What Is Capital Redemption Reserves?


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N. Akorede Babalola Profile
The capital-redemption reserve is a reserve fund required to be created by the United Kingdom Companies Act (1985) when shares are redeemed out of retained profits
and not out of a new issue of share capital. The reserve is created by
making a transfer out of the profit and loss account to a specially
designated account, the capital- redemption reserve account. Amounts
held in this account cannot be distributed to shareholders by way of dividend, although they may be used to make bonus issues of share capital. The
purpose of the reserve is to ensure that the company's capital is not
diluted by the redemption of some of the shares.
Anonymous Profile
Anonymous answered
Capital redemption reserves are the reserves, in which the companies allocate a profit to buy back shares for the company. Almost all of the major companies do have a capital redemption reserve account.

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