Capital reduction,

Definition of Capital reduction:

1. Capital reduction is the process of decreasing a company's shareholder equity through share cancellations and share repurchases, also known as share buybacks. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure.

2. Reducing the amount of issued share capital to reflect (1) permanent reduction in a firms scale of operations, or (2) revenue losses that cannot be recovered from the firms earnings, resulting in permanent loss of capital.

3. After a capital reduction, the number of shares in the company will decrease by the reduction amount. While the company's market capitalization will not change as a result of such a move, the float, or number of shares outstanding and available to trade, will be reduced.