Part 17

A company's share capital
Chapter 10

Reduction of share capital

Introductory

Circumstances in which a company may reduce its share capital
641
1
A limited company having a share capital may reduce its share capital—
a
in the case of a private company limited by shares, by special resolution supported by a solvency statement (see sections 642 to 644);
b
in any case, by special resolution confirmed by the court (see sections 645 to 651).
2
A company may not reduce its capital under subsection (1)(a) if as a result of the reduction there would no longer be any member of the company holding shares other than redeemable shares.
2A
A company may not reduce its share capital under subsection (1)(a) or (b) as part of a scheme by virtue of which a person, or a person together with its associates, is to acquire all the shares in the company or (where there is more than one class of shares in a company) all the shares of one or more classes, in each case other than shares that are already held by that person or its associates.
2B
Subsection (2A) does not apply to a scheme under which—
a
the company is to have a new parent undertaking,
b
all or substantially all of the members of the company become members of the parent undertaking, and
c
the members of the company are to hold proportions of the equity share capital of the parent undertaking in the same or substantially the same proportions as they hold the equity share capital of the company.
2C
In this section—
- “associate” has the meaning given by section 988 (meaning of “associate”), reading references in that section to an offeror as references to the person acquiring the shares in the company;
- “scheme” means a compromise or arrangement sanctioned by the court under Part 26
or 26A
(arrangements and reconstructions).
3
Subject to subsections (2) to (2B), a company may reduce its share capital under this section in any way.
4
In particular, a company may—
a
extinguish or reduce the liability on any of its shares in respect of share capital not paid up, or
b
either with or without extinguishing or reducing liability on any of its shares—
i
cancel any paid-up share capital that is lost or unrepresented by available assets, or
ii
repay any paid-up share capital in excess of the company's wants.
5
A special resolution under this section may not provide for a reduction of share capital to take effect later than the date on which the resolution has effect in accordance with this Chapter.
6
This Chapter (apart from subsection (5) above) has effect subject to any provision of the company's articles restricting or prohibiting the reduction of the company's share capital.
7
In subsection (1)(b), section 91(5)(b)(iii), sections 645 to 651 (except in
the phrases “sanctioned by the court under Part 26” and “sanctioned by the court under Part 26A”
) and 653(1) “the court” means, in England and Wales, the High Court.
S. 641 modified (1.10.2008) by The Companies Act 2006 (Commencement No. 7, Transitional Provisions and Savings) Order 2008 (S.I. 2008/1886), art. 3 (which article was revoked (1.10.2009) by S.I. 2008/2860, art. 6 (subject to Sch. 2) (with arts. 5, 7, 8))
S. 641 wholly in force at 1.10.2009; s. 641 not in force at Royal Assent see s. 1300; s. 641(1)(a)(2)-(6) in force at 1.10.2008 by S.I. 2008/1886, art. 2 (with arts. 6, 7); s. 641(1)(b) in force at 1.10.2009 by S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2) (as amended by S.I. 2009/1802, art. 18)
Pts. 1-39 (except for Pt. 7 and ss. 662-669), 45-47 extended (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), art. 5(1), Sch. 1 para. 2
Pts. 1-39 modified (31.12.2020) by Regulation (EC) No. 2157/2001, Art. AAA1(3) (as inserted by The European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 (S.I. 2018/1298), regs. 1, 97 (with regs. 140-145) (as amended by S.I. 2020/523, regs. 1(2), 5(a)-(f)); 2020 c. 1, Sch. 5 para. 1(1))
Words in s. 641(7) substituted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 33(8)(b) (with ss. 2(2), 5(2))
S. 641(7) inserted (22.4.2014) by S.I. 1991/724, Sch. Pt. 1 (as amended by The High Court and County Court Jurisdiction (Amendment) Order 2014 (S.I. 2014/821), arts. 1, 2(10)(a)(ii) (with art. 3))
Words in s. 641(3) substituted (4.3.2015) by The Companies Act 2006 (Amendment of Part 17) Regulations 2015 (S.I. 2015/472), regs. 2(1), 3(3) (with reg. 2(2))
Words in s. 641(2C) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 33(8)(a) (with ss. 2(2), 5(2))
S. 641(2A)-(2C) inserted (4.3.2015) by The Companies Act 2006 (Amendment of Part 17) Regulations 2015 (S.I. 2015/472), regs. 2(1), 3(2) (with reg. 2(2))