CAPITAL AND SHARES

35
for an order confirming the reduction (ss. 55, 56). The
power to reduce may be exercised in any way whatever
[see Poole v. National Bank of China (1907), A.C. 229],
although the Act particularises three ways, namely (a) by
extinguishing or reducing the liability on any of its shares
in respect of share capital not paid up; (b) either with or
without extinguishing or reducing liability on any of its
shares by cancelling paid-up capital which has been lost or
is unrepresented by available assets; and (c) either with or
without extinguishing or reducing liability on any of its
shares, by paying off any paid-up share capital which is in
excess of the wants of the company (s. 55).

In certain instances there is a practical reduction which can
be effected without the sanction of the Court, e.g. by for-
feiture of shares or by surrender (see Chapter IX). S. 40
of the Act of 1908, which gave power to pay off paid up capital
out of accumulated profits was repealed by the Act of 1928.
Where the articles of a company, as originally framed, or
as altered by special resolution, authorise it, shares not taken
or agreed to be taken may be cancelled, and the nominal
capital thus reduced without application to the Court (s. 50).

If the original articles do not give the power they must first
be altered in the usual way by special resolution, and the
special resolution for reduction subsequently passed [Patent
Invert Sugar Co. (1886), 31 Ch. D. 166]. A power to reduce
contained only in the memorandum is ineffective (re Dexine
Co. (1903), W.N. 82]. The precise procedure to be adopted
to effect a reduction depends upon whether or not the re-
duction involves either the diminution of liability in respect
of unpaid capital, or the return to shareholders of paid-up
capital. If either of these is involved, creditors are clearly
affected and may object [s. 56 (2)]; but in the more common
case where paid-up capital has been lost, or is unrepresented
by available assets, creditors are not prejudiced, and in such
cases, and indeed in any case other than the two cases speci-
fically mentioned in s. 56 (2), can only object if the Court so
allows.

The petition is supported by affidavit evidence. An
affidavit by the chairman of directors commonly sets out
the history of the company, and the circumstances leading
to the present position; whilst the secretary should depose
to the due calling of the meetings of the company. In
the case where the reduction is sought to be effected on
the ground of capital lost or unrepresented by available
assets, evidence of the loss should always be adduced [Caldwell
v. Caldwell (1916), W.N. 70].