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Reduce Company Share Capital

 

UK company cannot generally reduce its share capital unless permitted by statute and confirmed by the court.

However, under the Companies Act 2006, a limited company to reduce its capital in the following situations:

Reduction following redenomination

A limited company can reduce its capital following a re-denomination of its share capital under the new procedure in the Act, but this can only be done so as to obtain more suitable nominal values for the re-denominated shares, for example, if the re-denomination results in nominal values that are not whole units of the new currency.

The company must pass a special resolution within 3 months and within 15 days deliver a copy of that, as well as Form SH15 which includes a statement of capital to Companies House. You must also deliver a director's statement confirming that the reduction does not exceed 10% of the nominal value of allotted shares immediately following reduction.

Reduction supported by a solvency statement

A private limited company can reduce its capital by special resolution supported by a solvency statement so long as the reduction does not result in only redeemable shares being issued.

You must deliver to Companies House:

  • a copy of a special resolution authorising the capital reduction;
  • a copy of the solvency statement made in accordance with sections 642(1 )(a) and 643 of the Companies Act 2006;
  • a statement of capital;
  • a statement of compliance by the directors;
  • a fee of £10 for the standard service or £50 for the same day service.

All the company directors must sign the solvency statement. A statement of compliance by the directors confirms that the company made a copy of the solvency statement available to each of the eligible members as required and that the directors did not make the solvency statement more than 15 days before the company's members passed the resolution. All the directors must sign this statement of compliance. All of these documents must be delivered to Companies House within 15 days of the resolution being passed. Wherever possible, you should deliver all the forms together. The reduction of capital will not take effect until Companies House has registered a copy of the solvency statement, resolution and statement of capital.

Reduction confirmed by a court order

A company can reduce its capital by passing a special resolution and obtaining confirmation of the reduction from the court. You must also prepare a statement of capital and get this approved by the court.

You must then deliver the original and a copy of the court order to Companies House, along with the statement of capital and a fee of £10 for the standard service or £50 for the same day service. In most instances, the reduction will not take effect until Companies House has registered the copy of the court order and the statement of capital.

However, the 'authorised minimum' requirement constrains public companies. If a capital reduction brings the nominal value of a PLC's allotted capital below the authorised minimum, it will generally need to re-register as a private company. For this purpose, however, a public company can satisfy the authorised minimum requirement by means of shares denominated multiple currencies.

If you require help in preparing and submitting forms to Companies House, our London Accountants will be more than happy to assist you. Feel free to contact us.

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