capital redemption reserve

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A reserve created if a company purchases its own shares in circumstances that result in a reduction of share capital. It is a reserve that cannot be distributed to the shareholders and thus ensures the maintenance of the capital base of the company and protects the creditors' buffer (which gives creditors confidence to invest in the company, e.g. as suppliers or debenture holders). See also permissible capital payment.

Subjects: Financial Institutions and Services.

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