Section 116. Reduction of share capital by Court

(1) Subject to confirmation by the Court, a company may, by a special resolution, reduce the share capital of the company in any way which includes all or any of the following:

(a) by extinguishing or reducing the liability on any of the shares of the company in respect of unpaid share capital;

(b) by cancelling any paid-up share capital which is lost or unrepresented by available assets;

(c) by returning to the shareholders any paid-up share capital which in excess of the needs of the company.

(2) Where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if directed by the Court—

(a) every creditor of the company who, at the date fixed by the Court, is entitled to any debt or claim which would be admissible in proof against the company as if that date were the date of the commencement of the winding up of the company shall be entitled to object to the reduction of the share capital;

(b) the Court shall settle a list of creditors who are entitled to object, unless the Court is satisfied on affidavit that there are no such creditors shall ascertain as far as possible without requiring an application from any creditor the names, the nature and the amount of debts or claims of those creditors, and may publish notices fixing a final day on or before which creditors not entered in the list may claim to be so entered; and

(c) where a creditor entered in the list whose debt or claim is not discharged or has not been determined does not consent to the reduction, the Court may dispense with the consent of that creditor on the company securing payment of his debt or claim by appropriating as the Court directs—

(i) 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; or

(ii) if the company does not admit and is not willing to provide for the full amount of the debt or claim or if the amount is contingent or not ascertained, an amount fixed by the Court after the similar inquiry and adjudication as if the company were being wound up by the Court.

(3) Notwithstanding subsection (2), the Court may, after considering any special circumstances of any case, direct that all or any of the provisions of that subsection shall not apply with regards to any class of creditors.

(4) The Court may, on such terms and conditions as the Court thinks fit, make an order confirming the reduction if the Court is satisfied with respect to every creditor who under subsection (2) is entitled to object, that—

(a) his consent to the reduction has been obtained; or

(b) his debt or claim has been discharged, determined or secured.

(5) An order made under subsection (4) shall specify the following matters:

(a) the amount of the share capital of the company as altered by the order;

(b) the number of shares into which the share is to be divided; and

(c) the amount, if any, deemed to be paid-up on each share at the date of the order.

(6) The resolution for reducing share capital as confirmed by the order of the Court shall take effect upon lodgement of such order with the Registrar.

(7) A notice confirming the reduction of share capital issued by the Registrar shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with and that the share capital of the company is as stated in the order.

(8) Upon the lodgement of the order of the Court, the particulars shown in the order under subsection (5) shall be deemed to substitute the corresponding particulars in the constitution, if any, and such substitution and any addition ordered by the Court to be made to the name of the company shall be deemed to be alterations of the constitution for the purposes of this Act for such period as is specified in the order of the Court.

(9) Where the name of any creditor entitled to object to the reduction is not entered in the list of creditors by reason of his ignorance of the proceedings for reduction or the nature and effect of the proceedings with respect to his claim and after the reduction, the company is unable to pay the amount of his debt or claim within the meaning of the provisions of this Act with respect to winding up by the Court—

(a) every person who was a member of the company at the date of the lodging of the copy of the order for reduction shall be liable to contribute for 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 to be wound up on the day before the date of the lodging of the copy of the order for reduction; and

(b) if the company is wound up, on the application of any such creditor and proof of his ignorance of the proceedings for reduction or the nature and effect of the proceedings with respect to his claim, the Court may, if it thinks fit—

(i) settle accordingly a list of persons liable to contribute; and

(ii) make and enforce calls and orders on the contributories settled on the list as if the persons liable to contribute were ordinary contributories in a winding up.

(10) The rights of the contributories shall not be affected notwithstanding the reduction of the share capital under subsection (9).

(11) This section shall not apply to an unlimited company, but nothing in this Act shall preclude an unlimited company from reducing its share capital in any manner.

(12) Every officer of the company who—

(a) wilfully conceals the name of any creditor entitled to object to the reduction;

(b) wilfully misrepresents the nature of amount of the debt or claim of any creditor; or

(c) aids, abets or is privy to any such concealment or misrepresentation,

commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding three million ringgit or to both.