How can i red the share capital of my company?
To reduce your company’s share capital, a special resolution for reduction of the share capital will be passed by the Company at Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), after which an application will be made to a Federal High Court for confirmation of the reduction.
NOTE THAT every creditor of the company who at the date fixed by the court for the confirmation of the reduction is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction of capital.
The court shall settle a list of creditors entitled to object, and for that purpose;
(a) shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of the debts or claims;
(b) may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction of capital.
If a creditor entered on the list whose debt or claim is not discharged or has not been determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating (as the court may direct) the following amount if‐
- the company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim;
- the company does not admit, and is not willing to provide for, the full amount of the debt or claim, or
- if the amount is contingent or not ascertained, then an amount fixed by the court after the like enquiry and adjudication as if the company were being wound up by the court.
If satisfied, the court will direct,
(a) in respect of every creditor of the company who is entitled to object to the reduction of capital, that either‐
(i) his consent to the reduction has been obtained; or
(ii) his debt or claim has been discharged or has determined, or has been secured; and
(b) that the share capital does not by this reduction fall below the authorized minimum share capital,
The court may then make an order confirming the reduction on such terms and conditions as it thinks fit.
Where the Court makes such an order, it may also‐
(a) if for any special reason it thinks it proper to do so, make an order directing that the company shall, during such period (commencing on or at any time after the date of the order) as is specified in the order, add to its name as its last words “and reduced”;
(b) make an order requiring the company to publish (as the court directs) the reasons for reduction of capital or such other information in regard to it as the court thinks expedient with a view to giving proper information to the public and (if the court thinks fit) the causes which led to the reduction.
Where the company is ordered to add to its name the words “and reduced”, those words shall, until the expiration of the period specified in the order, be deemed to be part of the company’s name.
After the court order has been granted and its directives followed, the Company will proceed to the Corporate Affairs Commission for registration of the court order. For the registration, the company will submit;
- the order of the court confirming the reduction
- a copy of the order
- minutes of the meeting of the company (approved by the court) showing;
(a) the amount of the share capital;
(b) the number of shares into which it is to be divided, and the amount of each share; and
(c) the amount (if any) at the date of the registration deemed to be paid up on each share.
The resolution for reducing share capital as confirmed by the order so registered takes effect only after the order and minutes have been registered.
A notice of the registration shall be published in such manner as the court may direct.
A certificate of reduction being prima facie evidence that all the requirements of the CAMA regarding the reduction of share capital have been complied with will be given to the company.
When registered, the minutes of the meeting where the resolution was passed will be deemed to be substituted for the corresponding part of the company’s memorandum, valid and alterable as if it had been originally contained in it.
The substitution of such minutes for part of the company’s memorandum shall be deemed an alteration of the memorandum.
Reference S. 105-109 CAMA
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