You are the Company Secretary of PQR Ltd. The Board of the company is opting for reduction in the share capital of the company without seeking the approval of the Tribunal. How would you advise the Board?

Cases which amount to reduction of share capital but where no approval/confirmation by the Tribunal is necessary: (a) Surrender of shares - 'Surrender of shares' means the surrender of shares already issued, to the company, by the registered holder of shares. Where shares are surrendered to the company, whether by way of settlement of a dispute or for any other reason, it will have the same effect as a transfer in favour of the company and amount to a reduction of capital. But if, under any arrangement, such shares, instead of being surrendered to the company, are transferred to a nominee of the company then there will be no reduction of capital [Collector of Moradabad v. Equity Insurance Co. Ltd., (1948) 18 Com Cases 309: AIR 1948 Oudh 197]. Surrender may be accepted by the company under the same circumstances where forfeiture is justified. It has the effect of releasing the shareholder whose surrender is accepted for further liability on shares. The Companies Act, 2013 contains no provision for surrender of shares. Thus, surrender of shares is valid only when Articles of Association provide for the same and: (i) where forfeiture of such shares is justified; or (ii) when shares are surrendered in exchange for new shares of same nominal value. Both forfeiture and surrender lead to termination of membership. However, in the case of forfeiture, it is at the initiative of company and in the case of surrender it is at the initiative of member or shareholder. (b) Forfeiture of shares - A company may if authorised by its articles, forfeit shares for non-payment of calls and the same will not require confirmation/approval of the Tribunal. (c) Diminution of capital - Where the company cancels shares which have not been taken or agreed to be taken by any person. (d) Redemption of redeemable preference shares. (e) Buy-back of its own shares.