The privilege of limited liability clause for a company limited by shares implies that company cannot return its paid up share capital to its shareholders as its paid up share capital must be preserved for the benefit of the company’s creditors. However, the Act recognises that situations may render good justification for company to reduce its share capital. Henceforth, given the concerns, the reduction of the company’s capital is regulated by Section 64 of the Companies Act 1965 and procedure for reduction must be strictly followed.
| Self-test 3.2
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