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Capital Reduction: Meaning, Benefits & How It Impacts Shareholders

2 June 2025 | 7 mins read

Companies often adjust their financial structures to improve efficiency, return value to shareholders, or address financial challenges. Capital reduction is one such strategic tool that allows a company to decrease its share capital for various reasons, such as restructuring, adjusting excess capital, or offsetting losses. While it may seem like a negative action, capital reduction can actually have significant benefits for both the company and its shareholders. In this detailed guide, we will explore what capital reduction entails, its legal framework, advantages, and drawbacks, as well as its impact on shareholders.