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reduction of capital

The reduction by a limited company of its share *capital. Under the Companies Act 1985 there are two principal methods by which this may be achieved. When the company has capital in excess of its needs it can extinguish or reduce the liability of its members on any uncalled capital or it can repay to them the nominal value of their shares. When the company has suffered losses it can cancel paid-up shares because they are unrepresented by available assets. The reduction, which requires a *special resolution, must be authorized by the articles of association and confirmed by the court. If a variation of *class rights is involved, the consent of the shareholders is usually necessary. See also *alteration of share capital; *authorized capital.

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