Major changes to Companies Act 2016 in terms of Management and Restructuring of Share CapitalChange in Company Act Part 2 of 4

01eKTP 26

02Management and Restructuring of Share Capital under Companies Act, 2016
 

The major changes under the new Act in terms of management and restructuring of share capital are as follow:

03
a. No par value regime

The adoption of no par value regime will:

1. Simplify the company’s account
2. Enable company to raise capital with greater flexibility
3. Clarify the misleading perception that because of the par value
   

04b. Introduction of Solvency Statements as part of simplification rules for the following exercises:

1. Reduction of share capital
2. Redemption of share capital
3. Provision of financial assistance
4. Share buy back
5. Declaration of dividend

The solvency statements will take into account of

1. Cash flow solvency
2. Balance sheet solvency
3. Value of assets
   

05c. Loosening the Financial Assistance Prohibition

Under the new Companies Act, 2016, companies may give financial assistance for the purposes of

1. acquisition of its shares
2. reducing or discharging liability incurred for such an acquisition