Capital reduction

Capital reduction is a financial strategy employed by companies to decrease their total amount of equity capital. This can be achieved through the cancellation of shares, buybacks, or reducing the nominal value of the shares. The primary objective of capital reduction is often to return excess capital to shareholders, improve financial ratios, or restructure the company's capital structure to be more efficient. This maneuver can also help in eliminating accumulated losses, thereby presenting a healthier balance sheet. Companies must adhere to legal and regulatory requirements when performing a capital reduction to protect the interests of creditors and shareholders.