Commentary Part 17: a Company’s Share Capital Chapter 10: Reduction of Share Capital Section 642: Reduction of capital supported by solvency statement
955.This section sets out the conditions that must be satisfied in order for a private company limited by shares to reduce its share capital using the new solvency statement procedure.
956.The procedural requirements that the directors must follow when they propose a capital reduction using the solvency statement route are set out in subsections (1) to (3) which provides that the solvency statement made in connection with a reduction of capital by a private company cannot be made more than 15 days before the date on which the resolution to reduce capital is passed. It also provides that both the resolution and the solvency statement must be filed with the registrar in accordance with the provisions of section 644.
957.The solvency statement must also be made available to the company’s members when they vote on the resolution to reduce capital and the procedure for providing a copy of the solvency statement to the members varies according to whether the resolution to reduce capital is proposed as a written resolution or at a meeting of the company’s members (see subsections (2) and (3)). Whilst a failure to observe these procedural requirements will not affect the validity of the resolution to reduce capital, if a solvency statement which has not been provided to the company’s members in accordance with the provision of this section is subsequently filed with the registrar, every officer of the company who is in default commits an offence (see section 644).