How to understand that the funds used to acquire the company s shares should be expended from the c

Equity buybacks. The amount used must be appropriate**, and it must be guaranteed that it does not affect the company's registered capital.

It will not affect the existence and operation of the company.

In addition to the repurchase for the purpose of rewarding employees, the repurchase circumstances stipulated in Article 142 of the Company Law will be accompanied by the cancellation of shares or the transfer of shares in line with the market value, in other words, the actual assets required by the principle of capital maintenance in the Company Law will be consistent with the registered capital.

However, only for the repurchase of employee incentives, the company must carry out part (employees contribute to subscribe for shares) or even all of the capital (employees get shares for free) for equity repurchase, that is, the actual company's capital is reduced and does not meet the requirements of the capital maintenance principle.

In order to solve the problem of the actual reduction of the company's capital, it is necessary to stipulate the funds used for the repurchase of employee incentives** - the company's excess funds, and the most suitable for the concept of excess funds is after-tax profits. In other words, in the company's financial statements.

Only the after-tax profit is the company's excess available funds in the current period, and the use of this part of the funds does not involve the reduction of the company's capital, which is in line with the requirements of the company's capital maintenance principle.

Attached is the Company Law of the People's Republic of China.

Article 142 The 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) Reward shares to employees of the Company;

4) Shareholders request the company to acquire their shares because they disagree with the resolution on merger or division made by the general meeting of shareholders.

If the company acquires the shares of the company for the reasons in items (1) to (3) of the preceding paragraph, it shall be resolved by the general meeting of shareholders.

After the company acquires the company's shares in accordance with the provisions of the preceding paragraph, if it falls under the circumstances of item (1), it shall be cancelled within 10 days from the date of acquisition; If it falls under the circumstances of items (2) and (4), it shall be transferred or cancelled within six months.

The shares of the Company acquired by the Company in accordance with the provisions of Item (3) of the first paragraph shall not exceed 5% of the total issued shares of the Company; The funds used for the acquisition should be paid out of the company's after-tax profits; The acquired shares shall be transferred to the employees within one year.

The company shall not accept the company's ** as the subject of the pledge.

The acquisition of the Company's shares is not a cost expense of the Company, so it should be paid out of the Company's after-tax profits.

When repurchasing shares to pay employees.

It is equivalent to share-based payment, to borrow: management expenses, credit: capital reserve - other capital reserve, but at this time, management expenses cannot be deducted before tax.

Because there is no actual payment, it can only be done when the actual payment is made.

When the real reward for employees is borrowed: capital reserve - other capital reserve.

Credit: Equity. Capital reserve - equity premium.

At this time, the pre-tax deduction can be made before you spend it.