The tax risk is simply that if undistributed profits or reserve funds are used to convert into share capital, personal income tax is required, that is, shareholders have to pay personal income tax, and the converted share capital formed by reserve funds does not need to pay personal income tax. However, the implementation methods vary from place to place, and the tendentious view is that there is no need to pay personal income tax when capital reserve is converted into share capital.
From the procedural point of view, the main risk is that the shareholders of the company must convene a shareholders' meeting to study the capital increase and holding. If there are defects in the convening procedure, a lawsuit can be brought to cancel the resolution of the shareholders' meeting, and the details of the relevant procedures should be paid attention to; The second is the issue of preemptive right. If the old shareholders are not informed that they can exercise the preemptive right, the shareholding agreement signed with the third party may be invalid or revoked. The founder and management of the company need to pay attention to the procedure, but the legal concept in China is not deep enough, so we should pay more attention to the problems faced by these aspects. Shareholders of the company must convene a shareholders' meeting to study the issue of capital increase and share expansion. If there are defects in the convening procedure, a lawsuit can be filed to oppose the cancellation of the resolution of the shareholders' meeting. There is a saying in the west called procedural rights.
Second, the problems needing attention in the process of capital increase and share expansion
(1) Capital contribution
Matters needing attention in monetary investment:
1. When opening a temporary bank account for capital investment, you must indicate "investment funds" in the column of "purpose/source of funds/abstract/remarks" in the bank document.
2. Each shareholder contributes capital according to the proportion of capital contribution subscribed by him, and provides the original customs declaration form issued by the bank.
3. Investors must invest in physical and intangible assets (such as trademarks, patents, non-patented technologies, copyrights, land use rights, etc.). ) as the investor specified in the articles of association.
Matters needing attention in physical investment:
1. The physical objects used for investment belong to the investors, and there is no guarantee or mortgage.
2. Where industrial property rights or non-patented technologies are used as capital contributions, the shareholders or promoters shall have ownership over them.
3. If the capital contribution is made with the land use right, the shareholders or promoters have the land use right.
4. Where intangible assets are used as capital contribution, their proportion in the registered capital shall comply with the relevant provisions of the state. (Up to 70% of the registered capital)
5. The contribution of physical or intangible assets shall be evaluated and an evaluation report shall be issued.
6. The articles of association of the company shall stipulate the transfer of the above-mentioned capital contribution, and handle the transfer formalities in accordance with the relevant regulations within six months after the establishment of the company after the capital contribution, and report it to the company registration authority for the record.
Insufficient issuance in the process of capital increase and share expansion;
According to Article 86 of the Company Law, a joint stock limited company shall make a prospectus when offering shares to the public. Article 15 of the Contract Law stipulates: "An invitation to offer is an expression of intention to expect others to make an offer to themselves. Sent price list, auction announcement, tender announcement, prospectus, commercial advertisement, etc. It is an invitation to offer. " In other words, the prospectus issued by a joint stock limited company is an invitation to offer, the investor's subscription for shares is an offer, and the commitment right lies with the joint stock limited company. However, Article 87 of the Company Law further stipulates that the prospectus shall specify "the beginning and ending period of this offering and the explanation that the subscriber may revoke the subscribed shares when it is not expected to raise enough". From this point of view, if a joint stock limited company fails to raise enough shares, it loses its commitment right, and investors have the right to revoke the subscribed shares. Therefore, when a joint stock limited company introduces strategic investors by increasing capital and shares, it must consider the problem of insufficient issuance. One of the solutions is to explain in the prospectus that if the issue is insufficient, it will be made up by the existing shareholders to increase investors' confidence in subscribing for shares and ensure the success of capital increase and share expansion.
(2) conversion ratio.
Where the registered capital is increased by undistributed profits, the increase ratio shall not be too high.
Leave room, otherwise the company's performance on the books (mainly profit rate) will be affected, which is unfavorable to the company's long-term development. Moreover, the undistributed profit used for increase should be deducted from the accrued depreciation and taxable income up to the increase point, and the corresponding accrual and accounting adjustment should be made. The conversion ratio is too high, and once a large amount of depreciation and tax adjustment are involved, the capital verification may not pass; In this way, it is necessary to readjust the capital increase and share expansion plan, which will not only affect the process of capital increase and share expansion, but also have a negative impact on the company's reputation.
(III) Listing of the company
Several problems needing attention in increasing capital and shares for the purpose of listing. Article 9 of the Measures for the Administration of Initial Public Offering and Listing (Order No.32 of the CSRC) stipulates: "An issuer has been in business for more than three years after the establishment of a joint stock limited company, unless it is approved by the State Council. If a limited liability company is converted into a joint stock limited company according to the original book net asset value, the continuous operation time can be calculated from the date of establishment of the limited liability company. " Article 12 stipulates: "The issuer's main business, directors and senior management personnel have not changed significantly in the last three years, and the actual controller has not changed." According to the above regulations, the actual controller, management and main business of the company cannot be significantly changed for the purpose of increasing capital and shares for listing, so as not to affect the listing process of the company.
(4) Provident fund
The registered capital is transferred from the provident fund. Different types of provident funds have different transfer ratios:
1. If the registered capital is transferred from the statutory reserve fund to share capital, according to Article 169 of the Company Law, "When the statutory reserve fund is transferred to increase the registered capital, the reserve fund shall not be less than 25% of the registered capital of the company before the transfer", in other words, the maximum transfer ratio of the statutory reserve fund is 75%.
2. If the registered capital is increased by capital accumulation fund, the situation is a little more complicated and needs to be analyzed in detail according to the accounting system implemented by the company. The current accounting system includes Accounting Standards for Business Enterprises (Order No.33 of the Ministry of Finance), Accounting System for Business Enterprises (No.25 of the Ministry of Finance [2000]) and Accounting System for Financial Enterprises (No.49 of the Ministry of Finance [200 1]). The Accounting System for Financial Enterprises is only applicable to financial enterprises and will not be discussed here. Then there are two situations:
In one case, the company that plans to increase its capital and shares still implements the enterprise accounting system. The Accounting System for Business Enterprises clearly stipulates that the capital reserves formed by various reserve items (including non-cash assets reserves received from donations, equity investment reserves and related party transaction price differences) shall not be transferred to registered capital; In other words, when the company's provident fund is transferred to registered capital, it is necessary to deduct the reserved items that cannot be transferred.
In another case, the company that plans to increase its capital and share changes to implement the new accounting standards. In the new accounting standards, the accounting content of capital reserve has changed greatly, and only two detailed subjects are set up under it: capital (or equity) premium and other capital reserves. From the accounting contents stipulated in the Accounting Standards for Business Enterprises-Application Guide formulated by the Ministry of Finance, it can be seen that the funds under "capital reserve-capital (or equity) premium" belong to quasi-capital nature and can be directly transferred to registered capital; However, from the new accounting standards and their application guidelines, we can't see which items in "capital reserve-other capital reserves" can be directly converted into share capital, and which items can't be directly converted into share capital.
Although the Ministry of Finance clearly stipulates that companies that implement the new accounting standards will no longer implement the enterprise accounting system; However, to be on the safe side, we should still follow the legislative spirit of the Enterprise Accounting System when formulating the capital increase and share expansion plan, and exclude the items in the "capital reserve-other capital reserve" stipulated in the Enterprise Accounting System that are not allowed to directly transfer registered capital (see above for specific items); Or consult the accounting firm and industrial and commercial department in charge of capital verification in advance, so as not to bring trouble to capital verification or industrial and commercial change registration.
3. If the registered capital is increased by any provident fund, the Company Law, the Accounting System for Enterprises and the new accounting standards have not stipulated the proportion of any provident fund, so the registered capital can be increased in full by any provident fund.
(5) taxation.
The process of increasing capital and shares may also involve paying taxes.
First, if the registered capital is increased by undistributed profits, the undistributed profits used for the increase should be deducted from the tax payable at the time of increase, because the company may not pay taxes on time or the tax payment date is later than the increase date, so the corresponding taxes should be deducted first when increasing capital and shares.
2. According to the Provisions of State Taxation Administration of The People's Republic of China City, People's Republic of China (PRC) on Several Issues Concerning the Collection of Individual Income Tax (Guo Shui Fa [1994] No.89) and the Notice on Exemption of Individual Income Tax for Share Capital and Dividend Shares of Joint-stock Enterprises (Guo Shui Fa [1997] 198), it belongs to dividends and provident funds. Guo Shui Fa [1997] 198 also stipulates that the capitalization of capital reserve of joint-stock enterprises does not belong to dividend distribution, and the amount of capitalization obtained by individuals is not regarded as personal income and personal income tax is not levied. Many individual shareholders may not understand the above provisions, and it is best to explain them in the capital increase and share expansion plan.
Related reading:
Company's capital increase method
The ways of capital increase mainly include increasing face value, increasing capital contribution, issuing new shares or debt-to-equity swap.
1, increase the face value
Increasing the face value means that the company increases the amount of each share without changing the original total number of shares. In this way, the purpose of capital increase can be achieved. For example, statutory reserve fund, dividends to be distributed and newly paid shares by shareholders can all be recorded in each share, thus increasing its face value.
2. Increase investment.
Where a limited liability company needs to increase its capital, it may increase its capital contribution in proportion to the original shareholders, or invite others other than the original shareholders to contribute. If the original shareholders subscribe for the capital contribution, they may increase their shares or convert the capital reserve fund or dividend payable into capital contribution.
3. Issue new shares
A joint stock limited company may increase its shares by issuing new shares. Issuing new shares refers to the company issuing new shares in order to expand the capital demand. The issuance of new shares can be publicly offered to the public or subscribed by the original shareholders. Under normal circumstances, the original shareholders of the company enjoy the preemptive right.
4, debt-to-equity swap
A joint stock limited company can also increase its shares by converting convertible corporate bonds into company stocks. Convertible corporate bonds are bonds that can be converted into company stocks. If this bond is converted into company stock, the liabilities will be eliminated and the company's share capital will increase.