Besides the reasons above, a company owner may reduce the share capital of the company to:
If no creditor objections are raised, the company must submit the special resolution, solvency statement, director’s declaration, and notice containing the reduction information to ACRA via BizFile+ within eight weeks of the resolution date.
The capital reduction will only be effective once ACRA records the reduction information in the register.
The decision to opt for a court-approved or non-court-approved capital reduction method rests with the company itself.
Typically, companies prefer the court-approved method due to its conclusive nature. Once the court approves the capital reduction, it becomes challenging for creditors to challenge the decision based on fairness.
Moreover, as mentioned earlier, this method reduces potential liability for the board of directors, as there is no requirement to prepare a solvency statement.
However, the non-court approved method offers simplicity, speed, and eliminates the need to pay fees to the court.