64. Reduction of Share Capital

(1) A Private Company may reduce its Share Capital by a Special Resolution supported by a solvency statement under section 65 (Reduction of Share Capital by Private Company supported by solvency statement).

(2) A Public Company or Private Company may reduce its Share Capital by a Special Resolution confirmed by the Court, following the procedures in sections 66 (Reduction of Share Capital by Special Resolution confirmed by Court order) and 67 (Court order confirming reduction of Share Capital).

(3) A Company must not reduce its Share Capital under subsection (1) or (2) if:

• (a) its Articles of Association contain any prohibition or restriction relating to capital reduction; or
• (b) because of the reduction, there would no longer be any Shareholder of the Company other than holders of redeemable Shares; or
• (c) if the Company is a Public Company—the reduction in the Share Capital would result in the Company not having the share capital required by section 43 (Minimum share capital)or any other applicable AIFC Regulations and AIFC Rules, except in the circumstances to which section 69 (Public Company reducing its Share Capital below its authorised minimum) applies.

(4) Subject to subsection (3), a Company may reduce its Share Capital in any way, and on the terms, decided by it, including, for example:

• (a) by extinguishing or reducing the Liability on any of its Shares in respect of Share Capital not Paid-up, or
• (b) either with or without extinguishing or reducing Liability on any of its Shares, by

(i) cancelling any Paid-up Share Capital that is lost or unrepresented by available assets, or

(ii) by repaying any Paid-up Share Capital in excess of the Company’s requirements; or

• (c) by causing any of its Shares that have been issued otherwise than as fully Paid-up to be forfeited for Failure to pay any amount payable on them or by accepting their surrender instead of causing them to be forfeited.

(5) For this Chapter, a redemption or purchase by a Company of its Shares in accordance with Chapter 6 is not a reduction of the Share Capital of the Company.

(6) A Company must not reduce its Share Capital otherwise than in accordance with this Chapter. Contravention of this subsection is punishable by a fine.

65. Reduction of Share Capital by Private Company supported by solvency statement

(1) A Resolution for reducing Share Capital of a Private Company is supported by a solvency statement for section 64(1) (Reduction of share capital) if:

• (a) on a day not more than 30 days and not less than 15 days before the date the reduction of the Share Capital is to have effect, the Company has published a notice in the Appointed Publications stating the following:

(i) the amount of the Share Capital as most recently determined by the Company;

(ii) the nominal value of each Share;

(iii) the amount by which the Share Capital is to be reduced;

(iv) the date the reduction is to have effect; and

• (b) the notice contains a solvency statement that complies with subsection (2).

(2) A solvency statement is a statement by each Director of the Company that the Director:

• (a) has formed the opinion, as regards the Company’s situation at the date of the statement, that there is no ground on which the Company could be found to be unable to discharge its debts as they fall due; and
• (b) has also formed the opinion that:

(i) if the Company intended to commence its winding up within 12 months after the date of the statement, the Company would be able discharge its debts in full within 12 months of the commencement of the winding up; or

(ii) in any other case, the Company would be able to discharge its debts as they fall due during the year immediately after the date of the statement.

(3) A Director of the Company must not make a solvency statement mentioned in subsection (1)(b) unless the Director has reasonable grounds for the opinion expressed in the statement. In forming the opinion, the Director must take into account all of the Company’s Liabilities (including any contingent or prospective Liabilities).

(4) Contravention of subsection (3) is punishable by a fine.

(5) If a Company reduces the amount of its Share Capital, the Company must, within 14 days after the day the reduction takes effect, file with the Registrar a copy of the notice under subsection (1).

66. Reduction of Share Capital by Special Resolution confirmed by Court order

(1) If a Company is permitted to do so under its Articles of Association and has passed a Special Resolution for reducing its Share Capital, it may apply to the Court for an order confirming the reduction.

(2) If the proposed reduction of Share Capital involves the payment to a Shareholder of any Paid-up Share Capital or a diminution of Liability in respect of any unpaid Share Capital, the subsections (3), (4) and (5) apply, except so far as the Court directs otherwise under subsection (6).

(3) Any Creditor of the Company is entitled to object to the reduction of capital if the Creditor, at the date fixed by the Court, is entitled to a debt or claim that would be admissible in proof against the Company, if that date were the commencement of the winding up of the Company.

(4) The Court must settle a list of Creditors entitled to object under subsection (3). For that purpose, the Court:

• (a) must ascertain, as far as possible, without requiring an application from any Creditor, the names of the Creditors and the nature and amount of their debts or claims; and
• (b) may publish notices fixing a day or days by which Creditors not entered on the list are to claim to be entered in the list or are to be excluded from the right of objecting to the reduction of capital.

(5) If, for a Creditor entered on the list, the Creditor’s debt or claim is not discharged or has not determined and the Creditor has not consented to the reduction, the Court may dispense with the consent of that Creditor, on the Company securing payment of the Creditor’s debt or claim by appropriating, as the Court may direct, the following amount:

• (a) if the Company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it—the full amount of the debt or claim;
• (b) if the Company does not admit, and is not willing to provide for, the full amount of the debt or claim or the amount is contingent or not ascertained—an amount fixed by the Court.

(6) The Court may, having regard to any special circumstances of the case, direct that subsections (3), (4) and (5) do not apply, or apply with stated modifications, in relation to any class or any classes of Creditors.

(7) An Officer of the Company must not:

• (a) intentionally or recklessly:

(i) conceal the name of a Creditor entitled to object to the reduction of Share Capital, or

(ii) misrepresents the nature or amount of the debt or claim of a Creditor, or

• (b) be Knowingly Concerned in any such concealment or misrepresentation.

(8) Contravention of subsection (7) is punishable by a fine.

67. Court order confirming reduction of Share Capital

(1) The Court may, on the terms it considers appropriate, make an order confirming the reduction of a Company’s Share Capital, if satisfied, in relation to every Creditor of the Company who under section 66(3) (Reduction of Share Capital by Special Resolution confirmed by Court order) is entitled to object to the reduction of the Share Capital, that either:

• (a) the Creditor has consented to the reduction; or
• (b) the Creditor’s debt or claim has been discharged or has determined or has been secured.

(2) If the Court makes an order under subsection (1), it may also make either or both of the following orders:

• (a) an order requiring the Company to publish the reasons for the reduction of Share Capital, or the other information about it that the Court considers appropriate, with a view to giving proper information to the public about the causes that led to the reduction;
• (b) if there is any reserve arising out of the reduction of Share Capital—an order directing whether or not it is distributable.

68. Registration of order and statement of capital

(1) If the Court confirms the reduction of a Company’s Share Capital, the Company must give the Registrar:

• (a) a copy of the order of the Court confirming the reduction; and
• (b) a statement of capital, approved by the Court, showing in respect of the Company’s Share Capital:

(i) the total number of issued Shares; and

(ii) the aggregate nominal value of those Shares; and

(iii) the amount Paid-up and unpaid (if any) on each Share (whether on account of the nominal value or by way of premium).

(2) The Registrar must register the order and statement of capital. On that registration the Special Resolution for reducing the Share Capital as confirmed by the order takes effect.

(3) The Registrar must certify the registration of the order and statement of capital. The certificate:

• (a) must be signed by the Registrar; and
• (b) is conclusive evidence that all the requirements of these Regulations and the Rules in relation to the reduction of Share Capital have been complied with and that the Company’s Share Capital is as stated in the statement of capital.

(4) On its registration, the statement of capital is taken to be substituted for the corresponding part of the Articles of Association.

69. Public Company reducing its Share Capital below its authorised minimum

(1) If registration of an order of the Court under section 67 (Court order confirming reduction of Share Capital) in relation to a Public Company would result in the Company not having the Share Capital required by section 43 (Minimum share capital), the Registrar must nor register the order unless the Company is first re-registered as a Private Company under section 39 (Re-registration of Public Company as Private Company) or the Court has made an order under subsection (2).

(2) The Court may, by order, authorise the Company to be re-registered as a Private Company without it having passed the Special Resolution required under section 39 (Re-registration of Public Company as Private Company). The order must specify the changes to the Articles of Association and name in connection with the re-registration.

(3) The Registrar must, on receipt of an order under subsection (2), issue a certificate of incorporation altered to meet the circumstances of the case. On the issue of the certificate, the Company becomes a Private Company and the changes to the Articles of Association and its name take effect.

70. Liability to Creditors in respect of reduction of Share Capital by Court order

(1) This section applies if:

• (a) a Creditor entitled to object to the reduction of the Share Capital of a Company is not entered on the list of Creditors under section 66 (Reduction of Share Capital by Special Resolution confirmed by Court order) because of the Creditor’s ignorance of the proceedings for the reduction or of the nature and effect of the proceedings on the Creditor’s claim; and
• (b) after the reduction of capital, the Company is unable to pay the amount of the Creditor’s debt or claim.

(2) Every Person who was a Shareholder of the Company on the day the Special Resolution for reducing the Share Capital took effect under section 68(2) (Registration of order and statement of capital) is liable to contribute, towards payment of the Creditor’s debt or claim, an amount not exceeding the amount that the Person would have been liable to contribute if the Company had commenced to be wound up on the previous day.

(3) If the Company is wound up under these Regulations, the Court, on the application of the Creditor and proof that the Creditor is a Creditor mentioned in subsection (1)(a), may settle a list of Persons liable to contribute under subsection (2), and may make and enforce calls and orders on the Persons included on the list as if they were ordinary contributories in a winding up.

(4) This section does not affect the rights of the listed Persons among themselves.

71. Treatment of reserves arising from reduction of capital

Any reserve arising from the reduction of a Company’s Share Capital is only distributable as provided in the Articles of Association or authorised by a Special Resolution, unless otherwise provided by an order of the Court under section 67(2)(b) (Court order confirming reduction of Share Capital).