What must a private company obtain to reduce its share capital?

To reduce its share capital, a private company must obtain a special resolution. This requirement stems from the legal framework governing companies, specifically within the Companies Act. A special resolution is a formal decision made by the shareholders, which typically requires at least a 75% majority vote. This process is necessary because a reduction of share capital can affect the stakeholders' interests, and it ensures that all shareholders are adequately informed and given the opportunity to express their approval or disapproval.

Obtaining a special resolution provides a level of transparency and accountability in the decision-making process. It protects the interests of both creditors and shareholders, ensuring that any reduction in capital is justified and does not compromise the financial stability of the company. The special resolution must be properly documented and filed with the relevant authorities as part of compliance with corporate governance regulations.

In contrast, a shareholder agreement, financial audit, or directors' approval are not sufficient on their own to authorize a reduction of share capital, as they do not meet the stringent requirements outlined in law for such a significant alteration to the company's financial structure.