XYZ Ltd. is going for reduction of capital, but the Board of directors of the company expects objection from some of the creditors of the company. The Board seeks your opinion as a company secretary with respect to this

After passing the special resolution for the reduction of capital, XYZ Ltd. has to apply to the National Company Law Tribunal (NCLT) for the confirmation of resolution under section 66 of the Companies Act, 2013. Where the proposed reduction of share capital involves either (i) diminution of liability in respect of unpaid share capital, or (ii) the payment to any shareholder of any paid-up share capital, or (iii) in any other case, if the Tribunal so directs, the following provisions shall have effect: The creditors having a debt or claim admissible in winding-up are entitled to object. To enable them to do so, the Tribunal will settle a list of creditors entitled to object. If any creditor objects, then either his consent to the proposed reduction should be obtained or he should be paid off or his payment be secured. The Tribunal, in deciding whether or not to confirm the reduction will take into consideration the rights of the creditors. The Tribunal shall give notice of every application made to it to the Central Government, Registrar of Companies and to the Securities and Exchange Board of India, in the case of listed companies, and the creditors of the company and shall take into consideration the representations, if any, made to it by Central Government, Registrar, the Securities and Exchange Board and the creditors within a period of three months from the date of receipt of the notice. If no representation has been received from them within the said period, it shall be presumed that they have no objection to the reduction. Provided that no application for reduction of share capital shall be sanctioned by the Tribunal unless the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards specified in section 133 of the Companies Act, 2013 or any other provision of the Act and a certificate to that effect by the company's auditor has been filed with the Tribunal. There is no limitation on the power of the Tribunal to confirm the reduction except that it must first be satisfied that all the creditors entitled to object to the reduction have either consented or been paid or secured [British and American Trustee and Finance Corporation v. Couper (1894)]. When exercising its discretion, the Tribunal must ensure that the reduction is fair and equitable.