the representations, if any, made to it by that Government, Registrar, the SEBI and the creditors within a period of three months from the date of receipt of the notice.