Capital Reduction

Document Summary

Notice is hereby given that an Extra Ordinary General Meeting of Danfoss Systems Limited (formerly known as Eaton Fluid Power Limited) will be held on Thursday, February 29, 2024, at 12.30 PM IST through Video Conferencing ('VC') / Other Audio-Visual Means ('OAVM') to transact business related to approving the reduction of equity share capital of the company. The resolution proposes reducing the paid-up equity share capital of the Company by INR 16,67,780/-, represented by 1,66,778 equity shares of face value INR 10/- each, at a fair value of INR 872.99 per share, amounting to Rs. 14,55,95,526.22/-, and by returning it to the non-promoter shareholders. Consequently, the 1,66,778 equity shares held by said shareholder shall stand cancelled and extinguished. Ravichandran Purushothaman, authorized representative of the Company, is authorized to take all necessary steps for the resolution.

In view of the COVID-19 pandemic, the meeting will be held through Video Conferencing/Other Audio-Visual Means, complying with the Companies Act, 2013 and MCA Circulars. The Explanatory Statement pursuant to Section 102(1) of the Companies Act, 2013, is annexed to the notice. Attendance of members attending the EOGM through VC/OAVM will be counted for quorum. Members are requested to dematerialize their shareholding. Members holding shares in dematerialized mode are requested to intimate changes to their DP, not the company. Members holding shares either in physical or electronic form as of the cut-off date of 22nd February, 2024 may cast their vote by remote e-Voting, which commences on Monday, 26th February, 2024 at 9.00 a.m. (IST) and ends on Wednesday, 28th February, 2024 at 5.00 p.m. (IST).

The remote e-Voting module will be disabled by Link Intime India Private Limited after voting. Once a vote is cast, it cannot be changed. Voting rights are proportional to the paid-up equity share capital as of the cut-off date, Friday, 22nd February, 2024. CS Devendra V Deshpande is appointed as Scrutinizer to scrutinize the remote e-voting and e-voting process at the EGM. The Scrutinizer shall make a consolidated report within 48 hours of the EOGM conclusion, which will be countersigned by the Chairman or authorized Director. Results and the Scrutinizer's Report will be uploaded on the company's website. In the case of joint holders, the member whose name appears first in the Register of Members is entitled to vote at the EGM. Members are entitled to appoint a proxy, but physical attendance of Members is dispensed with, as such facility for appointment of proxies by the Members will not be available for the Extra Ordinary General Meeting. Institutional/Corporate Shareholders are required to send a scanned copy of its Board Resolution/Authorisation authorizing its representative to attend the Annual General Meeting through VC/OAVM and to vote through remote e-voting.
The notice of the EOGM is being sent electronically to members whose email addresses are registered with the Company/Depositories and is also available on the company's website. Information and instructions relating to remote e-voting are provided. Individual shareholders holding securities in demat mode can register directly with the depository or will have the option of accessing various ESP portals directly from their demat accounts. Instructions for the login method are provided for individual shareholders holding securities in demat mode with NSDL and CDSL, and for individual shareholders holding securities in physical form/Non-Individual Shareholders holding securities in demat mode. Instructions for shareholders to speak during the Annual General Meeting through InstaMeet are provided, requiring registration by 26th February 2024 and confirmation on a first-come, first-served basis. Shareholders are requested to speak only when the moderator announces their name and serial number. Instructions for shareholders to vote during the Annual General Meeting through InstaMeet are provided. Shareholders must use a good internet connection and Wi-Fi or LAN is recommended.

The proposal is to reduce the equity paid-up share capital of the Company from selective group of equity shareholders who are basically non-promoter shareholder. Capital reduction from such selective group involves repayment of excess capital which is not held by promoters. The reduction of share capital of the Company is being proposed from promoter shareholders, as it will be beneficial in the interest of non-promoter shareholders who have no liquidity as the Company is not listed on any stock exchange. Apart from non-promoter shareholders, only M/s Danfoss Fluid Power Private Limited holds 97.61% share of the Company.

The salient features of the scheme of reduction of equity share capital would be as follows: The Scheme proposes reduction of the paid up equity share capital of Danfoss Systems Limited (previously Eaton Fluid Power Limited) pursuant to Section 66 of the Companies Act, 2013 read with The National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016 and all other applicable provisions of the Companies Act, 2013 and any other law for the time being in force. The reduction of the paid up equity share capital of the Company shall be achieved by cancelling and extinguishing an aggregate of 166,778 fully paid equity shares of face value Rs. 10/- each held by non-promoter shareholders. In consideration of reduction of equity share capital, non-promoter shareholders would be at fair value determined by the valuer in accordance with the provisions of applicable law and internationally accepted principles. A joint report from valuers has been obtained which has determined INR 872.99 per share as the fair value of the shares of the Company. The Company has also obtained the fairness opinion from RBSA Capital Advisors LLP. Thus, considering the said fair value, in consideration of cancellation and extinguishment of the aforesaid 1,66,778 equity shares held by non-promoter shareholders they are proposed to be paid aggregate consideration of INR 14,55,95,526.22. A copy of the scheme of reduction of equity share capital as approved by the Board and report obtained from the valuer is enclosed with this.

The selective reduction in equity share capital held by a particular group involving non-promoter shareholders would give opportunity to such shareholders to liquidate their shareholding which otherwise illiquid since the Company is not listed on any stock exchange. Such reduction will not cause any prejudice to the creditors of the Company. The reduction of the equity share capital does not involve the diminution of any liability in respect of unpaid share capital. The creditors of the Company are also in no way affected by the proposed reduction of equity share capital as there is no reduction in the amount payable to any of the creditors, no compromise or arrangement is contemplated with the creditors and there is no reduction in the security, which the creditors may have in the Company. Therefore, the Directors are of the opinion to that the reduction of share capital as explained above can be achieved by reducing the share capital of the Company subject to confirmation from the National Company Law Tribunal, Mumbai Bench.

The Company's articles contain enabling provision for capital reduction and once the shareholders approve proposal by way of special resolution an application may be made to the Tribunal. Once the Tribunal sanctions proposal of capital reduction the capital will be returned to the shareholders by making payment to their account. The Board at its meeting held on 04th January 2024 has proposed scheme of reduction of paid-up equity share capital as aforesaid.

The Scheme proposes reduction of the paid up equity share capital of Danfoss Systems Limited (formerly known as Eaton Fluid Power Limited) pursuant to Section 66 of the Companies Act, 2013 read with The National Company Law Tribunal. The reduction of the paid up equity share capital of the Company shall be achieved by cancelling and extinguishing an aggregate of 166,778 fully paid equity shares of face value Rs. 10/- each held by non-promoter shareholders (as defined below) at fair value determined by the valuer in accordance with the provisions of applicable law and internationally accepted principles.

The share capital of the Company as on 4th January 2024 is as under: The Authorised Capital is Rs 15,50,00,000, comprising of Rs 7,00,00,000 in equity shares and Rs 8,50,00,000 in 8% preference shares. The Issued and Subscribed Share Capital is Rs 6,96,42,670 in equity shares The Fully Paid-up Share Capital is Rs 6,96,42,670 in equity shares

Upon the Scheme becoming effective, the paid-up equity share capital shall stand reduced from Rs. 6,96,42,670 divided into 69,64,267 equity shares of Rs. 10/- each to Rs. 6,79,74,890 divided into 67,97,489 equity shares of Rs. 10/- each. The aforesaid Reduction of the paid-up equity share capital of the Company shall be achieved by cancelling and extinguishing an aggregate of 1,66,778 fully paid equity shares of face value Rs. 10/- each held by non-promoter shareholders. In consideration of cancellation and extinguishment of the aforesaid 1,66,778 equity shares held by non-promoter shareholders they shall be paid consideration of INR 872.99 per share amounting to Rs. 14,55,95,526.22/- which is fair value arrived on the basis of valuation reports given by the valuer. The consent of the members of the Company to this Scheme shall be taken through a Special Resolution under the provisions of Section 66 of the Companies Act, 2013. Upon the Scheme becoming effective, the Company shall account for the reduction of share capital in its books of accounts.

The Form of minute, approved by the Tribunal to be delivered to the Registrar of Companies for registration under Section 66(5) of the Companies Act, 2013, is as follows: The paid up share capital of Danfoss Systems Limited is henceforth Rs. 6,79,74,890 (Rupees Six Crores Seventy-Nine Lakh Seventy-Four Thousand Eight-Hundred and Ninety only) divided into 67,97,489 (Sixty-Seven Lakh Ninety-Seven Thousand Four-Hundred Eighty Nine) equity shares of face value of Rs.10/- (Rupees Ten only) each reduced from Rs. 6,96,42,670 (Rupees Six Crores Ninety-Six Lakh Forty-Two Thousand Six-Hundred and Seventy only). The Scheme of Reduction of Capital would not affect the employees and workers of the Company in any manner. The creditors of the Company are in no way affected by the proposed reduction of the equity share capital. The Company hereto shall, with all reasonable dispatch, make an application under Section 66 of the Companies Act, 2013 read with National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016 to the National Company Law Tribunal, Mumbai Bench for sanctioning the Scheme. The Board of Directors of the Company shall take all such steps as may be necessary, desirable or proper to resolve any doubts, difficulties or questions, including interpretation of the Scheme, whether by reason of any directive or orders of any other authorities or otherwise howsoever arising out of or under or by virtue of the Scheme. The valuation report provided by SSPA & CO., Chartered Accountants, and T V BALASUBRAMANIAN, CA, RV (IBBI) to arrive at the fair value of the equity shares of Danfoss Systems Limited, recommends a fair value of INR 872.99 per share. The report uses information from the company's financial statements and from public domain to value the equity shares as per two valuation methods: The Market Approach and the Income Approach with respective values being INR 868.69 and INR 877.29.

RBSA Capital Advisors LLP provided a Fairness Opinion on the valuation of equity shares of Danfoss Systems Limited which said fair value per equity share of DSL as at the Valuation Date, as recommended by the Valuers, which forms the basis for the Proposed Transaction, is fair to the shareholders of DSL from a financial point of view.