Share Capital Reduction
Learn how to reduce share capital and understand its effects on shareholdings
Overview
The Reduction of Share Capital feature allows you to decrease a company's issued share capital. This action impacts all current shareholders proportionally unless otherwise specified. The platform automatically recalculates each shareholder's holdings to reflect the reduction while maintaining proportional ownership.
What you'll learn:
- How to reduce share capital in the platform
- How the platform applies reductions proportionally
- How to use advanced options for manual adjustments
- The effects of capital reduction on shareholdings
Performing a Share Capital Reduction
Step 1: Navigate to Capital Actions
- Navigate to the Share Class you wish to reduce
- Go to Capital Actions
- Select Reduction of Share Capital
Step 2: Configure the Reduction
Enter the following information:
- Target Issued Capital: Enter the total amount of issued share capital you want to remain after the reduction
- Example: If the company currently has 1,000 issued shares and you wish to reduce by 200 shares, set the target to 800 shares
Tip
The target issued capital is the final number of shares you want after the reduction. The platform will calculate the reduction amount automatically based on the difference between current and target capital.
Step 3: Review Automatic Pro-Rata Adjustment
The platform automatically recalculates each shareholder's holdings proportionally to reflect the reduction. See below to see how the reduction will be applied.
Example:
Before reduction:
- Shareholder A: 600 shares (60%)
- Shareholder B: 400 shares (40%)
After reducing to 800 shares:
- Shareholder A: 480 shares (60%)
- Shareholder B: 320 shares (40%)
Step 4: Configure Advanced Options (Optional)
Use the Advanced Options toggle to manually adjust the number of shares reduced per certificate:
- By default, reductions are applied pro-rata across all shareholders
- Enable advanced options to specify custom reduction amounts per certificate
- This allows you to apply non-proportional reductions if needed
- Set the target number of shares you wish each shareholder to have after the reduction takes place.
Tip
Use advanced options only when you need to apply a non-proportional reduction. In most cases, the automatic pro-rata adjustment ensures fair and proportional reductions for all shareholders.
Step 5: Review and Confirm
- Review the reduction configuration carefully
- Verify the target issued capital
- Check the preview showing how holdings will be adjusted
- Confirm rounding adjustments (if applicable)
- Click Save to complete the capital reduction
The capital reduction has been recorded. All shareholdings have been adjusted proportionally, and the company's capital structure has been updated.
Understanding Share Capital Reduction
A share capital reduction decreases the total number of issued shares in a company. By default, the reduction is applied proportionally to all shareholders, maintaining their relative ownership percentages.
Key Effects of a Share Capital Reduction
- Number of Issued Shares Decreases – The total number of shares is reduced to the target amount
- Share Capital Decreases – Total issued share capital is reduced proportionally
- Ownership Percentages Maintained – Shareholders' relative ownership percentages remain the same (unless using advanced options)
- Shareholdings Adjusted Proportionally – Each shareholder's holdings are reduced by the same percentage
- Cap Table Updates – The cap table automatically reflects the new share structure
Automatic Pro-Rata Adjustment
The platform automatically applies reductions proportionally across all shareholders. This ensures:
- Fair distribution of the reduction
- Maintenance of relative ownership percentages
- Consistent application across all certificates
Rounding Rules
The platform does not allow fractional shares or certificates. The system automatically rounds allocations to the nearest whole number when necessary.
Important
Due to rounding, there may be small discrepancies in the final share count. The platform rounds to the nearest whole number to ensure all allocations are valid.
Practical Example
What Happens Next
After completing a share capital reduction:
- The share class shows the new reduced number of issued shares
- All shareholdings are automatically adjusted proportionally
- The cap table reflects the new share structure while maintaining ownership percentages
- Share certificates are updated to reflect the new share quantities
- Share capital is updated to reflect the reduction
- The transaction appears in the capital actions history
Next Steps
After performing a share capital reduction, you may need to: - Review the updated cap table to verify ownership percentages - Check that all shareholdings have been adjusted correctly - Update share certificates to reflect the new quantities - Verify that rounding adjustments are acceptable - Review and update any related documentation that references share quantities
Related Topics
- Capital Actions Overview – Learn about other capital actions you can perform
- Setting up Share Classes – Understand how share classes work
- Cap Table – View how capital reductions affect ownership visualization