The requirements for the reduction of share Capital of limited company

The reduction of the share capital of a limited company, because it provides for a detailed procedure, different from that to be followed in the event of an increase in share capital, sometimes generates doubts when it should be done.

Before we get into the specific topic, brief considerations about social capital are necessary. The share capital of a limited company corresponds to the value indispensable for the start of its activities and can be composed of movable property, immovable property, semovents and/or cash, in other words, by everything capable of being valued monetarily.

This amount must be subscribed and paid. The subscription is the promise of delivery of the amount indicated as being that of the share capital, while the payment is the actual delivery, that is, the payment, which may or may not occur at the same time as the subscription.

This is because the partners can, when constituting the company or increasing the share capital, subscribe to their share capital and, subsequently, integrate it. This is what usually happens when the share capital consists of real estate. This is because the integration of ownership of real estate occurs only with the transfer in registration.

Once the share capital has been paid up, the partners can increase it, being a requirement for this only the payment of all the subscribed share capital. Once this is done, the partners must amend the social contract of the company so that it provides for the operation carried out.

Having outlined these brief considerations, we move on to the hypotheses of reduction of share capital that may occur when: (I) the company suffers irreparable losses or (ii) it is excessive in relation to its corporate purpose.

For the first hypothesis, the payment of the share capital is a required requirement and the reduction of the share capital will be carried out through a proportional decrease in the nominal value of the company’s shares. The operation will only be carried out with the recording, in the public registry of Commercial Companies, of the minutes of the meeting/meeting of partners that has approved it. Once this is done, the partners must amend the social contract of the company in order to provide for the reduction of the share capital.

For the second hypothesis, the payment of the share capital is not necessary and, in this case, the reduction of the share capital will be made through the restitution of part of the value of the shares to the partners or through the waiver of the installments still due, with a proportional decrease, in both cases, of the nominal value of the shares. Before, however, the social contract of the company is amended in order to provide for the reduction of the share capital, some steps must be followed:

• Step 1: convene an assembly / meeting of shareholders, observing the legal regulations, to deliberate on the reduction of the share capital;
• Step 2: hold the Assembly / meeting of members, drawing up, at the end, the respective minutes;
• Step 3: publish the minutes of the shareholders ‘ meeting; and
• Step 4: after 90 (ninety) days from the publication of the minutes of the shareholders ‘meeting, record, in the public registry of commercial companies, the minutes of the shareholders’ meeting and amend the company’s articles of incorporation, in order to provide for the reduction of the share capital.

The above-mentioned period of 90 (ninety) days is intended to give the creditors of the company the opportunity to claim the reduction of its share capital. If this is done by any creditor of the company, the reduction will be conditioned on proof of payment of the claimed credit or the judicial deposit of its value.

Failure to comply with the legally provided procedure may result in the nullity of the transaction and, consequently, invalidate the amendment to the social contract that provided for it.

Anna Paula Piovesan Pinheiro

Lawyer, graduated in law, with emphasis in Civil Law, from Universidade Presbiteriana Mackenzie, enrolled in the Brazilian Bar Association, São Paulo Section (OAB/SP) (2021). Author of articles. Lawyer at TM Associados.