Company law revision question and answer

How are the interests of the following persons protected when a reduction of a
company‟s capital is being considered the court.

i) The company‟s Creditors
ii)The company‟s members
iii)The general public
ANSWER
The procedure for reduction of capital prescribed the companies Act, safeguards the interests of shareholders, creditors and future investors in the following ways;

Shareholders:

1. Special resolution of members – can refuse the resolution.
2. Confirmation of reduction the courts. If unfairly prejudicial to the shareholders the courts may not confirm it.

Creditors:
1. Confirmation of reduction the courts.
2. Registration of the reduction.
3. Right to object the reduction .

Future Investors:
– Registration of reduction which protects all but existing shareholders.
– Special resolution of members.
– Confirmation of reduction the courts.
– Publication of the reduction as directed the court.
– Change of name.

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