Form NSC3 Application to Court for Cancellation of Special Resolution

Circumstances Where the Form NSC3 Application to Court for Cancellation of Special Resolution Is Used

A company that passes a special resolution to reduce its share capital must either confirm the reduction through a solvency statement (using Form NSC17) or, if the reduction would be supported by the solvency statement procedure but minority shareholders object, apply to the court for approval. The Form NSC3 application to court for cancellation of special resolution is the statutory mechanism for a company to seek the court's confirmation of a reduction that cannot proceed solely by the solvency statement route.

The Companies Ordinance (Cap. 622) governs share capital reductions under Part 5, Division 3. A special resolution authorising the reduction must be passed by at least 75% of shareholders voting in person or by proxy. If any shareholder who did not vote in favour of the resolution, or any creditor who would be prejudiced by the reduction, objects, the company cannot rely on the directors' solvency statement alone. It must instead make an application to court, and Form NSC3 is the originating process that starts that application.

Cancel Special Resolution Form NSC3: When Is It Required

A company must use Form NSC3 to cancel special resolution when the reduction involves any of the following:

• The reduction extinguishes or reduces the liability of members to pay unpaid shares.
• The reduction cancels paid-up share capital that is lost or unrepresented by available assets.
• The reduction pays off paid-up share capital that exceeds the company's needs.
• Any member or creditor objects to the reduction within the period prescribed by the court.

The form itself is titled "Application for Court Order Confirming Reduction of Share Capital and for an Order Approving Cancellation of Special Resolution". It is filed with the High Court of Hong Kong, not with the Companies Registry initially. The court then sets a return date for the hearing, and the company must notify shareholders and creditors accordingly.

Companies Registry Court Application NSC3: The Filing Procedure

Although the Companies Registry court application NSC3 begins at the court, the Registry has a central role after the court makes its order. The procedure works as follows:

1. The company files Form NSC3 with the High Court, together with supporting evidence including the special resolution, a statement of the company's financial position, and any objections received.
2. The court fixes a return date and directs the company to advertise the application in the Gazette and in at least one newspaper.
3. Creditors who object must be notified in writing, and the court may require the company to provide security for their claims.
4. At the hearing, the court may confirm the reduction on such terms as it thinks fit, or may refuse it altogether.
5. Once the court makes an order confirming the reduction and approving the cancellation of the special resolution, the company must deliver a certified true copy of the order to the Companies Registrar within seven days, together with Form NSC19 (Return of Reduction of Share Capital Confirmed by Court).

The court order itself, not Form NSC3, is what the Registry records. Form NSC3 is the application document that remains in the court file.

Application to Court Cancellation Special Resolution: Information Required

Every application to court cancellation special resolution under the reduction procedure must contain the following particulars:

• The name of the company and its company registration number.
• The date of the special resolution and the exact wording of the resolution.
• The amount of share capital before the reduction and the proposed amount after the reduction.
• The number of shares affected by the reduction and their nominal value.
• A statement of the company's financial position, including the amount of issued share capital, reserves, and retained earnings.
• The reasons for the reduction, for example that paid-up capital is lost or that the company has excess capital.
• A list of all shareholders and the number of shares each holds.
• Details of any objections received from shareholders or creditors.
• A statement of whether the company has any outstanding charges on its assets.

The company must also file an affidavit from a director or the company secretary verifying the accuracy of the information in the application.

Form NSC3 Hong Kong Court Application: Filing with the Companies Registry

After the court grants the order, the Form NSC3 Hong Kong court application file is complete at the court, but the company has ongoing obligations to the Companies Registry. Within seven days of the court order, the company must deliver:

1. A certified true copy of the court order confirming the reduction and approving the cancellation of the special resolution.
2. Form NSC19, which is the return of the reduction of share capital confirmed by court.

The Companies Registry then registers the court order and issues a certificate of registration. Once registered, the reduction takes effect, and the company's share capital is reduced as stated in the order.

The company must also file an amended return with the under the Business Registration Ordinance (Cap. 310) if the reduction changes the company's paid-up capital. The Inland Revenue Department may require a revised profits tax return (BIR51) if the reduction affects the company's tax liabilities, such as through the cancellation of share premium.

Notice of the Application

The court will ordinarily require the company to give notice of the application to every creditor who is entitled to object. The notice must specify the amount of the reduction and the date fixed for the hearing. Creditors have a right to appear at the hearing and to argue that the reduction would prejudice them. If the company fails to give proper notice, the court may adjourn the application and order the company to pay the costs.

Effect of the Court Order

Once the court order is registered by the Companies Registry, the reduction of share capital is binding on all shareholders and creditors. The company's memorandum of association is deemed to be altered to reflect the reduced share capital. The company must also file Form NSC11 (Notice of Alteration of Share Capital) if the reduction changes the number of shares or their nominal value.

A certified true copy of the court order and Form NSC19 must be filed with the Registry within seven days. Late delivery attracts a penalty of HK$200 per day up to a maximum of HK$5,000. The Registry's e-Services portal accepts electronic filing of Form NSC19, but the court order must be delivered as a scanned certified true copy.

Supporting Documents

The court will expect the following documents to accompany Form NSC3:

• A copy of the special resolution (usually a certified extract of the minutes of the general meeting).
• A list of all shareholders and the number of shares held by each.
• A statement of assets and liabilities as at a date not more than three months before the application.
• An auditor's report on the statement of assets and liabilities if the company is required to audit its accounts.
• Any objections received from shareholders or creditors.
• A draft of the order sought.

The court may also require the company to publish a notice in the Gazette and in a local newspaper. The cost of advertisement is borne by the company.