Share Capital Reduction Templates
Overview
The solvency statement route is a simpler and cheaper way for a private company to reduce its share capital than using the court approval procedure. A private limited company (not a public company) can reduce its share capital by passing a special resolution supported by a solvency statement made by the directors, in line with the Companies Act 2006.
This section brings together the core templates you need for a share capital reduction using the solvency statement route, including board approvals, shareholder approvals, the solvency statement itself and the Companies House filings.
When to Use These Templates
Best for:
- Private limited companies looking to reduce share capital without going to court.
- Tidying up or restructuring the balance sheet (for example, eliminating accumulated losses).
- Returning surplus capital to shareholders where the solvency statement test can be satisfied.
What this section covers
- Guidance on the solvency statement route to share capital reduction.
- Board resolutions to approve the reduction and approve the solvency statement.
- A written shareholder resolution and general meeting minutes for passing the special resolution.
- The directors’ solvency statement and the section 644 statement by the directors.
- The Companies House filings, including form SH19 and a covering letter.
Each template in this section is drafted to be fully compliant with the Companies Act 2006 requirements for this procedure.
🔀 Document Toolkit: Typical Sequence (may vary)
Step 1 - Understand the procedure and conditions
- Start with Share Capital Reduction - Guidance Notes.
- This explains the solvency statement route, when it can be used and the key steps and filings involved.
Step 2 - Board approval and directors’ statements
- Use Share Capital Reduction Board Resolution Templates to record the directors’ decision to recommend and implement a share capital reduction using the solvency statement route.
- Prepare and approve the directors’ statements using:
- Solvency Statement - Share Capital Reduction; and
- Section 644 - Statement By Directors.
Step 3 - Shareholder approval
Obtain member approval for the reduction by passing a special resolution using either:
- Written Resolution Template – Share Capital Reduction (for a written resolution procedure); or
- General Meeting Minutes - Share Capital Reduction (where the resolution is passed at a general meeting).
Step 4 - Filing at Companies House
File the required documents at Companies House, typically including:
- CHF - SH19 (Section 644 & 649) - Statement Of Capital;
- Section 644 - Statement By Directors; and
- Solvency Statement - Share Capital Reduction, as required.
- Use Letter To Companies House - Share Capital Reduction as the covering letter to submit the filings.
- Share Capital Reduction - Guidance Notes
- Share Capital Reduction Board Resolution Templates
- Written Resolution Template – Share Capital Reduction
- Solvency Statement - Share Capital Reduction
- General Meeting Minutes - Share Capital Reduction
- Letter To Companies House - Share Capital Reduction
- CHF - SH19 (Section 644 & 649) - Statement Of Capital
- Section 644 - Statement By Directors
Share Capital Reduction Templates is part of Corporate. Just ÂŁ38.50 + VAT provides unlimited downloads from Corporate for 1 year.
Frequently Asked Questions
How can a private company reduce its share capital without going to court?
By the solvency statement route: all the directors make a solvency statement, the shareholders pass a special resolution (at least 75%) within 15 days of that statement, and the documents are filed at Companies House. No court application is needed. The Share Capital Reduction templates cover each step: guidance notes, board resolutions, the solvency statement, the written resolution or general meeting minutes and the filings.
What is a solvency statement and who has to sign it?
A statement by every director that, having taken into account all the company's liabilities including contingent and prospective ones, each of them has formed the opinion the company can pay its debts now and will remain able to do so for the following year (or through any winding up begun in that year). All directors must make it, and it must be dated no more than 15 days before the shareholders' resolution. Making it without reasonable grounds is a criminal offence, so directors should investigate properly first.
What do we file at Companies House and when does the reduction take effect?
Within 15 days of the special resolution, file the resolution, the solvency statement, a statement of capital on form SH19 and the directors' statement of compliance confirming the solvency statement was made no more than 15 days before the resolution and was provided to members. The reduction takes effect only when Companies House registers the SH19 statement of capital, so do not act on the reduced figure before then. The set includes the SH19 and a covering letter.
Why would a company want to reduce its share capital?
Three common reasons: tidying the balance sheet by eliminating accumulated losses, returning surplus capital to shareholders where the solvency test can be met, and creating distributable reserves, since the reserve arising on a solvency statement reduction is generally treated as a realised profit under the Companies (Reduction of Share Capital) Order 2008. The last of these has accounting and tax consequences, so take professional advice on the use of the reserve. The guidance notes cover the options.
Can we reduce capital if the company is in financial difficulty?
Not by this route. Every director must honestly hold the opinion that the company can pay its debts at the reduction date and for the following year, taking contingent and prospective liabilities into account. If the directors cannot form that opinion on reasonable grounds, the solvency statement route is unavailable, and signing anyway risks criminal liability. In distress situations take insolvency advice before touching share capital. The guidance notes explain the solvency test in practical terms.