Warners Corporate team completed a corporate restructuring of a privately owned IT consultancy based in London. Part of the restructuring involved creating reserves that could be distributed to shareholders of the company. A relatively new procedure that was implemented by the Companies Act 2006 was utilised. This procedure negates the need for a private company to seek court approval to reduce its share capital. Instead, the shareholders can pass a special resolution approving the reduction of share capital. The shareholders’ resolution is supported by the directors of the company making a statement that the company is solvent and will continue to be able to pay its debt during the following 12 months.
“The new procedure implemented by the new Companies Act was introduced with effect from October 2008. The procedure enables privately owned companies, both large and small, to reduce their share capital in a variety of ways and has greatly simplified the process by dispensing with the need for an application to be made to court. In these difficult times the procedure provides a useful and cost effective method for private companies to dispense with unwanted share capital and create reserves that can then be paid out to shareholders”.