NCLT Dismisses Selective Capital Reduction

In a recent decision¹, the National Company Law Tribunal (NCLT), Kolkata Bench, against the established precedents, dismissed the selective capital reduction proposed by Philips India Limited (Philips). A capital reduction was proposed by Philips in terms of Section 66 of the Companies Act, 2013 (the Act) to squeeze out the minority shareholders.

The facts of the case are as follows:

• The non-promoter public shareholders held 3.16% in the paid-up share capital of Philips.
• The equity shares of Philips were delisted from the stock exchanges in the year 2004.
• Consequent to delisting, the public shareholders holding 3.16% of the total shareholding do not have avenue to monetize their shareholding. Therefore, Philips proposed selective capital reduction to give exit to said non-promoter public shareholders.