Reducing share capital is only doable by filing an order of court after obtaining all shareholders’ approval.
Some common reasons for reducing share capital include:
- Return to members the paid-up capital that the company no longer needs.
- Simplify its capital structure to be more efficient.
- Compensate shareholders who wish to cancel their shares in the company.
- Allow the company to pay up dividends, buy back shares or generate funds to meet other corporate needs.
- Eliminate losses which may be preventing the issue of dividends.
- Reduce or cancel the company’s paid up or unpaid shares.
- Cancel share capital that is no longer represented by available assets in the company.
In many instances, reduction of share capital is not advisable. Speak to us if you have to do it.