Return of Authorized Capital

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Our private ltd company raised additional capital from existing directors and shareholders for an expansion plan.  The expansion plan has been cancelled.

1. What are our options for return of the additional capital without making it taxable income in the hand of the shareholders.

In other words, is there a tax-neutral way to return/reduce authorized capital of a company ?  Is this a cumbersome process leading to increased scrutiny ?

2. Although we do not wish to shut down the company, if we go down that path is there a way to return the capital at that point without incurring taxes ? I assume it is not an easy task to shutdown a pvt. ltd. company in India ?

 

Thank you for any guidance.

 

Replies (3)

Hi,

 

There are 2 options available to you.

1.      Buy back of Equity shares u/s 77A

2.      Reduction of share capital u/s 100 with article authorisation and with the permission of court.

 

Yes it would be a cumbersome process.

 

Regards

 

Please find attach herewith a checklist for buy-back of equity shares allotted.

 

Regards

 

Buy-Back would be the easier way than the Reduction of Capital.


Because Upto 10% Share caapital can be buy-back through the board resolution only.

&

To buy-back upto 25% share capital can be buy-back through the resolution in the General Meeting.



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