Why share buybacks can reduce the registered capital of a company

The registered capital of the company is the product of the par value of the company and the total number of shares, and the par value of each share of all listed companies stipulated in China is 1.

If the listed company buys back ** and cancels the repurchased ** in accordance with the regulations, the total share capital of the company.

Correspondingly, in the case that the face value is fixed at 1 yuan, the total number of shares is reduced, and the registered capital will naturally decrease. Then go through the corresponding procedures and announce the boarding at the Industrial and Commercial Bureau.

Buyback of shares by the enterprise.

And deregister, reduce the impact of the registered capital: reduce net assets, increase the return on net assets.

roe）；Reduce **** and increase stock price; Increased ROE also has a boosting effect on **.

Further information] Registered capital is the ability and limit of the company's shareholders to assume debts (especially under the subscribed capital system).

If the company's shares can be arbitrarily acquired without capital reduction, it will create a situation, once the company has debts, the company's shareholders will directly use the company's assets to acquire the company's equity, thus making the company insolvent and not conducive to protecting the rights and interests of creditors.

The capital reduction in any country is required to be announced (the procedure is slightly different), this announcement is to give creditors the opportunity to declare their claims and ask for repayment, so as to avoid creditor losses to the greatest extent **Repurchase refers to the use of cash and other ways by listed companies from the market.

Repurchase a certain amount of ** issued by the company. Listed companies can consolidate the valuation foundation of the company through repurchase, and can also implement equity incentives for the repurchase.

policy, so that some outstanding employees and old employees enjoy the company's benefits. For example, the ** circulating market value of 10 yuan of the listed company will be sold to the company's employees for 2 yuan or 3 yuan after the company buys back, so that they can enjoy the benefits of profit difference at a low price. This practice is to stabilize the morale of the military, and after the rapid development of listed companies, it can retain more outstanding talents, so that employees can enjoy the benefits of enterprise development together, and they will also be allowed to sign a certain number of working years.

employment contracts.

After the listed company buys back part of the company through the trading venue, these form the company's treasury shares. In this way, the total number of ** in circulation of the company decreases, which is equivalent to the company returning part of the capital invested by shareholders, therefore, the treasury shares should be regarded as a reduction in share capital. By writing off the treasury shares (i.e., abolishing these**), the listed company can achieve the purpose of reducing its registered capital.

But it must be noted. China's company law has strict restrictions on the reduction of registered capital of corporate enterprises and the repurchase of companies by listed companies.

It shows that the company is confident in its future performance. Think that the current **** is underestimated. Therefore, buy at a low level by buying back at a low level. Buyback refers to the acquisition of a listed company from the market.

On the repurchase of a certain amount of the company's outstanding **. After the completion of the repurchase, the company can cancel the repurchased, but in the vast majority of cases, the company will retain the repurchased shares as "treasury shares", which are still outstanding shares, but do not participate in earnings per share.

calculation and distribution of benefits. Treasury shares can be diverted for other purposes in the future (e.g. Youzen, employee benefit plans, issuance of convertible bonds.

etc.), or when you need it, you can put it in the dust**.

Extended information: Repurchase refers to the act of a listed company using cash and other means to repurchase a certain amount of the company's outstanding issuance from the market. After the completion of the repurchase, the company can cancel the repurchase.

However, in the vast majority of cases, the company retains the repurchased ** as "treasury shares", which are no longer outstanding **, and do not participate in the calculation and distribution of earnings per share. Treasury shares can be used for other purposes at a later date, such as the issuance of convertible bonds, employee benefit plans, etc., or when funding is needed**.

November 9, 2018, China Securities Regulatory Commission, Ministry of Finance.

The State-owned Assets Supervision and Administration Commission (SASAC) jointly issued the "Opinions on Supporting Listed Companies to Repurchase Shares", which came into force on the date of promulgation. The Opinions broaden the repurchase funds**, appropriately simplify the implementation procedures, guide and improve governance arrangements, and encourage all kinds of listed companies to implement equity incentives or employee stock ownership plans.

Strengthen incentives and constraints, promote the company to consolidate the valuation foundation, improve the company's ability to manage risks, and improve the quality of listed companies.

From November 23, 2018, the "Implementation Rules for the Repurchase of Shares by Listed Companies on the Shanghai ** Stock Exchange (Consultation Draft)" has been open to the market for comments. The "Repurchase Rules" focus on solving the key "pain points" and "difficulties" of listed companies in the implementation of share repurchases, and better play the institutional functions of share repurchases.

Share repurchase refers to the repurchase of shares issued or tradable by the company according to certain procedures; It is a large-scale buyback of the company's outstanding shares to change the capital structure.

methods of defense; It is the repurchase of shares of the target company by the target company or its directors and supervisors. The main ways are cash, debt-for-equity swaps, or preferred shares.

The act of repurchasing its outstanding ** by exchanging ordinary shares.

Legal Analysis: No, equity repurchase does not necessarily cause a decrease in registered capital, in most cases it is only the transfer of equity between shareholders that leads to a change in the shareholding ratio. The reduction of capital will inevitably lead to a decrease in registered capital, but the proportion of equity among shareholders will not necessarily change.

Only the repurchase of the equity held by the shareholders in accordance with the law by the company itself will cause a capital reduction.

Legal basis: Article 142 of the Company Law of the People's Republic of China A company shall not acquire the shares of the company. However, this does not apply in any of the following circumstances:

1) Reduce the registered capital of the company; (2) merger with other companies holding shares of the Company; (3) Rewarding shares to employees of the Company; (4) Shareholders request the company to acquire their shares because they disagree with the resolution of the general meeting of shareholders on the merger or division of the company.

The company's acquisition of the company's ** is to return the shareholders' capital contribution to the investor, so the capital can be reduced by acquiring the company's **.

It can be simply understood that a listed company buys the company's ** in the secondary market and cancels the purchased **, which is to reduce the paid-in capital on the company's books, that is, to reduce the registered capital.

Repurchase refers to the act of a listed company using cash and other means to buy back a certain amount of the company's outstanding issuance from the market. After the completion of the repurchase, the company can cancel the repurchase. However, in the vast majority of cases, the company retains the repurchased ** as "treasury shares", which are no longer decorated as outstanding **, and does not participate in the calculation and distribution of earnings per share.

The differences between a company's equity repurchase and capital reduction are:

1. Different concepts: share repurchase refers to the company's repurchase of the company's shares issued or circulated according to certain procedures. It is a defensive method to change the capital structure by buying back the outstanding shares of the company on a large scale.

It is the repurchase of shares of the target company by the target company or its directors and supervisors. Capital reduction is the act of reducing the amount of registered capital of a joint-stock company. Its main purpose is to:

lump sum repayment of debts; adjustment of excessive capital; distribution of dividends; corporate mergers; Separation of Departments;

2. Different classifications: capital reduction can be divided into two categories: substantive capital reduction and nominal capital reduction. A substantial capital reduction is a reduction of the company's assets by an equal amount while reducing the company's book capital, and returning these assets to shareholders or transferring them to others.

A nominal capital reduction only reduces the amount of book capital, and the company's assets are not reduced accordingly, so it cannot make any return to shareholders or transfer assets to others;

3. Different methods: There are two ways to reduce capital: reducing the number of shares and reducing the denomination.

There are two basic forms of share repurchase: first, the target company distributes the available cash, provident fund and preferred shares to the shareholders in exchange for the ** held by the latter; Second, the company uses the proceeds to buy back its own ** through the sale of bonds;

4. The purpose is different: the purpose of share repurchase is the first state-controlled company, the first capital, effective scheduling and employee incentives; Equity can be adjusted in accordance with the law and the adjustment of equity can be optimized;

5. The procedure is different. The resolution of the general meeting of shareholders to reduce the capital and amend the articles of association accordingly must be passed by shareholders representing more than 2 3 voting rights. At the same time, for capital reduction, the registered capital of the company after capital reduction shall not be lower than the statutory minimum limit.

Share repurchase is conducive to promoting the efficient and orderly operation of the market. Share repurchase is a powerful tool and routine for the company to implement an anti-takeover strategy, which is conducive to stabilizing and maintaining the company's stock price.

China's "Company Law" has made specific and clear provisions on the registered capital of shares, and a certain amount of registered capital must be paid for the establishment of shares. However, in the course of the company's operation, the registered capital of the shares can be reduced. 1. The company can reduce the registered capital 1. Excess capital, that is, the company does not need the existing amount of registered capital for normal production and operation or to reduce the scale of operation.

2. The company has suffered serious losses and cannot make up for it for a long time. Due to the accumulation of operating losses over many years, even in the next few years, the profits of the enterprise cannot be compensated, in which case it is necessary to reduce capital to make up for the accumulated losses. 3. Separation of the company.

4. The registered capital of the company is still not in place after the deadline. 5. The company's false declaration, falsehood, and evasion of registered capital cannot be corrected after being punished. 6. The company buys back the equity of the company's shareholders, and needs to reduce the registered capital and paid-in capital at the same time.

2. The company reduces the registered capital by 1. reducing the total amount of capital contribution, and at the same time changing the original capital contribution ratio; 2. On the premise of not changing the proportion of capital contribution, reduce the capital contribution of each shareholder. 3. How to operate the reduction of the registered capital of the company 1. The shareholders (general meeting) will make a resolution to reduce the capital. The content of the resolution shall include:

Reduce the amount of subscribed registered capital, the specific way to reduce the amount of subscribed registered capital, and amend the articles of association accordingly. The resolution of the capital reduction of the shares shall be passed by more than two-thirds of the voting rights held by the shareholders present at the meeting. 2. Handle pre-approval (if any).

If laws, administrative regulations and decisions stipulate that the change of subscribed registered capital must be submitted for approval, the relevant pre-approval shall be handled and a copy of the relevant approval documents or licenses shall be submitted. 3. Compile the balance sheet and property list of the stuffy liquid system. When the company needs to reduce its registered capital, it must prepare a balance sheet and a list of assets.

4.Notification to creditors and public announcements. The company shall notify creditors within 10 days from the date of making the resolution to reduce capital, and make an announcement in a newspaper at or above the provincial level within 30 days.

5. Repay debts or provide guarantees. Within 30 days from the date of receipt of the notice, and within 45 days from the date of announcement if the creditor has not received the notice, the creditor has the right to require the company to pay off the debts or provide corresponding guarantees. 6. Amend the articles of association.

Amend the articles of association of the company according to the resolution or decision of the shareholders' meeting of the company's capital increase. 7. Handle the industrial and commercial change registration. If the company reduces its capital, it shall apply for industrial and commercial change registration after 45 days from the date of announcement.

It is worth noting that if laws and regulations have special provisions on the minimum amount of registered capital of a company, the registered capital after capital reduction cannot be lower than the minimum amount stipulated by laws and regulations.

Company Law of the People's Republic of China

Article 178.

When a limited liability company increases its registered capital, the capital contribution of the shareholders subscribing to the new capital shall be implemented in accordance with the relevant provisions of this Law on the payment of capital contributions for the establishment of a limited liability company. When the shares are issued to increase the registered capital, the shareholders subscribe for the new shares, and the relevant provisions of the payment of shares are implemented in accordance with the relevant provisions of this law.