If the majority of shareholders decide to reduce the share capital of the company by special resolution, it has the right to decide how the reduction shall take place. Discuss.

It is true if majority of shareholders decide to reduce the share capital of the company in the General Meeting and have the special resolution passed, there is no legal impediments or valid reasons for not allowing the reduction of share capital. In 'Siel Ltd., In re. (2008) 144 com. Cases 469 (Del.)}', reduction of capital was discussed that the petitioner company proposed to reduce the share capital by cancelling its equity shares which amount was to be credited to the general reserve account of the company. The reduction was approved by a special resolution passed in accordance with the provisions of Section 189 of the Companies Act, 1956 (now Section 114 of the Companies Act 2013), at an Extraordinary General Meeting. The reduction was in accordance with the Articles of Association of the company. On the objection raised by the Central Government, the petition was allowed on the ground that the reduction of share capital of a company is a domestic concern of the company and the decision of the majority would prevail. If the majority by special resolution decides to reduce the share capital of the company, it has the right to decide that how the reduction should be affected. A selective reduction is permissible within the frame work of the law for a company limited by share. Thus while reducing the share capital the company can decide to extinguish some of its shares without dealing in the same manner with all other shares of the same class. When the creditors and shareholders of the company approved the reduction of share capital none is affected and there has been no unfair or inequitable transaction.