Study On The Balance Of Interests In The Company’s Capital Reduction

Disputes caused by the company’s capital reduction can be roughly divided into two categories: one is disputes between controlling shareholders and small and medium shareholders,and the other is disputes between shareholders and creditors.The underlying cause of the dispute is the conflict of interest between the parties caused by the company’s capital reduction.The increasing number of such cases in practice indicates that the conflict of interest between the parties is becoming more serious and needs to be adjusted urgently.From the perspective of judicial practice,the types of conflicts of interest in the company’s capital reduction are mainly manifested in the three aspects of disputes about capital reduction procedures,capital reduction effectiveness,and capital reduction responsibilities.However,due to the flaws in the company’s capital reduction system in my country,there are various opinions and many doctrines concerning these dispute resolutions.it has been nearly30 years since the current "Company Law" promulgated in 1993,and the company’s capital reduction system has never been modified despite the substantial changes to the company’s capital system.Generally speaking,the current capital reduction system under the "Company Law" has simple regulations,structural flaws,and individual regulations almost lose their effectiveness,which is quite at odds with the actual situation.Specifically,the current capital reduction system mainly has problems such as the lack of distinction between the types of capital reduction,the failure to stipulate the legal consequences of improper capital reduction,and the imperfect creditor protection procedures.The law is the most important adjustment tool for conflicts of interest.Therefore,balancing the conflicts of interest of all parties in the company’s capital reduction should be achieved by improving the company’s capital reduction system.To improve the company’s capital reduction system,it is necessary to address the types of conflicts of interest that have arisen in practice and urgently need to be resolved,and to maximize the use of relatively mature judgment opinions and methods that have been formed in judicial practice in order to achieve the balance of benefits among low-cost,effective and practicable.Regarding the balance of interests between controlling shareholders and small and medium shareholders.In the internal governance of the company,there is an inherent conflict between controlling shareholders and small and medium shareholders in terms of their interests.Without a year-on-year capital reduction,the company’s shareholding structure could be changed,and individual shareholders could even be removed from the company,resulting in shareholder suppression.In order to prevent the abuse of the principle of capital majority decision and prevent controlling shareholders from oppressing small and medium shareholders through different ratios of capital reduction,small and medium shareholders should be protected on the basis of the principle of shareholder equality,and achieve the balance of interests between the controlling shareholders and small and medium shareholders through the improvement of the rules of different ratios of capital reduction.Specifically,if the company’s shareholders’ meeting makes a different ratio of capital reduction resolution,it shall be agreed by all shareholders.The different ratio of capital reduction resolution without the unanimous consent of all shareholders is not a situation where the content of the resolution violates the mandatory provisions of laws and administrative regulations,so its legal effect is not valid rather than null and void.Regarding the balance of interests between shareholders and creditors.Based on the limited liability company system,shareholders and creditors also have inherent conflicts in their interest positions.The substantial capital reduction reduces the company’s assets and leads to a decrease in the company’s solvency.What needs to be explained is that whether it is the return of the capital contribution paid by the company to the shareholders or the exemption of the shareholder’s capital contribution obligation,the reduction of the company’s liability property is a substantive capital reduction.In view of the 2013 "Company Law" amendments to the company’s capital system,a significant relaxation of controls on the capital formation stage,giving shareholders great freedom in capital contribution when the company is established,stimulating market vitality,but also leading to the weakening of capital guarantees,and thus intensifying the conflict of interest after the establishment of the company.Therefore,in the company’s operation stage after capital formation,creditors should be protected based on the principle of capital maintenance to maintain the order and safety of market transactions.Specifically,first,the company’s capital reduction system should distinguish between substantial capital reduction and formal capital reduction.Formal capital reduction does not detract from the company’s assets and is harmless to creditors.Therefore,there is no need for advance repayment or provision of guarantees,but the notice and Announcement procedure.Second,perfect creditor protection procedures.The scope of notifying creditors includes inevitable creditors and contingent creditors;the form of announcements in newspapers is outdated and lacks substantial utility,and should be changed to announcements on the Internet.The National Enterprise Credit Information Publicity System can be used as the announcement carrier.Finally,if the capital reduction resolution that violates the creditor protection procedures does not exist for the legal acts and invalidity of the resolutions stipulated in Articles 153 and 154 of the Civil Code and Article 22 of the Company Law,it shall be valid.The legal consequence is that the shareholders of the company Supplementary liability for the company’s debts within the scope of the capital reduction is the joint and several liability of all shareholders.In the process of future revision of the "Company Law",it is recommended to increase or modify the relevant clauses of the capital reduction system to resolve the three issues,i.e."different ratios of capital reduction resolution conditions","the announcement carrier of the creditor protection procedure",and "the legal consequences of improper capital reduction".The other issues discussed in this article may be regulated through judicial interpretations,or are legally applicable issues,and do not need to be resolved by amending the "Company Law" for the time being.