CORPORATIONS LAW- SECT 256B Company may make reduction not otherwise authorised (2024)

FAQs

CORPORATIONS LAW- SECT 256B Company may make reduction not otherwise authorised? ›

Company may make reduction not otherwise authorised

(1) A company may reduce its share capital in a way that is not otherwise authorised by law if the reduction: (a) is fair and reasonable to the company's shareholders as a whole; and.

Reduction of share capital means the reduction of issued, subscribed and paid-up capital of the Company. The reduction of capital is mainly done by companies for producing a more efficient capital structure.

An equal reduction requires shareholder approval by way of ordinary resolution whereas a selective reduction must be approved by either a special resolution (with certain voting restrictions), or a resolution agreed to by all ordinary shareholders.

Capital reduction is the process of decreasing a company's shareholder equity through share cancellations and share repurchases, also known as share buybacks. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure.

§ 256b, imposes a ceiling price that limits the prices that drug manufacturers may charge for drugs sold to specified health care facilities and entities, known as 340B entities.

Under section 250D of the Corporations Act 2001 (Cth), companies are able to appoint representatives to exercise their powers at meetings of another company, or in voting for circulating resolutions. To appoint a representative under Section 250D, the company's directors must pass a resolution to that effect.

Must be less than or equal to the authorized capital. Companies cannot issue shares beyond this limit. It cannot exceed the authorized capital but can be equal to it.

Approvals have to be obtained from shareholders, Board of directors and the National Company Law Tribunal. Resolution must have been approved by the shareholders which is passed by BoD. The shareholders must be sent a notice informing them about the general meeting.

A reduction of share capital is implemented by the company making a payment to its shareholders out of capital. That is, value paid, or taken to have been paid, by shareholders to the company to acquire shares is returned to the shareholders.

What is an example of a capital reduction? ›

Example of Capital Reduction

The company announces a share buyback and buys back 500,000 of its shares. These shares no longer trade publicly and reduce the number of shares outstanding the company has. Your company now has (1,250,000 – 500,000) = 750,000 shares outstanding.

Some companies also do this as a way to reorganise or simplify their group structures. The result of capital reduction is that the number of shares in the company will decrease by the reduction amount. However, the company's market value won't change – there will simply be fewer shares available to trade.

Capital reduction accounts for a strategic tool companies leverage to lower their share capital and meet various goals. By lowering share capital via share cancellations or other such strategies, companies can boost their distributable reserves and better manage equity.

In case of a capital reduction, shareholders whose shares are being cancelled will be taxed. Such taxation is not only as capital gains.

A capital reduction demerger involves the top company of the target group reducing its capital, in consideration for which the demerged business is transferred to a new holding company that in turn issues shares to the shareholders.

Capital reduction attempts to reduce the tradable shares of the company, whereas through shares buyback, the company repurchases its shares from the market. The solvency statement provision doesn't allow shareholders to take any action against capital reduction.

CORPORATIONS ACT 2001 - SECT 1017BB Trustees of registrable superannuation entities--obligation to make information relating to investment of assets publicly available.

(1)[Unless the articles provide for the retirement of all Directors at every annual general meeting, not less than two-thirds] of the total number of Directors of a public company, or of a private company which is a subsidiary of a public company, shall- (a)be persons whose period of office is liable to determination ...

At least 21 days notice must be given of a meeting of the members of a registered scheme. However, the scheme's constitution may specify a longer minimum period of notice.

(1) A public company must hold an annual general meeting ( AGM ) within 18 months after its registration. (2) A public company must hold an AGM at least once in each calendar year and within 5 months after the end of its financial year. Note: An AGM held to satisfy this subsection may also satisfy subsection (1).