Malaysia legislation
Section 53
Section 53
Special resolution for reduction of share capital
(a)
extinguish or reduce the liability on any of its shares in respect of share capital not paid up;
(b)
cancel any paid-up capital which is lost or unrepresented by available assets; or
(c)
pay off any paid-up share capital which is in excess of the needs of the company, or which it is otherwise in the interests of the company as a whole to have paid off,
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and may, so far as necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
(2)
Where the proposed reduction of share capital involves 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 the Court so directs—
(a)
every creditor of the Labuan company who, at the time fixed by the Court, is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction;
(b)
the Court, unless satisfied by statutory declaration by the directors that there are no such creditors, shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a final day on or before which creditors not entered on the list may claim to be so entered; and
(c)
where a creditor entered on 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 Labuan 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, although 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 like inquiry and adjudication as if the company were being wound up by the Court.
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(3)
Notwithstanding the provisions of subsection (2) the Court may, having regard to the circumstances of the case, direct that all or any of the provisions of that subsection shall not apply as regards any class of creditors.
(4)
The Court, if satisfied with respect to every creditor who under subsection (2) is entitled to object, that either his consent to the reduction has been obtained, or his debt or claim has been discharged or has been determined or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit, and may require the Labuan company to publish as the Court directs the reasons for reduction or such other information as the Court thinks expedient, and, if the Court thinks fit, the causes which led to the reduction.
(5)
An order made under subsection (4) shall show the amount of the share capital of the Labuan company as altered by the order, the number of shares into which it is to be divided and the amount of each share and the amount, if any, at the date of the order, deemed to be paid up on each share.
(6)
On the lodging of an office copy of the order with the
Authority, the resolution for reducing share capital as confirmed by the order shall take effect, and the Authority shall issue a certificate of such lodgment.
(7)
The certificate of the Authority 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 a
Labuan company is as stated in the order.
(8)
On the lodging of the copy of the order, the particulars shown in the order pursuant to subsection (5) shall be deemed to be substituted for the corresponding particulars in the memorandum, and such substitution and any addition ordered by the Court to be made in the name of the Labuan company shall (in the case of any addition to the name, for such period as is specified in the order of the Court) be deemed to be an alteration of the memorandum for the purposes of this Act.
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(9)
A member, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount the difference between the amount of the share as fixed by the order and the amount paid, or the reduced amount which is to be deemed to have been paid on the share, as the case may be, but where any creditor entitled to object to the reduction is, by reason of his ignorance of the proceedings for reduction, or of their nature and effect upon his claim, not entered on the list of creditors, and after the reduction the
Labuan company is unable, within the meaning of the provisions of this Act with respect to winding up by the Court, to pay the amount of his debt or claim —
(a)
every person who was a member of that Labuan company at the date of the lodging of the copy of the order of the Court for reduction shall be liable to contribute for the payment of that debt or claim to an amount not exceeding that which he would have been liable to contribute if the company had commenced to be wound up on the day before that date; and
(b)
if that Labuan company is wound up, the Court, on the application of any such creditor and proof of his ignorance of the proceedings for reduction or of their nature and effect upon his claim, may settle a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up, but nothing in this subsection shall affect the rights of the contributories among themselves.
(9A)
Notwithstanding subsection (1), an alteration of the memorandum by reducing the amount of its share capital and of its shares pursuant to a special resolution passed in accordance with subsection (1), may be made without confirmation by the Court, so long as the directors declare by way of a solvency declaration—
(a)
that in their opinion, as regards the Labuan company’s situation at the date of the solvency declaration, there is no
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ground on which the Labuan company could then be found to be unable to pay its debts;
(b)
that in their opinion—
(i)
if there is an intention to commence winding up of the
Labuan company within the period of twelve months immediately following the date of the solvency declaration, that the Labuan company will be able to pay its debts in full within the period of twelve months beginning with the commencement of the winding up; or
(ii)
if there is no intention to commence winding up, that the Labuan company will be able to pay its debts as they fall due during the period of twelve months immediately following the date of the solvency declaration; and
(c)
that they have formed the opinion that the value of the
Labuan company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not, after the proposed reduction, become less than the value of its liabilities (including contingent liabilities), and every creditor of the Labuan company entitled to any debt or claim admissible in proof against the Labuan company at the date of the solvency declaration shall be entitled to object to the reduction.
(9B)
The directors shall lodge a certified copy of the solvency declaration within thirty days with the Authority, and on such lodgment the Authority shall issue a certificate confirming the lodgment of the solvency declaration.
(9BA) If default is made in complying with subsection (9B), the director of the Labuan company who is in default commits an offence under this Act.
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Penalty: Fifty thousand ringgit or imprisonment for a term not exceeding three years or both.
(9C)
The Labuan company shall, for a period of six weeks beginning with the resolution date, make available the solvency declaration or a copy of it at the Labuan company’s registered office for inspection free of charge by any creditor of the company.
(9D)
A creditor of the Labuan company may, at any time during the period of six weeks referred to in subsection (9C), apply to the
Court for the resolution to be cancelled.
(9E)
Subsections (9C) and (9D) shall apply to a creditor of the
Labuan company who, at the date of his application to the Court, is entitled to any debt or claim which, if that date was the commencement date of the winding up of the Labuan company, would be admissible in proof against the Labuan company.
(9F)
Where an application is made by a creditor to the Court under subsection (9D)—
(a)
the creditor shall as soon as possible serve the application on the Labuan company; and
(b)
the Labuan company shall as soon as possible give a notice of the application to the Authority.
(10)
Any officer of a Labuan company who—
(a)
wilfully conceals the name of any creditor entitled to object to the reduction;
(b)
wilfully misrepresents the nature or the amount of the debt or claim of any creditor; or
(c)
aids, abets or is party to any such concealment or misrepresentation, commits an offence under this Act.
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Penalty: *Three million ringgit or imprisonment for a term not exceeding five years or both.
Rights of holders of preference shares to be set out in articles