The following Corporate Q&A produced in partnership with Brenda Hannigan of Southampton University provides comprehensive and up to date legal information covering:
This Q&A assumes that the company proposing to reduce its capital is a private company limited by shares.
A reduction of capital is governed by section 641 of the Companies Act 2006 (CA 2006). This provides that, in the case of a private company limited by shares, a reduction may be effected by a special resolution, supported by a solvency statement given by the directors, or by a special resolution confirmed by the court. A special resolution of the members (or of a class of members) of a company means a resolution passed by a majority of not less than 75% of those entitled to vote in accordance with CA 2006, ss 283(4), 283(5). Therefore, in a situation where the majority shareholder in a company holds 100% of the voting rights, they have the power to pass the relevant special resolution, acting alone.
For a specimen special resolution to be used on a reduction of capital using the solvency statement procedure, see Precedent: Solvency statement procedure—special resolution and for one to be used on a reduction of capital using the court procedure, see Precedent: Court procedure—special resolution.
In addition, in principle, a company can cancel all the shares in one particular class without cancelling the shares of another class, whichever procedure it is using,
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