Study On Several Issues Of Company’s Capital Reduction

Company’s capital reduction refers to the reduction of registered capital in the face of excessive capital or heavy losses.According to the actual reduction of the company’s net assets,it can be divided into nominal reduction and substantial reduction.Substantial company’s capital reduction will result in the outflow of company’s property to shareholders,which will weaken the company’s solvency,and will generally cause adverse effects on the company’s creditors,which are generally strictly regulated by legislation.China’s current company’s capital reduction system is particularly simple.It is not perfect in terms of procedures for capital reduction,the effectiveness of capital reduction,responsibilities for capital reduction,and ways of relief.There are quite a lot of differences in the understanding and application of laws,leading to the obvious phenomenon of different judgments for the same case in judicial practice.In 2013,the reform of Company Law showed a trend of shifting the focus of capital regulation from the stage of capital formation to the stage of capital operation,easing the regulation of capital contribution,but not strengthening the regulation of capital flow in company operation.In addition,under the subscription system,the circumstances of capital reduction of companies are diversified,and the impact of capital reduction on creditors is more complex,resulting in some new disputes.Therefore,how to improve the company’s capital reduction system,balance the interests of shareholders and creditors,balance efficiency and safety value is an urgent problem to be studied and solved.This paper focuses on the impact of company’s capital reduction on corporate creditors.This paper analysis a large number of cases of capital reduction disputes,summarizes the main disputes in judicial practice.Based on the laws of China’s capital reduction system,this paper analyzes the defects.Against the main problems of laws and the disputes in the judicial practice in China,the author respectively analyzes regulatory approaches from distinguishing the types of capital reduction,norming the program of action,analyzing the effectiveness of capital reduction,strengthening the responsibility.By referring to the mature overseas legislation,this paper puts forward some suggestions for the improvement of the capital reduction system under the guidance of the value of not only paying attention to transaction safety,but also to capital efficiency and balancing the interests of shareholders and creditors.This paper is divided into four chapters:The first chapter,based on 115 judgment documents on capital reduction disputes,focuses on the litigation issues of the current judicial practice of the company’s capital reduction.Through inductive analysis,these controversial issues are mainly concentrated in three aspects: procedure of capital reduction,effectiveness of improper capital reduction and responsibility of improper capital reduction.The second chapter analyzes that the institutional root of the dispute is the conflict of interest between shareholders and corporate creditors——shareholders want the maximum profit distribution with the minimum capital input,while creditors want the company’s property to be distributed to shareholders as little as possible.The root of the legislation is the defect of the regulation of capital reduction system,which is difficult to guarantee the balance of interests between shareholders and creditors.The third chapter is the focus of this paper,discuss mainly from the types of the capital reduction system,capital reduction procedures,capital reduction effectiveness recognition,capital reduction responsibility system four aspects.The reduction of capital should be divided into nominal reduction of capital and substantial reduction,focusing on substantial reduction of capital.In terms of capital reduction procedures,the company shall notify the known creditors one by one and clarify the reasons,and methods of capital reduction,balance sheet and property list,and the right to request repayment or guarantee,etc.;And according to the size of the company and the scope of business publish this notice in the national or provincial-level influential newspaper.If the company fails to notify the creditors,the creditors shall have the right to file a claim for suspension of capital reduction.Where the company fails to implement the above procedures and substantially reduces its capital,the reduction shall be null and void.On the liability of the company’s defective capital reduction,on the one hand,directors and executives should bear the corresponding liability for compensation based on their violation of duty of care;On the other hand,shareholders bear the responsibility of returning capital or capital contribution according to the original capital contribution agreement because of their withdrawal or exemption of capital contribution obligation.Where the company is unable to pay off its debts and is negligent in urging the shareholders to return capital,the creditors may request the shareholders of the reduced capital to bear the supplementary liability for compensation for the part of the company’s debts that cannot be paid off within the scope of the reduced capital.On the basis of the above analysis,the fourth chapter puts forward relevant suggestions from the aspects of perfecting the specific construction of the company’s capital reduction system and perfecting the relevant supporting system of the company’s capital reduction.