Reduction of Share Capital

Reduction of Share Capital

 

 A private company can have a reduction of its share capital to create or increase its distributable reserves. Reduction of share capital may be undertaken by private company in the following circumstances:

To return Surplus Capital

A private company may have cash which it has no immediate use, e.g sale proceeds obtained from sale of its assets or where cash was raised on a share issue for a particular purpose and circumstances have changed so that the funds are no longer required.

A reduction in share capital can be used to return some or all of this cash to shareholders by repaying paid-up share capital.

To facilitate Shares Buyback or Shares Redemption

A private company can redeem or buy back its own shares out of its distributable reserves or share capital.

If the company has insufficient distributable reserves or share capital to fund a buyback or share redemption, then the company reduce its share capital in accordance with sections 224 and 225 of the Companies Ordinance (Cap. 622) to create the required reserves for the buy back or redemption of shares.

 

For legal advice and services on share capital reduction of private company in Hong Kong, please contact CHOW & CHEUNG, Hong Kong Solicitors & Notary Public [ Tel: +852 2856 3799 or Email: cac@ccsn.hk]

Website:  www.ccsn.hk