Write off of existing Equity Capital of a company by either reducing the par value and/or by cancelling a certain number of shares or capital. If a cash payment is involved then it is described as Return of Capital.

A capital reduction means reducing a company's stated capital base. Companies with cumulative losses often reduce their stated capital to eliminate these losses. For example, a company, capitalized at 10 billion yen but carrying 9 billion yen in cumulative losses, can eliminate the losses by reducing its stated capital by 9 billion yen. This will reduce the firm's capital to 1 billion yen, however. The company often needs to recapitalize itself after conducting a capital reduction. These days, many firms do so through debt-for-equity swaps. Creditor banks are often using debt-for-equity swaps these days as a way to bail out ailing general contractors and retailers. Banks favor debt-for-equity swaps over debt forgiveness because it is easier for them to gain shareholders' understanding.

The return of capital on FAL shares to shareholders which under the Demerger Scheme will be applied, together with the Demerger Dividend, as consideration for the transfer of the PEH shares to shareholders