The advantages and disadvantages of the company's capital increase are relative, depending on the actual situation of the company and the purpose of capital increase. Here are some possible advantages and disadvantages:
Benefits:
Expand the company scale: capital increase can be used to expand the business scale, increase the number of employees or expand the company's production capacity. This helps to improve the company's market position and competitiveness.
Improve financial status: By increasing capital, the company can increase liquidity, reduce debt ratio and increase net asset value, thus improving the company's financial status and benefiting the company's long-term development.
Increase shareholders' income: If capital increase can bring more business opportunities and income, shareholders' income may also increase accordingly.
Increase the credibility: the company's capital increase can show the strength and confidence of the company to the outside world, thus increasing the credibility and image of the company, which is conducive to the company's business development and cooperation.
Disadvantages:
Dilution of shareholders' rights and interests: Capital increase usually dilutes the rights and interests of the original shareholders, because the addition of new capital will expand the company's share capital, thus reducing the shareholding ratio of the original shareholders.
Increase management cost: Capital increase may increase the management cost of the company, because the company needs to deal with more employees, customers and suppliers, and also needs to establish and maintain new business relationships.
Low utilization rate of funds: If a company only increases capital to expand its scale without clear investment plans and targets, then funds may be wasted and cannot be fully utilized.
Increase financial risks: capital increase may lead to an increase in the company's debt ratio, thus increasing financial risks. If the company's income can't cover the new capital cost, then the company's financial situation may deteriorate.
To sum up, the company's capital increase has advantages and disadvantages, depending on the actual situation of the company and the purpose of capital increase. If the company can make rational use of capital increase, it will bring more opportunities and benefits; If it can't be used reasonably, it will bring unnecessary risks and waste.
Legal basis:
Article 169 of the Company Law of People's Republic of China (PRC) stipulates that when a company issues shares, it shall convene a shareholders' meeting or the board of directors to make a resolution in accordance with the articles of association, and go through the examination and approval procedures according to law.