Meaning
This reserve plays a crucial role in safeguarding the interests of shareholders.Definition
Capital Redemption Reserve (CRR) is a statutory reserve created by a company when it redeems its redeemable preference shares or buys back its own shares out of divisible profits.Purpose and Creation
Its primary purpose is to maintain the company’s capital structure and protect creditors. It ensures that the capital reduced by share redemption or buyback is replaced, preventing a depletion of funds that could otherwise be distributed as dividends.Statutory Requirements
As per corporate laws, a CRR must be established from profits otherwise available for dividends, and it can only be used for issuing fully paid bonus shares to the company’s members.Author
