From 1 October 2008 section 642 of the Companies Act 2006 provides a new procedure for a private company to reduce its issued share capital by special resolution if the directors are able to confirm that the company will remain solvent – ie able to pay its debts - for a year after the reduction.
Under this new procedure there is no need to obtain a Court Order confirming the reduction and creditors have no right of objection.
However, it is not possible to reduce the capital so as to leave the company with no share capital or with only redeemable shares in issue. The existing reduction of capital procedure under section 135 of the Companies Act 1985 (requiring the reduction to be confirmed by Court Order) can still be followed if the company so chooses.
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