Transfer of certain sums to capital redemption reserve account
📚 Law Minded summary
Where a company buys back shares out of free reserves or the securities premium account, an amount equal to the nominal value of those shares must be moved into the capital redemption reserve.
The reserve keeps the company's capital base intact on paper even though shares have gone. It can be used to issue fully paid bonus shares.
(1) Where a company purchases its own shares out of free reserves or securities premium account, a sum equal to the no minal value of the shares so purchased shall be transferred to the capital redemption reserve account and details of such transfer shall be disclosed in the balance sheet.
(2) The capital redemption reserve account may be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.