The Procedure for Reduction of Share Capital.

How to Reduce Share Capital of the Company

After company registration if any time the directors or members of the company decide that they want to reduce the share capital of the company following procedure should be followed as per the articles of companies’ ordinance, 1984:

  1. Un-paid share Capital

 After company registration if a company may extinguish or reduce its liability on unpaid shares by reducing the capital to that extent.

  1. Lost or un-represented by assets of the company:

After company registration if some of the assets of the company is lost for example due to fire the capital of the company does not reflects such assets and therefore in such conditions the company may opt for reduction of share capital.

  1. Excess Capital:

After company registration if at any time the company feels that any paid up capital is in excess of its wants it may opt for reduction of such capital.

After Company Registration the procedure for reduction of share capital is as under:

  1. The directors of the company consider the proposal of reduction of share capital in their meeting and pass a resolution in this regard. The resolution should mention the amount of authorized capital, no of shares and reasons as to why company wants to reduce its share capital after registration.
  2. The next step is directors of the company call a meeting of the shareholders to pass a resolution for reducing the share capital. Notice of meeting shall be sent to the members at least 21 days before the meeting. If at the time of company registration the company was registered as listed company the aforesaid notice shall also be published in at least 2 newspapers circulating in the province where the stock exchange at which the company is listed is situated.
  3. The resolution for reducing share capital is discussed in the meeting and should be passed by a resolution of at least ¾ of the members of the company.
  4. Copy of special resolution is filed with the registrar on the concerned form 26.
  5. Consent of the creditors is obtained.
  6. Petition is filed to the court for order confirming reduction.
  7. Advertisement for reduction is published in newspaper on the direction of the court.
  8. On confirmation from court the following documents are filed with registrat.
  9. Certified copy of the order of the court
  10. Copy of special resolution on Form 26
  11. Amended copy of Memorandum and Articles of Association with new minutes forming part.
  12. Bank Challan as required by Securities and Exchange Commission of Pakistan.

Stock Exchanges are informed about the reduction of share capital.

Alteration shall be mentioned in all subsequent copies of memorandum and articles of association.

Words and reduced shall be added for one year or any other period if fixed by the court to the name of the company.


Before I go into detailed process of how to transfer shares for company registered in Pakistan let me first explain for purpose of understanding what the meaning of transfer of shares is:

First see the below two definitions for understanding purposes

Transfer in law means an act through which the property is transferred from one person to another.


Transmission means the act through which the title of the property is transferred from one person to another through operation of law.

So transfer of shares means the procedure through which the shares from an existing shareholder is transferred from one person to another normally for some consideration whereas if such transfer is initiated through some act of law then it will be called as transmission and not transfer.

Under law all the shareholders of the company have the right to transfer their shares as and when they like except if the transfer of shares is explicitly denied by the articles of association of the company then it is not possible.

Now let us see the relevant provisions of the companies ordinance, 1984 regarding the transfer of shares and debentures:

The first relevant provision with regard to transfer of shares in the company states that every company has the right to transfer it shares in case the application is made. The transfer shall me made within 45 days from the date of application.

When a person submits to the company the share transfer deed and the company finds any deficiency in the trust deed the company shall notify within 30 days of any problem identified in the share transfer deed.

However if any different provisions are stated in the Articles of Association of the company that shall also be taken into consideration in fact they are going to supersede this process of transfer of shares.

The process for Transfer of shares for Company registered in Pakistan:

  1. Preparation of Share Transfer deed and submission with the company in case of Private Limited Company.
  2. The company only proceeds to transfer the shares if the transfer deed is proper and is duly executed by the transferor and the transferee.
  3. Approval from Board of directors confirming the transfer of shares.
  4. Changes in the Memorandum of the company stating the new pattern of shareholding against each member.
  5. Reporting the transfer of shares on the prescribed forms is the next and last step for transfer of shares.