(1)Where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.
(2)If the proposed reduction of capital involves either—
(a)diminution of liability in respect of unpaid share capital, or
(b)the payment to a shareholder of any paid-up share capital,
section 646 (creditors entitled to object to reduction) applies unless the court directs otherwise.
(3)The court may, if having regard to any special circumstances of the case it thinks proper to do so, direct that section 646 is not to apply as regards any class or classes of creditors.
(4)The court may direct that section 646 is to apply in any other case.
Cases considering section 645 (4)
[2019] EWHC 751 (Ch) · 26 March 2019
Applies the court’s jurisdiction to confirm the reduction of capital. The reduction was confirmed because it served the same discernible commercial purpose as the scheme and did not prejudice creditors (see paras [13], [38]).
[2018] EWHC 873 (Ch) · 20 April 2018Disapplies
Provides the procedural basis for applying to confirm a reduction of share capital after a special resolution. (see para [73])
Does not apply because the Demerger Reduction involved neither diminution of liability for unpaid share capital nor repayment of paid-up share capital. (see para [74])
Identifies a discretion to direct that the creditors-list procedure does not apply in special circumstances, although the judgment proceeded under section 645(4). (see para [73])
Provides the basis for considering whether to direct that the creditors-list procedure applies in a case not falling within section 645(2). The court provisionally concluded that no list was required. (see paras [73]-[74], [87]-[96])
[2014] EWHC 1357 (Ch) · 1 May 2014Defines
The court explains that a company which has passed a resolution for reducing share capital may apply for an order confirming the reduction. This provides the procedural basis for the confirmation application (see para [23]).
The court identifies the circumstance in which section 646 applies to a proposed reduction involving payment to a shareholder of paid-up share capital (see para [23]).
The court treats payment of paid-up share capital to shareholders as the trigger for applying section 646 unless the court directs otherwise (see para [23]).
The court recognises its power, having regard to special circumstances, to direct that section 646 does not apply to a class of creditors. That power was exercised in the case (see paras [23], [52]).
What each judgment says about section 645 is in the case-law panel in the full Act.
966.These sections replace or restate various provisions in the 1985 Act that are concerned with reductions of capital confirmed by order of the court.
967.Sections 645 and 646 restate section 136 of the 1985 Act which is concerned with the procedure for making an application to court to confirm a reduction of capital (including the creditors’ right to object). If, on such an application, an officer of the company intentionally or recklessly conceals a creditor or misrepresents the nature or amount of a debt owed by the company, or is knowingly concerned in any such concealment or misrepresentation he commits an offence (see section 647). As now the court may make an order confirming the reduction of capital on such terms and conditions as it thinks fit (see section 648 which restates section 137 of the 1985 Act).
968.Section 649 replaces section 138(1) to (4) of the 1985 Act. Under section 138 of that Act, a resolution to reduce capital using the existing court approved scheme takes effect when the court order confirming the reduction and minute of the reduction are registered by the registrar. The minute (which must be approved by the court) sets out key information regarding the company’s share capital immediately after the reduction. Section 649 updates the 1985 Act provisions by replacing the current requirement for a minute of the reduction with a statement of capital (see note on section 619). Like the minute confirming the reduction, this statement must be approved by the court.
969.In line with the CLR’s recommendations (Final Report, paragraph 13.11), subsection ( 3)(a)(i) of this section provides that a reduction of capital that forms part of a compromise or arrangement under Part 26 of the Act will take effect at the same time as other aspects of that compromise or arrangement: namely on delivery of the court order confirming the reduction (and statement of capital approved by the court) to the registrar (unless the court orders that it should take effect on the registration of these documents) (see new subsection (3)(a)(ii)).
970.In all other cases, that is, where the reduction of capital does not form part of a compromise or scheme of arrangement under Part 26, where a company reduces its share capital using the court approved procedure the reduction will, as now, take effect on registration of the court order confirming the reduction (and statement of capital) by the registrar. Subsection ( 5) requires the registrar to certify the registration of the order and statement of capital. Subsection ( 6) restates section 138(4) of the 1985 Act in relation to such certificate.