SUMMARY
NCLT directed Walmart India to submit supporting judgements from higher courts to strengthen its arguments
Walmart India has moved the tribunal to offset accumulated losses against the share premium received from existing shareholders under Sections 66 and 52 of the Companies Act, 2013
Flipkart said that it is ‘confident’ of honouring its commitments, meeting its liabilities, as well as fulfilling both present and future fund requirements
Ecommerce major Flipkart’s parent entity Walmart India has moved the Delhi bench of the National Company Law Tribunal (NCLT) to seek a reduction of share capital.
Reduction of share capital allows a company to adjust (or eliminate) accumulated losses or change the capital structure of a company.
While hearing the case on Wednesday (August 9), the NCLT directed Walmart India to submit supporting judgements from higher courts to strengthen its arguments. Meanwhile, the tribunal has adjourned the matter to next week.
According to Moneycontrol, Walmart India has moved the tribunal to offset accumulated losses against the share premium received from existing shareholders. The ecommerce major, in its plea, cited Sections 66 and 52 of the Companies Act, 2013 to undertake the move.
Flipkart, in a statement, said, “In compliance with the Companies Act, 2013 and with the consent of the Company’s Board and shareholders, Walmart India has proposed to undertake the reduction of share capital. The reduction of share capital essentially entails the set-off of our accumulated losses with securities premium and does not have any impact on creditors and shareholders of the company, nor does it impact the value of the shares.”
Section 52 empowers a company, issuing shares at a premium, to transfer a sum equivalent to the premium to a ‘securities premium account’ to provision for the future reduction of share capital. On the other hand, Section 66 allows a company to reduce its share capital with the explicit permission of the tribunal.
Flipkart, as per the report, reiterated that the reduction would be subject to the NCLT approval, adding that the company was ‘confident’ of honouring its commitments, meeting its liabilities, and fulfilling both present and future fund needs.
If the NCLT concurs with the plea, it will notify the Registrar of Companies (RoC) and the central government to pave the way for capital reduction.
While it was not immediately clear what has led to the move, it has come at a time when Flipkart has been raking up heavy losses. The company’s marketplace arm saw its standalone net loss zoom 1.5X to INR 4,361 Cr in FY22 against a loss of INR 2,881.3 Cr in the year-ago period.
