In what circumstances does a company's share capital automatically increase according to government directives?

Share capital increases with government orders.

• Conversion of loans to shares.

• Government directives play a role.

• Terms must be reasonable.

What is the primary distinction between the reduction of share capital and diminution of capital as per the Companies Act?

Reduction and diminution differ significantly.

• Reduction needs court approval.

• Diminution requires ordinary resolution.

• Diminution cancels unissued shares.

Fill in the blank: The Tribunal's order confirming the reduction of share capital must be published in ___ as directed by the Tribunal.

A manner specified by the Tribunal

True or False: A company can directly issue stock without converting its fully paid-up shares into stock.

False. A company can only convert fully paid-up shares into stock; direct issuance of stock is not allowed.

What are the key requirements for a company to buy back its shares under Section 68 of the Companies Act?

Key requirements for share buy-back.

• Authorized by company articles.

• Approved by board or resolution.

• Maintain debt-equity ratio of 2:1.

Explain the significance of creditors’ rights in the context of share capital reduction.

Creditors' rights protect their interests.

• Ensure debts are safeguarded.

• Court checks claims before approval.

• Maintains financial stability and trust.

What procedural steps must a company take to effect a reduction of share capital without tribunal approval?

Reduction of share capital is possible.

• Share forfeiture is one method.

• Surrender of shares is allowed.

• Must follow company’s articles.

In what scenario can a company proceed with a reduction of share capital despite being in arrears?

A company must remedy defaults first.

• Defaults must be resolved first.

• Timeframe of three years applies.

• Legal provisions govern reductions.

Fill in the blank: A company must file a declaration of solvency with the Registrar of Companies when intending to ___ its own shares.

Buy back

What are the implications for a company if it fails to comply with the regulations governing buy-backs?

The company may face fines ranging from ₹1 lakh to ₹3 lakh and its officers could face imprisonment for up to three years or fines for non-compliance.