Reduce share capital

Limited company registered with Companies House in the United Kingdom, generally cannot reduce its share capital unless permitted by statute and confirmed by the court order.

Your limited company can reduce its share capital under the Companies Act 2006 in the following situations:

Reduction following redenomination

Your limited company can reduce its capital following a re-denomination of your 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.

Your company must pass a special resolution within 3 months and within 15 days deliver a copy of that, as well as the 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

Your 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 your 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 your directors;
  • The statutory fee payable for registration of this event by Companies House.

All your company directors must sign the solvency statement.

A statement of compliance by your directors must confirm that your company have made a copy of the solvency statement available to each of the eligible shareholders as required and that your directors did not make the solvency statement more than 15 days before your company’s members passed the resolution. All your 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. 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

Your 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 the statutory fee applicable.

In most instances, the reduction will not take effect until Companies House has registered the copy of your court order and the statement of capital.

However, the ‘authorized minimum’ requirement constrains public limited company (PLC). If a capital reduction brings the nominal value of a PLC’s allotted capital below the authorized minimum, it will generally need to re-register as a private limited company.

For this purpose, however, a public limited company can satisfy the authorized minimum requirement by means of shares denominated multiple currencies.

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