CRR is a statutory reserve created when a company buys back its own shares or redeems preference shares, ensuring capital remains intact.
Capital Redemption Reserve (CRR) is a reserve created by a company when it buys back its own shares or redeems preferred shares. It is a statutory reserve mandated by company laws to ensure that the company maintains its capital base even after reducing its share capital. CRR is created by transferring an amount equal to the value of the shares bought back or redeemed from the company’s profit or other free reserves to the CRR account.
The CRR cannot be used for dividend distribution but serves to protect creditors by maintaining the company’s capital integrity. It reflects the company's commitment to maintaining financial stability despite changes in its capital structure.
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