Cap. 386 Art. 83Reduction of issued share capital.

(1)(a) A company may by extraordinary resolution of the general meeting reduce its issued share capital or undistributable reserves, including for the purposes of creating a distributable reserve. The provisions of this sub-article shall be without prejudice to any higher percentage than that required for an extraordinary resolution, as may be set out in the company’s memorandum or articles of association.

(b) Without prejudice to the provisions of sub-article (9), a reserve arising from the reduction of issued share capital or the reduction of an undistributable reserve carried out in accordance with sub-articles (1) to (3) shall be treated as authorised profit for the purposes of Chapter XI of Title I of Part V of this Act.

(c) The notice convening the general meeting at which an extraordinary resolution as referred to in paragraph (a) is to be taken shall, in addition to the requirements laid down in article 135(1)(a), also specify the purpose of the reduction and the way in which it is to be carried out.

(d) A reduction in share capital shall be void to the extent that it reduces the capital to less than the minimum prescribed by article 72.

(2) A copy of the resolution referred to in sub-article (1)(a) shall be delivered by the directors or by the company secretary to the Registrar for registration.

(3) A reduction of the issued share capital or of undistributable reserves of a company shall take effect immediately on the lapse of three

(3) months from the date of the publication of the statement referred to in article 401(1)(e):

Provided that if a creditor of the company whose debt existed prior to the publication of the statement mentioned in this sub-article objects thereto by sworn application filed within the period of three (3) months reckoned as aforesaid and satisfies the Court that due to the proposed reduction his claims would be prejudiced and that no adequate safeguards have been obtained from the company, the Court shall either uphold the objection or allow the reduction on sufficient security being given.

(4) The Registrar of Courts shall without delay cause a copy of any application filed in accordance with sub-article (3) and of any decision given thereon to be served on the Registrar for registration.

(5) The total or partial waiving of the unpaid part of the issued shares and the release of the holders of those shares from their obligation to pay up that unpaid part shall, notwithstanding anything contained in the memorandum or articles of a company, in all cases be considered as a reduction in share capital.

(6) Where there are different classes of shares, the decision by the general meeting concerning a reduction in the issued share capital shall be subject to a separate vote for each class of shareholders whose rights are affected by the reduction, and for every separate vote taken the same majority shall be required as where the shares are not divided into different classes.

(7) A reduction of the issued share capital or of undistributable reserves whose purpose is to offset losses incurred shall take effect immediately on the registration of the resolution concerning such a reduction in accordance with sub-article (2) and the provisions of sub-article (3) shall not apply.

(8) A reduction of the issued share capital whose purpose is to include sums of money in a reserve shall take effect immediately on the registration of the resolution concerning such a reduction in terms of sub-article (2) and the provisions of sub-article (3) shall not apply:

Provided that following this operation, the amount of the reserve is not more than ten per cent of the reduced issued share capital: Provided further that any such reserve shall be used only for offsetting losses incurred or for increasing the issued share capital by the capitalisation of such reserve.

(9) In the cases referred to in sub-article (8) the amounts deriving from the reduction may not be used for making payments or distributions to shareholders or to discharge shareholders from the obligation to pay calls on their shares.

(10) The prohibition referred to in sub-article (9) shall not apply to any amount derived from the reduction of any reserve referred to in sub-article (8) where:

(a) the said reduction is authorised by a new extraordinary resolution of the general meeting in terms of sub-article (1);

(b) the aforementioned resolution is delivered to the Registrar in terms of sub-article (2); and

(c) the provisions of sub-article (3) are applied to the reduction.

(11) A notice of reduction of the issued share capital shall be delivered by the company to the Registrar, for registration, within fourteen (14) days after the effective date of the reduction:

Provided that the notice referred to in this sub-article shall not be required in respect of reduction of non-distributable reserves, or the share premium account in terms of article 114(1) or a reduction of the capital redemption reserve in terms of article 115(1)(e).

(12) In cases of default in complying with the provisions of sub-article (11), every officer of the company who is in default shall be liable to an administrative penalty.