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Q:
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How can I proceed the capital reduction?
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A:
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Pursuant by section 211 of the Companies Ordinance (Cap. 622), there are two procedures for a company to reduce its share capital, namely:
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1.
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Court free capital reduction procedure (reduction by special resolution supported by a solvency statement; and
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2.
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Reduction of share capital by special resolution confirmed by the Court (solvency statement is not required).
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Q:
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How to choose between the method of share capital reduction?
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A:
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In general, the court fee reduction procedure is comparatively faster and cheaper to get the same result. However, this method is only applicable for a company that is solvent, and a solvency statement must be prepared.
On the other hand, a company that is insolvent must reduce its share capital after obtaining approval from the Court. No solvency statement is required, but confirmation (approval) of the Court must be received before proceeding.
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Q:
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How long does it take for a solvent private company to conduct reduction of share capital?
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A:
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Based on the assumption that no objection is received, it shall take at least 8 weeks to complete the whole procedure. The mentioned period should be starting from the submission of the solvency statement and special resolution.
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Q:
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What should be included in the solvency statement?
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A:
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The solvency statement is a specified form under the Companies Ordinance that include Directors’ opinion in relation to the followings:
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1.
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immediately after the reduction of capital, there will be no ground on which the company could be found to be unable to pay its debts; and
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2.
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either
1）
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For company that intended to commence winding up of the company within 12 months after the date of the reduction of share capital, the company will be able to pay its debts in full within 12 months after the commencement of the winding-up; or
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2）
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For other cases, the company is able to pay its debts when due during the period of 12 months immediately, following the date of the reduction of share capital.
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Q:
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Who should be in charge for making and signing the solvency statement?
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A:
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The solvency statement must be made by all directors of the company. When forming the opinions, they are liable to investigate the company’s state of affairs and prospects and take all the liabilities of the company, including contingent and prospective/ future liabilities, into account.
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Q:
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Where shall the special resolution and the solvency statement be kept?
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A:
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Pursuant to section 219(1), the company must ensure that the special resolution re approval of reduction of share capital and the solvency statement must be kept a the company’s registered office or designed place for member’s and creditors’ inspection during the following periods:
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1.
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Beginning of the day that the company published the Gazette related to the reduction, or first publication of notice of reduction, whichever is earlier.
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2.
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Ending five weeks after the date of special resolution.
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Q:
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What is the requirement of Gazette and publication?
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A:
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The followings must be included in the notice:
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一、
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A statement of the company’s approval on the reduction;
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二、
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Specific amount of the share capital to be reduced and the date of the special resolution;
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三、
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Location of the special resolution and solvency statement that are available for members’ and creditors’ inspection; and
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四、
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Statement to the creditors or the members, who did not consent to or vote in favor of the special resolution, may apply to the Court for cancellation within five weeks after the date of special resolution.
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Other than a Gazette, the company must publish a notice in 1 English and 1 Chinese in specified newspaper before the end of the week of which the special resolution is passed.
Kaizen could assist you to publish a Gazette and Publication in case required. Please contact our professionals for further details.
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FAQ
