What is the procedure to reduce company’s share capital in Singapore?

Procedure to reduce your Company’s Share Capital

Method

Procedures

1) Reducing capital with the approval of the court

• For a successful court-approved capital reduction, the following actions are required:
• A special resolution for the reduction must be passed; and
• The reduction must be confirmed by the court
• The company must send ACRA a notice stating that the special resolution has been passed. Before the court approves the resolution, it must be satisfied that each qualifying creditor has either consented to the reduction or assured the court that his debt is secured or safeguarded.
• This is because where a company proposes to reduce its share capital, the court must ensure that its creditors are not adversely affected by such reduction.
• A qualifying creditor is a creditor whose debt or claim would be admissible in proof, if the company were to hypothetically commence winding up on a certain date fixed by the court.
• Once the court has approved the reduction, the company, must lodge with ACRA a copy of the approving court order and a notice containing the reduction information within 90 days of the approval.
• The company is then permitted by ACRA to edit its shareholdings according to the approved capital reduction. The capital reduction will be effective only when ACRA records the information duly lodged with it.

2) Reducing capital without the approval of the court

• For a successful non-court approved capital reduction, the following steps need to be carried out:
• A shareholders’ special resolution must be passed;
• The board of directors makes a solvency statement (if required to do so); and
• The company must comply with the publicity requirements.