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The share buyback is not ideally a scheme of capital reduction. The result of buyback leads to temporary capital reduction. This is because the number of shares post-buyback gets reduced.
The two main differences between the reduction of capital and share buyback:
Buyback of shares is the replacement of capital. As per the Companies Act, a company is required to utilize free reserves and securities premium reserves and transfer the funds to a Capital Redemption Reserve (CRR) account for the issue of bonus shares in the future.
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