The purchase or redemption of its own shares by a company; this is permitted subject to certain legal restrictions. For example, in the UK redeemable shares may only be redeemed if they are fully paid. If the redemption or purchase of a company’s own shares would lead to a reduction of its capital, a capital redemption reserve will need to be created. The Companies Act 2006 has made it easier for private companies to reduce their capital in this way. See also permissible capital payment.
Subjects: Financial Institutions and Services — Accounting.