Board Resolutions - Share Capital Reduction

The Share Capital Reduction – Guidance Notes should be read in advance of this document.

These Board Resolutions – Share Capital Reduction have been created following the new provisions of the Companies Act 2006, which introduce a new way for private companies to reduce the amount of their share capital.

Since 1 October 2008 private companies, as an alternative to passing a special resolution and obtaining court approval, have had the option of reducing the amount of their share capital by special resolution supported by a solvency statement made by the directors.

The solvency statement route provides a simpler and cheaper means for a company to reduce its share capital. The solvency statement must be made not more than 15 days before the date of the special resolution and must be available to the members when they vote on the resolution to reduce the company's share capital.

In these Board Resolutions – Share Capital Reduction, the board of directors proposes the reduction of share capital, which must then be approved by the shareholders by special resolution.

Please note that the solvency statement is only applicable to private companies, however, both private and public companies will continue to be able to reduce their share capital by special resolution confirmed by court order.

These resolutions are in open format. The document contains fields which must be completed. It also contains wording options in square brackets which must be adjusted to suit your purposes. If the company has only one director, then paragraphs 1 to 3 and paragraph 9 can be deleted together with references to "the chairman". Similarly, any references to the "Company Secretary" should be deleted if the company does not have one and the field should be completed with the name of the director responsible for secretarial duties.

Paragraphs 4 and 5(b) contain options for the way in which the share capital reduction is to be effected. The first three options are specified in the Companies Act 2006 and if one of them applies, you should delete the others. The Act also states that a company can reduce its share capital in any way permitted and, if this is the case, the manner of share reduction should be entered into the field and all the other options should be deleted. The wording in paragraphs 4 and 5(b) and also the wording of the "Written Resolution – Reduction of Share Capital" or the "Minutes - Reduction of Share Capital" (depending on which method is used for shareholder approval by special resolution) must be consistent.

Paragraphs 5(b), 6, 7 and 8(d) should be amended depending on whether a written resolution or a general meeting is used for shareholder approval by special resolution and they must be consistent with each other.

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