Petitioner Company filed Scheme of Capital Reduction (Scheme) at Hon'ble National Company Law Tribunal (NCLT) Ahmedabad Bench, where it was proposed to cancel 99.85 % of Paid-up equity Share Capital by and paying Rs.77.49 Per share aggregating to Rs.5404.93 Lakhs by passing special resolution. Interestingly, the Net-worth of the Company is negative.
On direction of Hon'ble NCLT, Petitioner Company served individual notices to each of the secured & unsecured creditors. None of the creditors has raised objections to the Scheme. In view of Negative net worth and negative book value per share, proposed capital reduction was disallowed by the Hon'ble National Company Law Tribunal (NCLT) Ahmedabad Bench stating that the Capital Reduction is not in overall interest of the company and its stakeholders.
Petitioner Company filed an appeal with Hon'ble National Company Law Tribunal (NCLAT) and argued on following grounds:
a) Petitioner Company states that Company has sufficient arrangement of Cash Flows to undertake reduction of share capital and should not have any adverse impact on company ability to honour its obligation toward shareholders in case of reduction of share capital.
b) Negative Net-worth of the company appearing in the books is due to depreciation being charged on the assets of the capital-intensive industry - Solar Power Plant
c) Petitioner Company has referred to catena of judgement where it states that Reduction of Share Capital is Domestic Affair of Particular Company in which ordinarily a Tribunal will not interfere because of the reason that it is majority decision that prevails. Following are some of the Judgement referred by Petitioner company to NCLAT.
Hon'ble Delhi High Court in case of Reckitt Benckiser (India) Ltd. (CP 206 of 2004)-held that:
This story is from the August 2022 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the August 2022 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Advent International to combine its listed & private entity business
Recently, Advent International announced the merger of its privately held pharma company into recently acquired listed pharma company.
Eris Lifesciences on Acquisition Spree to expand its branded formulations portfolio
Recently, Eris Lifesciences Limited announced acquisition of 'branded Formulation Business' of Biocon Biologics Limited pertaining to the India territory through slump sale. In addition, ELL also announced a foreign acquisition.
Vuenow Merges All Entities Will It Create Value?
Recently, Vuenow Infratech Limited, a BSE listed company, announced the merger of two private companies itself.
Dalmia Group continues its journey of segregation of businesses by way of demerger
Recently Dalmia Group announced yet another restructuring of one of its group companies Dalmia Bharat Refractories Limited.
Rane Group to consolidate its listed operational entities
After keeping different operational listed entities for years, Rane Group, one of the key players in Auto Ancillary space has decided to consolidate its listed operational companies under Rane (Madras) Limited.
Zuari Group's attempts to create the biggest private producer of Fertilisers
“Transfer of Identified shares from ZACL to ZMPPL is a precondition for approval of the merger transaction”
Shankara Building Products separates its trading & marketplace business for independent growth
Recently, Shankara Building Products Limited announced the demerger of its trading/building material marketplace business from its manufacturing business.
CASE LAW: Reduction of Share Capital by way of cancellation of Shares amounts to "Transfer" and Losses available for set-off
Recently, the Mumbai bench of the Income Tax Appellate Tribunal in the case of Tata Sons Limited held that the reduction of share capital of the company by way of cancellation of shares is an extinguishment of rights in shares and be treated as \"transfer\".
Allcargo Logistics creating a more simplified structure
“The transaction will separate the international supply chain business into a separate entity”
TVS Group's Restructuring A Benchmark for Family Arrangements
\"Part I of the scheme, although complex with multiple transactions, executed to achieve separation of ownership between various family branches\"
