REDUCTION OF SHARE CAPITAL

Section 116 Section 117

Special Resolution + Confirmation by Special Resolution + Solvency
Court Statement
Reduce share capital by all/any way of:- 1. Passed a Special Resolution
a. Reducing liability on any 2. Sends a notice to DGI (s134) &
company shares w regards to Registrar of Companies within 7
unpaid share capital; days from date the Special
b. Cancel paid up share capital Resolution has been passed
which is lost / unrepresented by stating
available assets; a. Resolution has been
c. Return to shareholders any paid- passed
up share capital that is in excess b. Contain Text of Resolution
of company’s needs. c. Resolution date
d. Meets the solvency
requirements under sub 3
Creditor of comp is entitled to debts or Effective in accordance with Section 119
claim, objection and not to consent to
the reduction
Court will make way / give way to Solvency Requirements:-
creditor to settle the debts due and 1. All Directors make solvency
owing to them statement in relation to reduction
of share capital
a. Private Companies
Within 14 days from date
of resolution passed but
within time to comply with
sub (5)
i. If SR passed by
written reso – every
copy served with
SS.
ii. If SR passed by
GM, Solvency
statement is
available for insp
during GM
iii. SS is available at
the company’s
registered office for
inspection FOC for
6 weeks from date
of reso passed

b. Public Companies
Within 21 days from date
resolution passed but
within time to comply with
sub (6)

Court will only make order to confirm
the reduction if Court is satisfied:-
a. Consent of Creditor for reduction
has been obtained
b. Debt/Claim has been discharged,
determined / secured;
Order of reduction shall state :-
a. Amount of share capital of the
company as altered by the order
b. Number of shares into which
share is to be divided; and
c. Amount of any paid up on each
share at the date of the order.
Resolution for reducing share capital as
confirmed by court to take effect upon
lodgement with Registrar
2. Lodge a copy of solvency
statement wit Registrar together
with notice.
Solvency requirement need not be
complied with if reduction of share
capital is solely by way of cancellation
of any paid-up share capital which is
lost or unrepresented by available
assets.
Company shall advertise a notice of
reduction of share capital in one widely
circulated newspaper in Malaysia in BM
and English not later than 7 days from
passing SR

Position when at the end of period of objection by Creditor

S119
1. Period of objection is six weeks from the date of SR passed
2. Lodge with registrar within two weeks after the 6 th weeks end, the following:-
a. Copy of SR
b. Copy of Solvency Statements
c. Copy of Statements by director confirming requirements under
117(1) & (3) have been complied with & no application for
cancellation of reso has been made
d. Copy of notice of reduction of share capital referred to Sub 117(10)
3. Reduction of share capital shall take effect upon the information being
recorded
4. Registar shall issue a notice to confirm the reduction of share capital

Solvency Test
S112
1. Company satisfy the test if
a. immediately after transaction (ie share capital reduction), no ground
on which company could be found unable to pay its debts
b. Pay debts in full within 12 months immediately following the date of
transaction
c. Asset is more than liability of the company at the date of transaction
2.

Solvency Statement
S113
1. Form of Solvency Statement is determined by Registrar
2. Solvency Statement is to state :-
a. Date Statement is made
b. Name of each director making statement
 c. Signed by each director
d. Supported by Declaration to the effect that Directors made inquiry
into affairs of company
3. Statement by each director that they have formed an opinion that each
director making the statement has formed opinion that company satisfies
the solvency test
4. Before forming such opinion, Director shall
a. Inquire into company’s state of affairs & prospects,
b. Consider all liabilities of company