DIMINUTION OF SHARE CAPITAL IS NOT REDUCTION OF SHARE CAPITA

DIMINUTION OF SHARE CAPITAL:

                                                    Diminution of share capital means cancellation of share capital which has not been subscribed or agreed to be subscribed.

REQUIREMENT FOR DIMINUATION:

                                                                   

1.       It must be authorized by the article of association.

2.       Ordinary resolution is required to be passed.

DIMINUTION OF SHARE CAPITAL IS NOT REDUCTION OF SHARE CAPITAL:

Although diminution is the cancellation of share capital it does not mean reduction of share capital. In the following cases diminution of capital is not reduction of capital. Which are stated below:

               

1.       Cancellation of unsubscribed capital.

2.       Redemption of redeemable preference share.

3.       Buy back of share under section 68.

4.  Where reduction of share capital in pursuance of order of tribunal sanctioning any compromise or arrangement under section 230.