Capital reserves

Updated: Aug 20, 2021

A class of reserves generally associated with limited companies. being those reserves which are not available for distribution to members because such distribution is forbidden by law. Until reccntly they also included reserves which in the opinion of the directors should be retaincd indefinitely as part of the capital of the company. The 1980 Companies Act virtually abolished the necessity to distinguish capital reserves in company balance sheets by redefining reserves as undistributable and distributable reserves. Those that arc undistributabic are now generally required to be identified individually, e.g. share premium reserve or capital redemtion reserve and not grouped into a combined all-embracing figure for capital reserves.

Reference: The Penguin Business Dictionary, 3rd edt.

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