Section 66 of the Companies Act, 2013
Section 66 of the Companies Act, 2013 – Reduction of Share Capital
Section 66 of the Companies Act, 2013 provides the legal framework for a company to reduce its share capital, subject to certain conditions and approval by the Tribunal.
📘 Bare Text of Section 66:
Section 66(1):
A company limited by shares or limited by guarantee and having a share capital, may, by passing a special resolution and with the confirmation of the National Company Law Tribunal (NCLT), reduce its share capital in any manner including:
(a) extinguishing or reducing the liability on any of its shares in respect of unpaid share capital, or
(b) either with or without extinguishing or reducing liability on any of its shares:
cancelling any paid-up share capital which is lost or unrepresented by available assets; or
paying off any paid-up share capital which is in excess of the wants of the company.
✅ Key Points:
Applicable to: Companies limited by shares or by guarantee with share capital.
Requires:
Special Resolution of shareholders.
Approval from NCLT (National Company Law Tribunal).
Methods of Reduction:
Cancel unpaid share capital.
Cancel paid-up capital not represented by assets (e.g., accumulated losses).
Pay back excess capital not required by the company.
Safeguards:
Creditors' interests are protected – they must be notified and can object.
Auditor’s certificate required to confirm accounting treatment complies with the law.
Not applicable to: Buy-back of shares under Section 68.
🧾 Example:
If a company has issued shares of ₹10 each, out of which ₹7 is paid-up and the remaining ₹3 is unpaid, the company may reduce the liability of shareholders by cancelling the unpaid ₹3 (if allowed by its Articles and approved by NCLT).
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