Chapter IV - Share Capital and Debentures
Section 66
Section 66: reduction of share capital
A company limited by shares, or limited by guarantee with a share capital, may reduce its share capital by special resolution, but the reduction needs confirmation by the Tribunal.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Subject to confirmation by the Tribunal on an application by the company, a company limited by shares or limited by guarantee and having a share capital may, by a special resolution, reduce the share capital in any manner and in particular, may— (a) extinguish or reduce the liability on any of its shares in respect of the 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 which is lost or is unrepresented by available assets; or (ii) pay off any paid-up share capital which is in excess of the wants of the company, alter its memorandum by reducing the amount of its share capital and of its shares accordingly: Provided that no such reduction shall be made if the company is in arrears in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon.
(2) The Tribunal shall give notice of every application made to it under sub-section (1) to the Central Government, Registrar and to the Securities and Exchange Board, in the case of listed companies, and the creditors of the company and shall take into consideration the representations, if any, made to it by that Government, Registrar, the Securities and Exchange Board and the creditors within a period of three months from the date of receipt of the notice: Provided that where no representation has been received from the Central Government, Registrar, the Securities and Exchange Board or the creditors within the said period, it shall be presumed that they have no objection to the reduction.
(3) The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been discharged or determined or has been secured or his consent is obtained, make an order confirming the reduction of share capital on such terms and conditions as it deems fit: Provided that no application for reduction of share capital shall be sanctioned by the Tribunal unless the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards specified in section 133 or any other provision of this Act and a certificate to that effect by the company’s auditor has been filed with the Tribunal.
(4) The order of confirmation of the reduction of share capital by the Tribunal under sub-section (3) shall be published by the company in such manner as the Tribunal may direct.
(5) The company shall deliver a certified copy of the order of the Tribunal under sub-section (3) and of a minute approved by the Tribunal showing— (a) the amount of share capital; (b) the number of shares into which it is to be divided; (c) the amount of each share; and (d) the amount, if any, at the date of registration deemed to be paid-up on each share, to the Registrar within thirty days of the receipt of the copy of the order, who shall register the same and issue a certificate to that effect.
(6) Nothing in this section shall apply to buy-back of its own securities by a company under section 68.
(7) A member of the company, past or present, shall not be liable to any call or contribution in respect of any share held by him exceeding the amount of difference, if any, between the amount paid on the share, or reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the order of reduction.
(8) Where the name of any creditor entitled to object to the reduction of share capital under this section is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after such reduction, the company commits a default, within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016, in respect of the amount of his debt or claim,— (a) every person, who was a member of the company on the date of the registration of the order for reduction by the Registrar, shall be liable to contribute to the payment of that debt or claim, an amount not exceeding the amount which he would have been liable to contribute if the company had commenced winding up on the day immediately before the said date; and (b) if the company is wound up, the Tribunal may, on the application of any such creditor and proof of his ignorance as aforesaid, if it thinks fit, settle a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
(9) Nothing in sub-section (8) shall affect the rights of the contributories among themselves.
(10) If any officer of the company— (a) knowingly conceals the name of any creditor entitled to object to the reduction; (b) knowingly misrepresents the nature or amount of the debt or claim of any creditor; or (c) abets or is privy to any such concealment or misrepresentation as aforesaid, he shall be liable under section 447.
Introduction
Section 66 lists the main ways of reducing capital, sets a bar where deposits or interest are in arrears, and builds in protection for creditors through notice, representations and the Tribunal’s satisfaction about their claims.
Buy-back under section 68 is a separate route and is excluded by section 66(6).
Key takeaways
Special resolution plus Tribunal
The company passes a special resolution and applies to the Tribunal for confirmation.
Deposit arrears bar
No reduction may be made while the company is in arrears in repaying deposits or interest on them.
Creditor protection
The Tribunal notifies the Central Government, Registrar, SEBI for listed companies and creditors, and confirms only when creditors’ claims are discharged, determined, secured or consented.
Choose the mode of reduction
Section 66(1) allows reduction "in any manner", in particular by (a) extinguishing or reducing liability on shares for capital not paid-up, or (b) with or without doing so, (i) cancelling paid-up capital that is lost or unrepresented by available assets, or (ii) paying off paid-up capital in excess of the company’s wants. The memorandum is altered by reducing share capital and shares accordingly.
The proviso bars any reduction if the company is in arrears in repaying deposits, whether accepted before or after the Act commenced, or interest on them.
Notice and representations
The Tribunal gives notice of the application to the Central Government, the Registrar, the Securities and Exchange Board in the case of listed companies, and the creditors. Representations made within three months of receipt of the notice are considered; if none is received in that period, no objection is presumed (section 66(2)).
Confirmation conditions
The Tribunal may confirm the reduction if satisfied that every creditor’s debt or claim has been discharged, determined or secured, or that the creditor’s consent has been obtained (section 66(3)). It will not sanction the reduction unless the proposed accounting treatment conforms to the accounting standards specified in section 133 or other provisions of the Act, and the company’s auditor has filed a certificate to that effect.
After the order
Publish the confirmation order as the Tribunal directs (sub-section (4)). Within thirty days of receiving the order, deliver a certified copy, with a minute approved by the Tribunal showing the share capital, number of shares, amount of each share and amount deemed paid-up on each share, to the Registrar, who registers it and issues a certificate (sub-section (5)).
Liability of members and officers
A member’s liability on a share is limited to the difference between the amount paid or deemed paid and the amount fixed by the reduction order (sub-section (7)). If a creditor who was not entered on the list because of ignorance of the proceedings is later met with a default by the company within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016, members on the registration date can be made to contribute as provided in sub-section (8). An officer who knowingly conceals a creditor, misrepresents a claim, or abets such conduct is liable under section 447 (sub-section (10)).
Amendments and commencement
Section 66 came into force on 15 December 2016 under S.O. 3677(E). Paragraph 3 of the Eleventh Schedule to the Insolvency and Bankruptcy Code, 2016 replaced the earlier "unable to pay" test in sub-section (8) with a default within the meaning of section 6 of the Code; section 255 of the Code came into force on 15 November 2016 (S.O. 3453(E)). Section 13 of the Companies (Amendment) Act, 2020 omitted sub-section (11), which had imposed a fine for failure to publish the order, effective 21 December 2020 (S.O. 4646(E)).
Practical preparation
Check the articles; confirm no deposit or interest arrears; choose the mode under section 66(1); obtain the auditor’s certificate on accounting treatment; pass the special resolution; apply to the Tribunal with the list of creditors; respond to representations; publish the order as directed; file the certified order and minute with the Registrar within thirty days.
Practical checklist
Do
- Prepare a complete and accurate list of creditors.
- Obtain the auditor’s certificate on accounting treatment before applying.
- Diarise the thirty-day filing after receiving the order.
Avoid
- Do not apply while deposits or interest are in arrears.
- Do not use section 66 for a buy-back; section 68 applies.
- Do not omit any known creditor from the list.
Illustrative example
Hypothetical: writing off lost capital
A company’s accumulated losses mean part of its paid-up capital is not represented by available assets.
Mode
Use section 66(1)(b)(i) to cancel paid-up capital that is lost or unrepresented by available assets.
Approve
Obtain the auditor’s certificate and pass a special resolution.
Confirm
Apply to the Tribunal, address creditor representations, then file the order and minute with the Registrar.
Outcome
- The reduction takes effect on registration of the Tribunal’s order and minute by the Registrar.
Glossary
- Tribunal
- The National Company Law Tribunal constituted under section 408 of the Act.
- Minute
- The Tribunal-approved statement of share capital particulars delivered to the Registrar with the order.
- Contributory
- A person liable to contribute to a company’s assets in a winding up.
Frequently asked questions
Is a special resolution enough to reduce share capital?
No. The reduction must be confirmed by the Tribunal on the company’s application.
Who gets notice of a reduction application?
The Central Government, the Registrar, SEBI for listed companies, and the company’s creditors.
Does section 66 apply to buy-back?
No. Section 66(6) excludes buy-back of a company’s own securities under section 68.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026