NCLT enables the consolidation and reduction of the share capital of Simpson and Co
Chennai: On a stay of Simpson and Co, the National Company Law Tribunal (NCLT), Chennai authorized the consolidation of shares and reduction of the company’s share capital. Consequently, the paid-up shares of Rs 10 each in the company’s share capital will be grouped into 250 shares of Rs 2,500 each. Dismissing the objection raised by the dissident shareholders to the consolidation, the bench composed of R Sucharitha (judicial member) and B Anil Kumar (technical member) ordered the company to create a trust to deposit the fractional shares of the dissidents.
According to the company, the board of directors at its meeting on September 25, 2019 approved the proposal to consolidate the share capital into shares of a larger amount by increasing the par value of the shares from Rs 10 to Rs 2,500 per share. so that all 250 shares with a par value of Rs 10 held by a member are consolidated into 1 share with a par value of Rs 2,500.
It has also been decided that any fraction resulting from such consolidation will be reduced under the provisions of the Companies Act of the capital of the company. The consideration to be paid for the shares has been set at Rs 14,860 per share.
According to the company, the decision was made in view of the large number of small shareholders as the private company has become very cumbersome and expensive for the company to serve the large number of shareholders. He added that consolidating actions should be beneficial for all parties involved. On the one hand, small shareholders would get an exit opportunity for stocks that don’t have a ready market, while the company will benefit from significant cost savings.
In agreement with the same, the court rejected the objections of the dissident shareholders and ruled in favor of the company.