NCLT Mumbai Clears NSE Academy’s Rs. 241.32 Crore Preference Share Capital Reduction under Section 66

Background and Core Issue

The National Company Law Tribunal, Mumbai Bench, in In re NSE Academy Limited, considered a petition under Section 66 of the Companies Act 2013 seeking approval for a selective reduction of the company’s paid-up preference share capital.

NSE Academy Limited sought confirmation of a special resolution to reduce its paid-up share capital by ₹241.32 crore out of an aggregate paid-up capital of ₹251.32 crore, largely comprising preference shares. The proposal was positioned as a capital reduction and not a redemption under Section 55.

The Tribunal eventually sanctioned the reduction, holding that the proposal was fair, lawful, and not adverse to creditors, shareholders or public interest.

Corporate Profile and Capital Structure

NSE Academy Limited was incorporated on 12.03.2016 under the Companies Act 2013. The company is engaged in:

• Providing financial education and training
• Conducting certification programmes in financial markets
• Running placement-oriented training initiatives
• Managing online and offline testing platforms
• Offering continuing professional education
• Providing degree and diploma-linked academic courses, independently or with other institutions

Originally incorporated as “NSE Educational Facilities Limited”, it was renamed “NSE Academy Limited” with effect from 17.05.2016.

The petition detailed the then existing issued, subscribed and paid-up share capital of the company as:

• 1,00,00,000 equity shares of face value ₹10 each
• 19,92,00,000 7% Cumulative Optionally Convertible Redeemable Preference Shares of face value ₹10 each
• 4,21,20,000 7% Compulsorily Convertible Preference Shares of face value ₹10 each

Totaling ₹2,51,32,00,000.

The reduction sought was to bring this down effectively to ₹10,00,00,000, being only the equity share capital, by cancelling preference share capital aggregating ₹2,41,32,00,000.

Enabling Provisions in Articles and Shareholder Resolution

Articles of Association

Article 43 of NSE Academy’s Articles of Association authorizes the company, by special resolution and in accordance with law, to reduce:

• Its share capital;
• Any capital redemption reserve account; and
• Any share premium account.

This enabling clause provided the internal corporate authority to proceed with a capital reduction, subject to statutory compliance and Tribunal confirmation.

Board and Shareholders’ Approval

1. The Board of Directors, in its meeting dated 07.06.2025, resolved to proceed with a reduction of preference share capital.
2. Subsequently, at the Annual General Meeting and Extra-Ordinary General Meeting held on 03.07.2025, the members passed a special resolution approving the reduction of preference share capital in terms of the proposal.
3. The company filed Form MGT-14 with the ROC, Mumbai, evidencing the filing of the special resolution.

Commercial Rationale for Capital Reduction

The company justified the proposed reduction on multiple business and financial grounds:

1. Purpose of Original Preference Capital Issue

   • Preference share capital had been initially raised to support:
     • Day-to-day business operations; and
     • Investments into the then subsidiary TalentSprint India Private Limited and step-down subsidiary TalentSprint Inc.

2. Exit from Subsidiaries and Surplus Funds

   • In April 2025, NSE Academy transferred its entire investment (100%) in TalentSprint India Private Limited and TalentSprint Inc. for a consideration of INR 24,536.25 lakhs.
   • Post this transaction, the interim financial statements as on 30.04.2025 reflected surplus cash (including liquid investments) of INR 24,076.56 lakhs.

3. Insufficient Reserves for Redemption

   • On the same date, the company’s interim financial statements showed a negative reserve balance of INR 3,798.85 lakhs, indicating inadequate free reserves for redemption of preference shares under Section 55.

4. Lack of Immediate Business Need for Excess Cash

   • The management stated that there were no immediate or foreseeable deployment opportunities for the surplus cash for operational or investment purposes that would benefit the company.

5. Impending Divestment by Holding Company

   • The holding company, NSE Investments Limited, was considering divesting its stake in NSE Academy.
   • Before such a divestment, the management intended to upstream excess funds to the holding company, which could be efficiently achieved via capital reduction.

In light of these factors, the Board proposed a capital reduction of preference share capital as a method of repatriating surplus funds that were considered “in excess of the wants of the company” within the meaning of Section 66(1)(b)(ii) of the Companies Act 2013.

Status of Proceedings and Stakeholders