Capital reduction refers to the company's decision to reduce its share capital or shareholders' shares to solve the company's debts when there is a legitimate and effective conflict of interest or the company is bankrupt and unable to repay its debts. Capital reduction involves the protection of creditors' rights and interests and must comply with the provisions of the company law. According to Article 141 of the Company Law of People's Republic of China (PRC), the company implements a limited liability system, and shareholders are liable for the debts of the company. When a company reduces its registered capital according to law or shareholders reduce their capital contribution, and applies for dissolution or bankruptcy, the legitimate rights and interests of the company's creditors shall not be harmed. In the specific operation, the company needs to pay attention to the following matters: 1. Must indicate the way, proportion and duration of capital reduction, whether it constitutes a major issue; 2. The company shall formulate a capital reduction plan and make an announcement; 3. The resolution of capital reduction needs to be passed by the shareholders' meeting and reported to the company registration authority for the record; 4. The company should reserve enough funds to pay debts and reserves required by creditors; In addition, the capital reduction also needs to pay attention to specific issues such as shareholders' consent and various situations that may cause creditors' opposition.
After the capital reduction, how does the company deal with the losses caused by debt? The company's capital reduction may lead to the loss caused by debt that cannot be fully compensated. In the capital reduction plan, specific measures should be formulated to deal with this part of the loss, such as increasing surplus reserve fund or profit reserve fund, so as to fully protect shareholders' rights and interests.
Capital reduction is aimed at the normal enterprise behavior in the case of bankruptcy and poor management, but it involves the interests of creditors and the compliance of laws and regulations, which requires the company's senior management to carefully consider and formulate a capital reduction plan and operate within the scope of laws and regulations.
Legal basis:
Article 141 of the Company Law of People's Republic of China (PRC) * * * Company implements a limited liability system, and shareholders are liable for the debts of the company. When a company reduces its registered capital according to law or shareholders reduce their capital contribution, and applies for dissolution or bankruptcy, the legitimate rights and interests of the company's creditors shall not be harmed.