1. The original company has too much capital and excess formal capital, which will lead to the idleness and waste of capital in the company;
2. The company suffered serious losses, and the gap between total capital and actual assets was too large. The company's capital has lost its due legal significance to prove the company's credit status.
The reasons for the company's capital reduction are as follows:
1. Pay off accumulated debts in one lump sum. Due to the accumulation of operating losses for many years, even in the next few years, the profits of enterprises can not be made up. In this case, it is necessary to reduce capital to make up for the accumulated losses.
2. Adjust too much capital. The company needs huge funds at first, but after it is on the right track, there may be excess funds, so it also needs to reduce capital.
3. Pay more dividends. Since dividends are distributed according to the profit of capital, reducing capital can increase dividends. At the same time, it can also be combined with "one-time repayment of accumulated debts" to eliminate losses and resume dividends as soon as possible.
4. Company merger. This is usually done when the company's assets are balanced.
5. Separate the parts. When some departments in the company are separated and independent, assets are also separated, which is also a kind of capital reduction for enterprises. There are two types of capital reduction: formal capital reduction and substantial capital reduction. The formal capital reduction means that the capital is reduced only in the account book, and the company's property is not reduced. For example, the company repurchases a certain proportion of tradable shares, reduces the denomination, and returns a sum of money to shareholders. Capital reduction that needs to make up for losses due to poor operating conditions is a substantial capital reduction, and most of the capital reductions belong to this situation.
Legal basis: Article 177th of the Company Law of People's Republic of China (PRC).
When a company needs to reduce its registered capital, it must prepare a balance sheet and a list of assets.
The company shall notify the creditors within ten days from the date of making the resolution to reduce the registered capital, and make an announcement in the newspaper within thirty days. Creditors have the right to require the company to pay off debts or provide corresponding guarantees within 30 days from the date of receiving the notice, or within 45 days from the date of announcement if they have not received the notice.