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WHEN DOES A REDUCTION TAKE EFFECT?

It is important to note that a reduction of capital only takes effect on registration of the required filings by the Registrar of Companies (at Companies House). Click the following links for an overview of the Solvency Statement and court confirmation procedures.

Filing or sending the papers to Companies House does not amount to registration - Companies House must have actually processed the filings and placed them on the register.

Registration can take over 10 days from receipt of the relevant documents by Companies House (depending on their workload). However, please note that Companies House also offer a same day filing service, which currently costs £50 as opposed to £10 for the standard service.

It follows that if a reduction of share capital is being undertaken as part of a wider transaction, the steps to be taken after the reduction should not be carried-out until the relevant filings appear on the record at Companies House. For example, if you want to declare a dividend of a distributable reserve created on a reduction, then be sure that the reduction has taken effect before the dividend is paid; otherwise the dividend will be unlawful.


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