Section 626: Reduction of capital in connection with redenomination
917.Following a redenomination of a company’s share capital, it is likely that the company will be left with shares expressed in awkward fractions of the new currency, for example, 0.997 dollars or 1.01 euros. The company may therefore wish to renominalise the value of the shares affected (that is, alter the nominal value of these shares) to obtain share values in whole units of the new currency. It can do this in one of two ways: if the company has distributable reserves it may capitalise those reserves to increase the nominal value of the shares affected; alternatively, it may reduce its share capital using the procedure set out in section 626.
918.This section enables a company to renominalise the value of its shares by cancelling part of its share capital. A special resolution of the company’s members is required but there is no need for the directors to make a solvency statement or for the company to go to court (as required where a company reduces its share capital under Chapter 10 of this Part).
919.Under subsection (3), a resolution to reduce capital in connection with a redenomination must be passed within 3 months of the resolution to redenominate the company’s share capital.
920.Subsection (4) provides that the amount by which a company can reduce its share capital using this new provision is capped at 10% of the nominal value of the company’s share capital immediately after the reduction. This 10% cap is required by the Second Company Law Directive (77/91/EEC) and applies to any reduction of capital in a public company which is not approved by the court.
921.Where a company reduces its share capital under this section, the amount by which the company’s share capital is reduced must be transferred to a new non-distributable reserve (see section 628).