BEFORE THE NATIONAL COMPANY LAW TRIBIUNAL BENCH AT
_________
Company Application No. of 2019
In the matter of the Companies Act, 2013
And
In the matter of Section 66 & Section 52 and other applicable provisions of the Companies Act, 2013 and the National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016

And
In the matter of Limited

_____________ Limited,

a Company registered under the Companies Act,
1956, and having its Registered Office at
___________________________
represented by its Director, Mr. __________ .... Applicant Company

APPLICATION UNDER SECTION 66 & 52 OF THE COMPANIES ACT, 2013 AND THE NATIONAL COMPANY LAW TRIBUNAL (PROCEDURE FOR REDUCTION OF SHARE CAPITAL OF COMPANY) RULES, 2016 AND THE NATIONAL COMPANY LAW TRIBUNAL RULES, 2016, FOR CONFIRMING THE REDUCTION OF SHARE CAPITAL

The Applicant above named begs to submit as follows:
1. The Applicant above named, ___________ Limited (also referred to as “Applicant Company” or “Petitioner Company”), is an unlisted public company limited by shares incorporated on the ________ in the State of __________ under the Companies Act, 1956 and is represented by its Director, Mr. _______.

2. The registered office of the Applicant Company is situated at _________________, India.

3. The main objects of the Applicant Company as set out in Clause III (A) of its Memorandum of Association are briefly stated as under:
a) _____________________

An up-to-date printed copy of the Memorandum of Association and Articles of Association of the Applicant Company is produced herewith and marked as
Annexure A 1.

4. The Authorized Share Capital of the Applicant Company as on
_________ is Rs. __________/- divided into _________Equity Shares of Rs.10 /- each. The issued equity share capital of the Applicant Company as on
____________ is Rs. ____________divided into equity shares of Rs.10 each. The subscribed and paid-up capital of the Applicant Company as on ______________ is Rs. ___________/- divided into ____________ Equity Shares of Rs. 10 /- each. The Applicant Company submits that subsequent to
__________, there has been no change in its capital structure.

5. The Applicant Company is engaged in the business of _________________________ (hereinafter referred to as the “Business of the Applicant Company”).

6. The Applicant Company submits that though the Companies Act 2013 does not specifically require the Articles of Association (‘AOA’) to have a clause to permit reduction of share capital, however, Article 76 of the AOA of the Applicant enables the Applicant Company, from time to time, to alter its share capital in any manner permitted by law. The relevant extract of Article 76 of the AOA is provided below:

“76. The Company may in a General Meeting from time to time alter the conditions of its Memorandum in respect of the Capital as follows:-
…
f) Reduce its share capital or any Capital Redemption Reserve Fund or any share premium account in any manner authorized by law.

Further, Article 77 of the AOA of the Company states that:

“77. The powers conferred by these Articles may be exercised by ordinary resolution except in case of reduction of share capital when the exercise of the power in that behalf shall be special resolution. The Company shall give due notice to the Registrar of any such alteration of the Capital.

7. The Applicant Company states that the latest financial position of the Applicant Company as on __________ is provided below:

Particulars Amount in INR
Net worth
Cash & Bank Balance
Current Assets
Non-Current Assets
Current Liabilities
Long Term Liabilities

The audited financial statements of the Applicant as on 31st March 2018 and the latest provisional financial statements as on ________ is provided as
Annexure A2 & A3.

8. The Applicant Company states that it has << >> secured Creditor, at an outstanding value of Rs. <<amount>>- (Rupees << >> only. The Applicant Company further has << >> (<<in words>>) unsecured creditors which are classified broadly into 3 (Three) classes of Unsecured Creditors as tabulated below:

S.No. Class of Unsecured Creditor No. of Unsecured creditors in the said class Total Outstanding Amount (in Rupees)
1. Related Parties << >> << >>
2. Other Parties << >> << >>
3. Trade Creditors << >> << >>
TOTAL << >> << >>

The Chartered Accountant certificate reflecting the number of Secured Creditors and Unsecured Creditors of the Applicant Company is marked and annexed herewith as Annexure A 4. The Affidavit by two Directors of the Applicant Company confirming the list of creditors is marked and annexed herewith as Annexure A 4A.

9. The Applicant Company by virtue of the provisions of Sections 66 & 52 of the Companies Act 2013, intends to reduce the issued, subscribed and paid up share capital of the Applicant Company. The reason and rationale for the reduction of the Share Capital as provided in the explanatory statement issued to the equity shareholders of the Applicant Company are as follows:

a) The delisting of the equity shares of the Company has resulted in non-tradability of its equity shares. With the Company’s security now being unlisted, the individual shareholders do not have tradable security for exit. This has significantly impaired the value of the shares as the same are no longer marketable and prevent the shareholders from realizing the optimal value and returns on their investments in the Company. Keeping in mind the interest of the shareholders and the need to provide a permanent liquidity option for illiquid shares, return of share capital to the non-promoter shareholders is proposed. This will help the non-promoter shareholders in realizing the true potential of their investments in the Company which can be gainfully deployed elsewhere.

b) The primary concern of the Company is the benefit and protection of the interest of its non-promoter shareholders and, therefore, the non-promoter shareholders are being made the primary beneficiaries of the proposed reduction. The Board of Directors have proposed this selective return and consequent reduction as a measure of good corporate governance with a view to protect the non-promoter shareholders and to provide them an exit.

After detailed deliberation, the Board of Directors of the Company are of the view that the selective reduction of equity share capital is in accordance with Section 66 read with Section 52 of the Companies Act, 2013 (‘the Act’) which is one of the practical and optimally efficient option available to the Company.

10. The key benefits of Selective Reduction of Equity Share Capital of the Applicant Company are as follows:
a) Provide an exit opportunity to the non-promoter shareholders to liquidate their entire shareholding.
b) Provide Return on Investment to the non-promoter shareholders and to enrich the shareholders.
c) Provides greater level of transparency, openness and secure full involvement of shareholders. All the non-promoter shareholders of the Company would benefit from the selective reduction of equity share capital in the same proportion as his/ her/ its share in capital of the Company.
d) Reduces administrative cost of the Company.
e) Helps in effective management of the Company.
f) The selective reduction of equity share capital is in the best interests of the shareholders and it does not impact the shareholders, creditors or stakeholders in any manner whatsoever.

11. Based on the above facts and circumstances the Board of Directors of the Applicant Company thought it fit to reduce and restructure its share capital. In view of the foregoing, the Board of Directors have, at their meeting held on
_________ decided to reduce the Share Capital of the Applicant Company.

Copy and extract of the resolution passed by the Board of Directors of the Applicant Company is produced herewith and marked as Annexure A 5. The Applicant Company states that the reduction of the following:
a) The Share Capital Account; and
b) Securities Premium Account General Reserve and balance in Profit and Loss Account to the extent of available balance on such accounts and as required and decided by the Board of the Applicant Company.

as stated in the annexed Board Resolution is the proposed reduction of capital sought to be undertaken by the Applicant Company, hence, the present application is being presented before this Hon’ble Tribunal for the confirmation of the reduction of capital as provided. Part (ii) of the resolution referred hereinabove are items which were additionally approved by the Board of Directors of the Applicant Company and do not form part of the present Application but have been stated for the purposes of disclosure.

12. The equity shareholders of the Applicant Company duly passed a special resolution at the Annual General Meeting held at _____ on the __________, approving the selective reduction of the Equity Share Capital of the Applicant Company, and it was resolved as under :

"RESOLVED THAT pursuant to clause 76(f), 77 of the Articles of Association of the Company, Section 52, Section 66 and such other applicable provisions of the Companies Act, 2013 (including any statutory modifications or re-enactment thereof, for the time being in force) and subject to the confirmation by the Hon'ble NCLT at Chennai or any other relevant authority empowered to approve the Selective Reduction of Share Capital (hereinafter referred to as "NCLT" or “Tribunal”) or such other sanctions and approvals of the appropriate authorities (if required) and subject to such terms, conditions or modifications if any, as may be prescribed by such authorities while granting such approvals, consents or permissions and which may be agreed to by the Board of Directors of the Company [hereinafter referred to as "Board" which expression shall be deemed to include any Committee of Directors constituted by the Board], consent of the members be and is hereby accorded to the Selective Reduction of the Company's existing subscribed and paid-up equity share capital comprising of _______ equity shares of face value INR 10/- each fully paid up aggregating to INR ___________/- by cancelling and reducing _____ subscribed and paid-up equity shares which are held by non-promoter shareholders or such other number of subscribed and paid-up equity shares, however not exceeding 115,911 equity shares of the Company, as held by the non-promoter shareholders as on the date determined by the Board after the proposed selective reduction is approved by the NCLT [hereinafter referred to as "Record Date"]. The non-promoter shareholders holding paid-up equity shares of the Company as on the Record date shall be paid a sum of INR ___/- per equity share for the reduction of the equity shares held by them, inclusive of a premium of INR ___/- over the face value per equity share of INR 10/- each, based on the fair market value per share determined as per the valuation report dated ________ issued by the independent valuer, being ____________..”

“RESOLVED FURTHER THAT upon the selective reduction of the equity share capital of the Company, the issued equity share capital of the Company shall stand reduced as follows:
Particulars Amount
Total number of issued equity shares of the Company as on ________
Face value per share of the equity shares INR 10
Total issued equity share capital of the Company as on __________
Total number of equity shares to be reduced as envisaged by the selective capital reduction
Total number of issued equity shares of the Company post the selective capital reduction
Total issued equity share capital of the Company post the selective capital reduction

“RESOLVED FURTHER THAT upon the selective reduction of the equity share capital of the Company, the subscribed and paid-up equity share capital of the Company shall stand reduced as follows:
Particulars Amount
Total number of subscribed and paid-up equity shares of the Company as on ________
Face value per share of the equity shares INR 10
Total subscribed and paid-up equity share capital of the Company as on ______
Total number of equity shares to be reduced as envisaged by the selective capital reduction
Total number of subscribed and paid-up equity shares of the Company post the selective capital reduction
Total subscribed and paid-up equity share capital of the Company post the selective capital reduction

“RESOLVED FURTHER THAT upon reduction of such share capital, the amount paid as consideration shall be adjusted against the subscribed, issued and paid-up equity share capital of the Company to the extent of face value and the premium paid over and above the face value shall be adjusted against the Securities Premium Account, General Reserve and balance in Profit and Loss Account to the extent of available balance on such accounts and as required and decided by the Board.”

“RESOLVED FURTHER THAT the selective reduction of the Company's equity share capital as indicated above is subject to the payment to be made to the non-promoter equity shareholders which shall be within 30 days of the Record Date and all such payments will be made by RTGS, NEFT, pay order or demand draft, subject to necessary regulatory approvals and after deduction of all applicable expenses and statutory dues.”

`“RESOLVED FURTHER THAT Mr. _________ (DIN: ______) and Mr. _________(DIN: ), Directors of the Company as authorized by the Board, be and are hereby severally authorized on behalf of the Company to do all such other acts, matters, deeds and things necessary or desirable in connection with or incidental thereto for enabling the Board to give effect to the above selective reduction of equity share capital including but not limited to:
i. settling, signing, finalizing, executing and filing all necessary documents including the petitions, affidavits, pleadings and such other documents as may be required to be filed with the NCLT or any other authority and such further deeds, documents and writings as may be necessary in this regard;
ii. making applications to the relevant authorities or other persons for their approval to the said selective reduction, as may be required;
iii. making such disclosures to governmental or regulatory authorities as may be required;
iv. affixing the Common Seal of the Company in accordance with the provisions of the Articles of Association of the Company on any documents in connection with the above resolution, as may be required; and
v. settling all questions, difficulties or doubts that may arise in connection with the selective reduction of capital as it may, in its absolute discretion, deem fit.”

Copy of the notice and the extract of the Special Resolutions passed at the Annual General Meeting dated ___________ of the Applicant Company is marked as Annexure A 6.

13. The Applicant Company has << >> shareholders out of which ___ shareholders were present at the Annual General Meeting The details of the voting exercised by the shareholders (by show of hands) in approving the reduction in capital as provided below:
S. No. Name of Shareholder who voted in favour of the Capital reduction
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

S. No. Name of Shareholder who voted against the Capital reduction
1
2
3

14. The Applicant Company submits that the proposed reduction and restructuring of the Share Capital does not involve the diminution of any liability in respect of unpaid Capital. The Applicant Company further states that the proposed reduction of capital does not in any manner whatsoever prejudice or affect the rights of the creditors or any stakeholders.

15. The form of the minute proposed to be registered under section 66 (5) of the Companies Act 2013 and as per Rule 6 (2) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016 is as follows :

“The issued equity share capital of ___________ Limited (‘the Company’) is henceforth Rs. ___________/- divided into _________ Equity Shares of Rs.10/- each, reduced from Rs. ____________/- divided into __________ Equity Shares of Rs.10/- each. The subscribed and paid-up equity share capital of the Company is henceforth Rs. __________/- divided into ________ Equity Shares of Rs.10/- each, reduced from Rs. __________/- divided into ________Equity Shares of Rs.10/- each. The securities premium account, General Reserve and balance in Profit and Loss Account is henceforth Nil, << >> and << >> respectively, reduced from Rs.___________/-, Rs. __________/- and Rs. _____________/- respectively.”

The Form of Minute is marked and attached as Annexure A 7.

16. The Applicant Company based on the said statement and factual scenarios, prays that this Tribunal may order notice to the creditors or publication of notice under rule 3 (1) (iii) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016. The Applicant Company further states that this Hon’ble Tribunal may also order notices to the Regional Director, Ministry of Corporate Affairs and the Registrar of Companies, Chennai as per rule 3 (1) (i) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016.

17. The Applicant Company states that there are no deposits and that the Applicant Company has no arrears of repayment of deposits or any interest thereon. The certificate from the statutory auditor stating and confirming that there is no arrears of repayment of deposits or any interest thereon and the declaration by the Director of the Applicant Company confirming the same is marked and annexed as
Annexure A 8 & A 9. In addition to these certificates, the certificate from the statutory auditor that the reduction of capital is in accordance with the accounting standards specified under section 133 or any other provisions of the
Companies Act 2013 is marked and annexed as Annexure A 10.

18. The Applicant Company respectfully submits that since it has more than adequate assets including cash and bank balances to satisfy all its creditors, the words “and reduced”, be not added to the name of the Applicant Company as the last words thereof.

19. The Applicant submits that this Hon’ble Tribunal is having jurisdiction in as much as the Registered Office of the Applicant Company is situated within the jurisdiction of this Hon’ble Tribunal.

20. The Applicant therefore prays :-
(1) That the reduction and restructuring of the Share Capital of the Applicant duly approved by the equity shareholders of the Applicant at an Annual General Meeting thereof held on ____________ at Chennai be confirmed by this Hon’ble Tribunal so as to be binding on all shareholders and creditors of the Applicant;

(2) That notices may be ordered to the Regional Director, Ministry of Corporate Affairs and the Registrar of Companies, Chennai as per rule 3 (1) (i) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016;

(3) That notices may be ordered to all the creditors as provided for rule 3 (1) (iii) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016;

(4) That directions may be given for the publication of advertisements as provided for under rule 3 (3) of the National Company Law Tribunal (Procedure for reduction of share capital of the Company) Rules, 2016 in an English and Tamil newspaper having State-Wide circulation;

(5) That to this end all inquiries and directions necessary and proper be made and given ;

(6) That the proposed minute be approved by this Hon’ble Tribunal;

(7) That the Applicant be not required to add the words “and reduced” to its name as the last words thereof; and

(8) That this Hon’ble Tribunal may pass such further or other orders as it may deem fit and proper in the facts and circumstances of the case.

21. PARTICULARS OF THE BANK DRAFT EVIDENCING PAYMENT OF FEE FOR THE APPLICATION MADE:

(i) Branch of the bank on which drawn:
(ii) Name of the issuing branch:
(iii) Demand Draft No.:
(iv) Date:
(v) Amount: Rs.5000/-
22. LIST OF ENCLOSURES:

S. No. Date Particulars
1. Application
2. Affidavit in support of the Application
3. Memorandum & Articles of Association of the Applicant Company is marked and attached as Annexure A 1
4. Audited financial statements of the Applicant Company as on _____________ is marked and attached as Annexure A 2
5. Latest Provisional financial statements of the Applicant Company as on __________ is marked and attached as Annexure A 3
6. The Chartered Accountant certificate reflecting the number of Secured Creditors and Unsecured Creditors of the Applicant Company is marked and annexed herewith as Annexure A 4. The Affidavit by 2 (Two) Directors of the Applicant Company declaring and confirming the list of creditors is marked and annexed herewith as Annexure A 4A.
7. Board Resolution dated _______ passed by the Board of Directors of the Applicant Company approving the reduction of capital is marked and attached as Annexure A 5.
8. Copy of the notice and the extract of the Special Resolutions passed at the Annual General Meeting of the Applicant Company on
__________ is marked and attached as Annexure A 6.
9. Form of Minute is marked and attached as Annexure A 7.
10. Certificate from statutory auditor confirming that the Applicant Company has no default in arrears of repaying deposits is marked and attached as Annexure A 8.
11. Declaration by the Director of the Applicant Company confirming there are no arrears of repayment of deposits is marked and attached as Annexure A 9.
12. Certificate from statutory auditor stating the proposed reduction is accordance with the accounting standards prescribed under section 133 or other provisions of the Companies Act 2013 is marked and attached as Annexure A 10.

(Signature of the Authorised Signatory)
Date: <<date>>
Place: __________