Private Limited Capital Redemption and Bonus Issue.

Hi Mr. A. Muthukumar,

Please correct me if I am wrong As per my knowledge , your first query comes under section 100(1) of Co. Act 1956, which deal with reduction of Capital( if u want to repay balance amount ) ,It states that reduction can be effected by reducing nominal amount of shares by writing off or by repaying the paid up capital.

Kindly take note that Reduction of capital required to follow a detail and stringent procedure along with Court approval,if u intend to go for reduction and if u want steps in this regard I will post detail checklist ,

If u just want to divide your share in samller amount than fixed by MOA in such a manner so that proportion of between paid and unpaid amount ,if any on reduced or divided share capital is same as original shares it will come under section 94 Co. " subdivision of share " can be effected through passing ordianry resolutionif articles allow .

I would also like to throw light on option mentioned by you to issue bonus share, issuing bonous shres means ploughing back your profit or in simple words bringing part of unutilised profit under the head shre capital, which is compleatly different from reduction of capital and it actuly amounts to increse in share capital

yes in both the cases you will require to file certain form through MCA to ROCIn case of reduction you need to file special resolution through Form 23 and you have to file verious forms for receiving Court order for reduction

In case of bonus issue ROC approval through MCA is reuired to obtain if new share capital exceeds limit of authorised capital you have to first increase Authorised capital by filing form 5 , again you will require to follow completly diffrent procedure but much more simple than reduction of Capital

Even pvt ltd. Co. can opt for all three situation i.e. reduction (redemption of Equity capital is possible only through reduction ) subdivision as well as bonous issue after following proper procedure.

I hope I have tried to clarify basic difference of both situation , If u want any further clarification please feel free to revert back.

Regards Gargi