Beaufort Sentosa: Capital Reduction via Preference Share Cancellation under Companies Act
Beaufort Sentosa Development Pte Ltd applied to the High Court of Singapore on 14 August 2001 for approval to reduce its share capital under s 73 of the Companies Act by cancelling preference shares and repaying the shareholders, as it lacked sufficient profits for redemption under s 70. The court, presided over by Justice Choo Han Teck, allowed the application, finding no prejudice to creditors and deeming it a commercially expedient method of managing the company's capital.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application allowed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Beaufort Sentosa sought court approval to reduce capital by cancelling preference shares due to insufficient profits for redemption. The court allowed the application, finding no prejudice to creditors.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Beaufort Sentosa Development Pte Ltd | Applicant | Corporation | Application Allowed | Won | Tan Tian Luh |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Choo Han Teck | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Tan Tian Luh | Helen Yeo & Partners |
4. Facts
- Beaufort Sentosa sought to reduce share capital by cancelling preference shares.
- The company could not redeem preference shares due to insufficient profits.
- A special resolution was passed to cancel preference shares and repay shareholders.
- Sentosa Development Corp consented to the capital reduction.
- Preference shares were due for redemption between 1999 and 2001.
- The application was part of a share restructuring exercise.
5. Formal Citations
- Beaufort Sentosa Development Pte Ltd, OS 601054/2001, [2001] SGHC 220
6. Timeline
| Date | Event |
|---|---|
| Preference shares due for redemption in various tranches. | |
| Preference shares due for redemption in various tranches. | |
| Special resolution passed at company meeting. | |
| Preference shares due for redemption in various tranches. | |
| Judgment issued. |
7. Legal Issues
- Reduction of Share Capital
- Outcome: The court held that it was empowered to sanction the application to reduce the applicant's share capital by cancelling the preference shares.
- Category: Substantive
- Sub-Issues:
- Cancellation of preference shares
- Repayment to shareholders
- Prejudice to creditors
- Objection from preferred shareholders
- Related Cases:
- [1971] 2 All ER 289
- [1971] 1 WLR 583
- [1975] 10 SASR 577
- [1980] NSWLR 569
- [1989] NSWLR 343
- [1968] 3 All ER 829
- [1929] VLR 316
8. Remedies Sought
- Order approving proposed reduction of share capital
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Corporate Law
11. Industries
- Real Estate
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re Holders Investment Trust | N/A | Yes | [1971] 2 All ER 289 | England and Wales | Cited as an obliquely relevant case regarding the redemption of preference shares by means of a simple reduction of capital. |
| Re Holders Investment Trust | N/A | Yes | [1971] 1 WLR 583 | England and Wales | Cited as an obliquely relevant case regarding the redemption of preference shares by means of a simple reduction of capital. |
| Re Birkenshaw Holdings | N/A | Yes | [1975] 10 SASR 577 | Australia | Cited as authority for the proposition that a court can approve a reduction of capital where the reduction consists in the repayment of redeemable preference shares. |
| Re Steel Improvement Holdings | N/A | Yes | [1980] NSWLR 569 | Australia | Cited as a case that rejected the Birkenshaw approach, arguing that s 61(3) is mandatory and a special provision. |
| Re Morganite Australia | N/A | Yes | [1989] NSWLR 343 | Australia | Cited as a case that followed Re Birkenshaw Holdings, holding that there is no reason to exclude from the general provisions of s 123 a particular case where the reduction was to effect a cancellation of cumulative preference shares. |
| Re Saltdean Estate Co | N/A | Yes | [1968] 3 All ER 829 | England and Wales | Cited as an English case in which the judge approved a petition to reduce the company's share capital by extinguishment of preferred shares notwithstanding opposition to the petition by the preferred shareholders. |
| Re A Lesser & Co | N/A | Yes | [1929] VLR 316 | Australia | Cited as a case where the court dispensed with the advertisement of the presentation of the petition as well as the settlement of the list of creditors. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 1994 Ed) s 73 | Singapore |
| Companies Act (Cap 50, 1994 Ed) s 70 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Preference shares
- Capital reduction
- Share restructuring
- Redemption
- Special resolution
- Companies Act
15.2 Keywords
- Capital reduction
- Preference shares
- Companies Act
- Singapore
- Corporate law
16. Subjects
- Company Law
- Corporate Finance
17. Areas of Law
- Company Law
- Capital Reduction