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Legal Terms - Capital redemption reserve
A fund created to safeguard creditors by preventing any reduction in the assets that form a company's capital. Under some conditions, a firm is authorized to repurchase its own shares. If there is a provision in the original share contract, the corporation repurchases its own shares. If there is no existing term, the corporation will buy its own shares. Regardless of the scenario, the value of the initial amount of money will decrease by the buy or redemption amount, unless an equivalent sum is transferred to a reserve that is subject to the same limitations as the initial capital.
A fund created to safeguard creditors by preventing any reduction in the assets that form a company's capital. Under some conditions, a firm is authorized to repurchase its own shares. If there is a provision in the original share contract, the corporation repurchases its own shares. If there is no existing term, the corporation will buy its own shares. Regardless of the scenario, the value of the initial amount of money will decrease by the buy or redemption amount, unless an equivalent sum is transferred to a reserve that is subject to the same limitations as the initial capital.
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