Reduction of Share Capital of a Company

Bangladesh’s Corporate / Company litigation legal framework is governed primarily by the Companies Act, 1994, which outlines the legal procedures for the incorporation, operation, and dissolution of companies. However, when disputes arise or corporate compliance needs to be rectified through judicial channels, parties must rely on specific sections of this Act and supplementary laws depending on the situation.

At Kazi Law Chamber, we provide end-to-end Corporate litigation support in matters related to company law, drawing upon decades of experience in representing both corporate entities and shareholders before the Company Bench of the Hon’ble High Court Division of the Supreme Court of Bangladesh.

Common Areas of Company Law Litigation

Our firm routinely handles applications, disputes, and compliance corrections, including but not limited to the following areas:

• Alteration of the Objects Clause in the Memorandum of Association

• Rectification of the Share Register

• Reduction of Share Capital 

• Condonation of delay in holding the AGM

• Condonation of delay in filing the Return of Allotment 

• Condonation of delay in registering Mortgages or Charges

• Mergers, Demergers, and Corporate Restructuring

• Mergers & Acquisition

• Protection of Minority Shareholders

• Judicial Winding-Up of Companies

Reduction of Share Capital of a Company

Under Sections 59 and 60 of the Companies Act, 1994, a company limited by shares may reduce its authorised share capital in any manner, provided the power to do so is specifically stated in its Articles of Association. Notably, the Act grants a company-wide-ranging power such as to extinguish or reduce the liability of any of its shares in respect of unpaid share capital, cancel any paid-up capital that is lost or unrepresented by available assets or pay off any paid-up share capital which is considered surplus to the company's requirements.

The reduction of share capital must be approved by passing a special resolution in accordance with the law. Following the resolution, a petition is filed before the Company Bench of the High Court Division for confirmation. The Court, in evaluating such an application, may consider whether the reduction proposal is fair and equitable to all classes of shareholders and whether creditors’ rights are likely to be impacted. It further examines whether all shareholders in the same class are treated equally, and in cases of differential treatment, whether the affected members have given their informed consent. The Court also considers whether notices were issued and sufficient disclosures were made to the shareholders at the time of voting in the EGM, thereby ensuring they exercised an informed choice.

In many cases, especially when creditors’ interests are likely to be affected, the Court may require the applicant company to obtain a No Objection Certificate (NOC) from its creditors. This is particularly relevant for financial institutions, where provisions of the Bank Companies Act and related financial regulations may be triggered.

The procedural framework for reducing the share capital is similar to that for alteration of the objects clause under Sections 12 and 13. The company must issue a 21-day notice convening an Extraordinary General Meeting (EGM). Upon adoption of the special resolution, an application is made to the High Court under Sections 59 and 60. Following admission of the application, the Court will direct publication of notice in two national daily newspapers, one in Bangla and the other in English. The applicant must then file an affidavit-in-compliance, confirming that procedural steps, including newspaper publication, have been completed.

At the final hearing, the Court may allow the application and pass orders permitting the reduction of share capital, usually subject to the company making a nominal donation to a recognised charity. Thereafter, the company must submit the certified judgment, amended Memorandum and Articles of Association, and other required documents to the Registrar of Joint Stock Companies and Firms (RJSC) within the stipulated timeframe for final registration.

As one of the leading company law firms in Dhaka, Kazi Law Chamber offers meticulous legal support in drafting special resolutions, preparing court applications, and ensuring full regulatory compliance with the RJSC and creditor requirements. We guide our clients through every step of the capital reduction process, delivering practical solutions that align with both statutory obligations and strategic business goals. Our corporate lawyers have extensive experience handling a wide range of matters before the Company Bench of the High Court Division, including alteration of the objects clause in the Memorandum of Association, rectification of the share register, reduction of share capital, condonation of delay in holding the AGM or filing the return of allotment, and registration delays involving mortgages or charges. We also advise on complex proceedings involving mergers, demergers, corporate restructuring, minority shareholder protection, and judicial winding-up of companies, offering strategic legal solutions tailored to each client’s business objectives.