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What is a reduction of share capital?
What is a reduction of share capital?
Abeer Haider avatar
Written by Abeer Haider
Updated over a week ago

A company can reduce its share capital by cancelling shares, repaying share capital, reducing the nominal value of a share class or reducing the amounts unpaid on shares. A company may want to reduce its share capital for various reasons, including to increase or create distributable reserves to enable dividends to be paid to shareholders, to return surplus capital to shareholders, to facilitate a share buyback or redemption of shares, or as part of a scheme of arrangement relating to an intra-group reorganization. English company law requires the maintenance of a company's share capital for the benefit of its creditors and there are statutory provisions in place that govern how a company can reduce its share capital.

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