Capital Reduction
Capital Reduction
The ability for a company to engage in a capital reduction was introduced in July, 1998. As from this date, it was no longer necessary to make application to a Court for approval and the process became much simpler.
For an unlisted company, a capital reduction is generally either:
Selective - whereby the treatment of shareholders differs; or
Equal access - whereby all shareholders participate equally in the capital reduction.
An overview of the procedure for a capital reduction is as follows:
1. Directors meet to convene a general meeting at which the resolution approving the capital reduction is put.
2. Secretary to issue notices of the General Meeting to all Shareholders. Attached to that notice must be the wording of the proposed resolution and all matters which the Company believes would be relevant to adequately inform the shareholders prior to asking them to decide upon the resolution.
3. The ASIC is to receive a copy of the notice of General Meeting together with all papers issued to shareholders.
4. General Meeting so that the shareholders can vote upon the proposed capital reduction.
5. Settlement of the transaction: This normally will involve either:
- the Company drawing a cheque in favour of the participating Shareholders;
- and, if applicable, the cancellation of shares.
Cancellation is not mandatory.
6. Notice of resolution and cancellation of shares (if applicable) to be sent to the ASIC.
There is a set timetable to follow this with procedure. You are “locked into” observing certain timeframes. All up, the procedure is usually completed within six weeks.
We are always happy to answer your questions, on any aspect pertaining to this service. We have a team of friendly, knowledgeable staff who will help you with any query you may have.
For more information contact the helpful staff at Castle Corporate