Procedure for Cancellation of Shares

Procedure-for-Cancellation-of-Shares

According to clause (e) of Sub-section (1) of Section 61 of the Companies Act, 2013, a limited company having a share capital may, if so authorised by its articles, cancel its shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.

Sub-section (2) of Section 61 of the Act lays down that such cancellation of shares shall not be deemed to be a reduction of share capital.

Here the cancellation of shares means cancellation of shares of a particular unissued class of shares and not the paid up share capital.

Section 64 of the Act makes it obligatory on the part of a limited company having share capital, which has cancelled any share capital, to give notice thereof to the Registrar, within thirty days of the passing of the resolution, specifying the shares cancelled.

Procedure for Cancellation of Shares

1. To ensure that the articles of association of the company contain a provision authorising it to cancel its shares. In the absence of such a provision, the articles have first to be altered in accordance with the provisions of Section 14 of the Companies Act, 2013.

2.      Convene and hold a Board meeting to –

·      decide and pass a resolution in respect of the scheme of cancellation of shares of the company;

·     fix time, date and venue for holding general meeting (extraordinary or annual) of the company to pass an ordinary resolution or a special resolution, if so required by the articles for this purpose;

·      approve notice, agenda and explanatory statement to be annexed to the notice of the general meeting as per Section 101 and 102 of the Act; and

·       to authorise the company secretary or any other competent officer of the company to issue notice of the general meeting on behalf of the Board of directors of the company.

3.    In case of listed company, on the conclusion of the Board meeting, send to the stock exchanges, where the securities of the company are listed, particulars of such cancellation of the shares of the company.

4.      Issue notice of the general meeting as per provisions of the Companies Act to all the members, directors and auditors of the company.

5.    In case of listed company, forward three copies of the notice of the general meeting along with the explanatory statement annexed to the notice to the concerned stock exchanges as per the Listing Agreement.

6.    To hold the general meeting and have the resolution (ordinary or special, as the case may be) passed.

7.      In case of listed company, forward a copy of the proceedings of the general meeting to the concerned stock exchanges as per the Listing Agreement.

8.   In case of cancellation resulting in alteration of articles file with the ROC, Form MGT – 14 along with a certified copy of the special resolution, the explanatory statement annexed to the notice of the general meeting at which the resolution was passed and copy of altered Memorandum of Association and Articles of Association, within thirty days of the passing of the resolution.

9.   Give notice in compliance with the provisions of section 64 of the Companies Act, 2013, of the cancellation, to the Registrar in Form SH – 7, within thirty days of the passing of the resolution, along with the prescribed filing fee. The Registrar will record the alteration in the memorandum of the company.

10. In case of listed company, forward to the concerned stock exchanges, six copies (one of which must be certified) of such amendments to the memorandum of association as soon as they are adopted by the company in general meeting, as per the Listing Agreements signed with the stock exchanges.

11. Make necessary changes in all the copies of the memorandum of association of the company lying in the registered office of the company so that no unaltered copy is issued to any person.
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