If shares are bought back out of free reserves then a sum equal to nominal value of the shares so bought back is transferred to:

Question

Quizplus · Accepted Answer

When shares are bought back out of free reserves, a sum equal to the nominal value of the shares so bought back is transferred to the Capital Redemption Reserve Account (CRR). This is done to comply with the legal requirement that ensures the company's capital is maintained by restricting the amount available for dividend distribution.

If Shares Are Bought Back Out of Free Reserves Then