What is the normal process for a capital reduction?

Normally, a capital reduction occurs as follows:

1. Directors meet to convene a general meeting at which they put forward the resolution approving the capital reduction.

2. The secretary issues 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. ASIC must receive a copy of the notice of general meeting, together with all papers issued to shareholders.

4. The general meeting takes place so that shareholders can vote upon the proposed capital reduction.

5. Settlement of the transaction should next take place. This normally will involve either the company drawing a cheque in favour of the participating shareholders, or the cancellation of shares, if applicable. Cancellation is not mandatory.

6. Notice of resolution and cancellation of shares (if applicable) must be sent to ASIC.

There is a set timetable to follow with this procedure. You are ‘locked into’ observing certain timeframes. All up, the procedure is usually completed within six weeks.

If you would like to do a capital reduction, simply fill in our order form and submit it to us. We’ll be happy to help.