Rules 1 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 1 to 3 of the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 set out how a company applies to the Tribunal to confirm a reduction of its share capital under section 66: the Form RSC-1 application, the list of creditors and auditor's certificates that go with it, the notices the Tribunal gives, and the publication of the notice. They are stated as amended up to the rules as notified on 15 December 2016, with no amendment listed by MCA, per the MCA e-book; later amendments should be checked.
The application to confirm a reduction is made in Form RSC-1 with the fee in the Schedule of fees. It carries a creditor list (made not earlier than fifteen days before filing and certified by the Managing Director or two directors), the auditor's certificate on that list, a certificate and declaration on deposit arrears, and an auditor's certificate on the accounting treatment. The Tribunal gives notice within fifteen days of submission, notice to creditors goes within seven days of its direction, and objections are filed within three months of publication.
Overview
Section 66 of the Act provides for reduction of share capital; see Section 66 of the Companies Act, 2013: reduction of share capital. These rules give the Tribunal procedure, and they carry forward in Rules 4–6, the Schedule of Fees and the forms. A scheme of compromise or arrangement before the Tribunal follows a different route; for the petition stage there, see Rules 15–17 of the CAA Rules.
Companies planning a reduction can discuss the documents and the timetable with us under legal consultation.
Rule 1: title, commencement and definitions
The rules came into force on the date of their publication in the Official Gazette (notification of 15 December 2016, made under section 469(1) and (2) read with section 66). Rule 1(3) says that words not defined in the rules but defined in the Act, the Companies (Specification of Definitions Details) Rules, 2014 or the National Company Law Tribunal Rules, 2016 carry the meanings given there. The NCLT Rules, 2016 are a separate set of rules and are not explained here.
Rule 2: the application and its documents
2(1). An application to the Tribunal to confirm a reduction of share capital is in Form RSC-1, with a fee as prescribed in the Schedule of fees to these rules. The fee is set out in the article on Rules 4–6, the Schedule of Fees and forms.
2(2). The application is accompanied by:
- (a) the list of creditors, duly certified as true and correct by the Managing Director, or in his absence by two directors, made as on a date not earlier than fifteen days before the date of filing, showing creditors class-wise with their names, addresses and amounts owed;
- (b) a certificate from the auditor that the list in (a) is correct as per the company's records, verified by the auditor;
- (c) a certificate by the auditor and a declaration by a director that the company is not, on the date of filing, in arrears in the repayment of deposits or interest on them; and
- (d) a certificate by the company's auditor that the accounting treatment proposed for the reduction conforms to the accounting standards specified in section 133 or any other provisions of the Act.
2(3). Copies of the creditor list are kept at the registered office. Any person who wants to inspect it may do so at any time during ordinary business hours and take extracts, on payment to the company of fifty rupees for inspection and ten rupees per page for extracts.
Rule 3: notice and directions by the Tribunal
3(1). Within fifteen days of submission of the application under rule 2, the Tribunal gives notice, or directs that notice be given, seeking representations and objections, to:
- (i) the Central Government and the Registrar of Companies, in all cases, in Form RSC-2;
- (ii) the Securities and Exchange Board of India, for listed companies, in Form RSC-2; and
- (iii) the creditors of the company, in all cases, in Form RSC-3.
3(2). The notice to creditors is sent within seven days of the Tribunal's direction, or another period the Tribunal directs, to each creditor in the list, about the application and the list, stating the amount of the proposed reduction, the amount or estimated value of the creditor's debt, contingent debt or claim, and the time within which he may send representations and objections.
3(3). Along with its directions, the Tribunal directs publication of the notice, in Form RSC-4, within seven days of the directions, in English in a leading English newspaper and in a leading vernacular newspaper, both with wide circulation in the State where the registered office is, or in newspapers the Tribunal directs, and uploading on the company's website (if any), seeking objections from creditors and stating the hearing date.
3(4). The published notice states the amount of the proposed reduction, the places where the creditor list may be inspected and the time fixed by the Tribunal for creditors' objections. A proviso says objections, if any, are filed in the Tribunal within three months from the date of publication of the notice, with a copy served on the company.
3(5). The company, or the person directed to issue notices and publication, files an affidavit in Form RSC-5 confirming dispatch and publication, as soon as may be but not later than seven days from the date the notices are issued.
3(6). Where the Tribunal is satisfied that the debt or claim of every creditor has been discharged, determined or secured, or his consent obtained, it may dispense with notice to creditors or publication, or both.
Example. Nirmal Textiles Ltd files Form RSC-1 on 20 March, with a list of creditors made on 12 March and certified by its Managing Director, an auditor's certificate on the list, a certificate and declaration on deposits, and a certificate that the accounting treatment follows section 133. The Tribunal, within fifteen days, directs notices in RSC-2 to the Central Government and the Registrar, and in RSC-3 to each creditor, and orders publication in RSC-4 in an English and a vernacular newspaper. The company sends the creditor notices within seven days and files the RSC-5 affidavit within seven days of issue.
Steps and periods as printed
| Step | Rule | Who | Period as printed | Form |
|---|---|---|---|---|
| Application to confirm reduction | 2(1) | Company | None | RSC-1, fee per Schedule |
| Creditor list | 2(2)(a) | Managing Director or two directors | Made not earlier than fifteen days before filing | Certified list |
| Notice to authorities and creditors | 3(1) | Tribunal | Within fifteen days of submission | RSC-2; RSC-3 |
| Notice sent to each creditor | 3(2) | Company or person directed | Within seven days of direction | RSC-3 |
| Newspaper publication | 3(3) | Company or person directed | Within seven days of directions | RSC-4 |
| Objections to Tribunal | 3(4) proviso | Creditors | Within three months of publication | None |
| Affidavit of dispatch and publication | 3(5) | Company or person directed | Not later than seven days from issue | RSC-5 |
| Dispense with notice | 3(6) | Tribunal | If every creditor's claim discharged, determined, secured or consented | None |
Need help with a reduction of capital?
A reduction needs a clean creditor list, the right auditor's certificates and notices that go out on time. Our advisers can help you plan the filing and the notices; start with a legal consultation and bring your latest balance sheet and creditor records.
Key takeaways
- The application is in Form RSC-1 with the Schedule fee, plus four sets of supporting documents.
- The creditor list must be made not earlier than fifteen days before filing and certified by the Managing Director or two directors.
- The Tribunal gives notice within fifteen days; creditor notice and publication each have a seven-day period.
- Objections are filed within three months of publication, with a copy to the company.
- The Tribunal may dispense with creditor notice if every creditor's claim is discharged, determined, secured or consented to.
Read next
- Rules 4–6 of the NCLT reduction rules: objections, hearing, order and fees
- Rules 15–17 of the CAA Rules: petition to sanction a scheme
- Section 66: reduction of share capital
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.