Provided that a confirmation by the Court is obtained, a company limited by shares or a company limited by guarantee which also has a share capital may, if so authorized by its articles of association, by special resolution notified to the Department of the Registrar of Companies and Intellectual Property (hereinafter referred to as the “Registrar”) and published pursuant to section 365A of the Companies Law (Cap 113) (hereinafter referred to as the “Law”), has the power to proceed with a reduction of its share capital in any way, and in particular, without prejudice to the generality of the foregoing power, may:

1. eliminate or reduce the liability on any of its shares in connection with the non paid up share capital; or
2. either with or without reducing or eliminating liability on any of its shares, cancel any paid-up share capital which is lost or not represented by the company’s available assets; or
3. either with or without reducing or eliminating liability on any of its shares, return any paid up share capital which is in excess of the company’s needs;
4. write off paid up share capital for the purpose of nullifying company’s losses;
5. write off paid up share capital by the creation of a reserve account, to be named “the capital reduction reserve fund” that shall be subjected to the same treatment as the share premium account in accordance with section 55 of the Law, and may, if it is considered necessary, alter its memorandum by reducing the amount of its share capital and of its shares (section 64 of the Law).

It shall be noted that in cases of a public companies, the issued share capital cannot be reduced to an amount which is lower than the minimum share capital provided for in section 4A of the Law (namely the amount of €25.629), unless the decision regarding the reduction provides for an increase of the share capital to an amount at least equal to the aforesaid minimum share capital at the same time (section 64 of the Law).

A company passing a resolution regarding a share capital reduction, may apply to the Court requesting the issue of an order confirming the reduction (section 65 of the Law).

If the reduction of share capital involves decrease of liability in connection with any unpaid share capital or the return to any shareholder of any paid-up share capital, and in any other case if the Court so directs, the below provisions shall apply, subject to subsection 65(3) of the Law (subsection 65(2) of the Law):

1. each company’s creditor who on the date determined by the Court is entitled to any debt or claim that would be admissible as proof against the company (if that date were the commencement of the company’s dissolution), and who can prove that there is a reasonable possibility that the reduction of the share capital will jeopardize the repayment of the debt or the settlement of the claim thereof, and that there are no adequate guarantees in place by the company, shall be entitled to object to the reduction;
2. the Court shall arrange for the preparation of a list of creditors that are entitled to object, and to this end, shall determine/discover, as far as possible without requiring an application to be submitted by the creditors, the names of the said company’s creditors and the nature and amount of the debts or claims thereof, and may publish notices setting  a day or days within which creditors the names of which are not included therein will be able to claim to be entered on the said list or are to be excluded from the right of objecting to the reduction;
3. if a debt or claim of a creditor included in the list is not repaid or is not determined, and the said creditor does not consent to the reduction, the Court may, if it considers appropriate, not request the consent of the specific creditor upon the company securing of the payment of his debt or claim, and the Court may direct, the following amount:
4. In case the company admits the full amount of debt or claim, or, even if the company does not admit the full amount of the debt or claim, is willing to pay for it, then the amount determined by the Court is full amount of the debt or claim;
5. In case the company does not admit or is unwilling to pay and/or settle the full amount of the debt or claim, or if the amount is contingent or not determined, then an amount shall be fixed by the Court upon the conduct of an inquiry and adjudication as if the company was wound up by the Court.
6.  

If a reduction of share capital involves the limitation of liability in connection with any unpaid share capital or the repayment to any shareholder of any paid share capital, the Court may direct that subsection 65(2) of the Law shall not apply regarding any class or any classes of creditors (subsection 65(3) of the Law).

Provided that the Court is satisfied with regards to each company’s creditor entitled to object to the reduction that either his acquiescence to the reduction has been acquired or his debt or claim has been settled/repaid or determined, or has been secured, the Court may proceed with the issue of an order approving the reduction on such terms and conditions as it considers appropriate (subsection 66(1) of the Law).

Upon submission with the Registrar of a copy of the order issued by the Court, confirming the reduction of the company’s share capital, and the minutes approved by the Court indicating the share capital amount as modified by the order, the number of shares into which the share capital is to be divided, the value of each share and the amount, if any, deemed to be paid on each share, the competent officers of the Registrar shall proceed with the registration of the order and minute (subsection 67(1) of the Law).

Moreover, it is noted the order and minutes approving the reduction of the company’s share capital shall have effect upon submission and registration thereof with the Registrar (subsection 67(2) of the Law).

The Registrar shall certify the registration of the order and the minutes. The certificate issued by the Registrar shall constitute conclusive evidence that all the requirements of the Law relating to the reduction of the company’s share capital have been complied with (subsection 67(4) of the Law).

The minutes, upon submission and registration thereof with the Registrar are deemed to substitute the corresponding part of the company’s memorandum, and shall be valid and variable as if these had been originally contained therein (subsection 67(5) of the Law).