Redenomination reserve meaning

A redenomination reserve is the non-distributable reserve created when a company converts its share capital into a new currency and, to achieve convenient nominal values per share, makes a limited capital reduction. Under the Companies Act 2006 (Part 17, Chapter 8), a company limited by shares may, by resolution, redenominate its share capital and then use an expedited reduction of share capital solely to adjust nominal values to amounts the company considers more suitable. The amount of that reduction (capped at 10% of the nominal value of the company’s allotted share capital immediately after the reduction) must be transferred to the redenomination reserve. The reserve may only be applied in paying up shares to be allotted to members as fully paid bonus shares. Subject to that use, capital maintenance rules treat the redenomination reserve as if it were paid-up share capital; it is not available for distribution. This is a statutory concept under the UK Companies Act 2006 and is used consistently across England & Wales, Scotland and Northern Ireland. In Ireland, while companies may redenominate share capital under the Companies Act 2014, the specific term “redenomination reserve” is not used and local capital reduction and reserve rules apply.