Research On The Capital Reduction System Of Chinese Company Law

As a profit oriented business organization, in order to make the company capital fully utilized and increase shareholders’ returns in daily business activities, it’s highly possible that company may increase its capital. Capital is the property basis of the company to carry out business activities, however company capital reduction may cause negative impact to company interests related parties.First of all, we could recognize that the countries which have developed company law all have clearly defined their company capital, classified capital, and substantial capital reduction and insubstantial capital reduction is the most important classification based on their own business practices. Besides, without exception these countries all set up a complete system which generally includes the conditions for capital reduction to liability consequence. These rules are delicately analyzed, with practical operation. In contrast, the company capital reduction system in Chinese company law is too scattered and general overall, in lack of capital connotation definition, the classification of capital reduction, and the complete system structure and not easy to carry in to practical operation.Second, with the minimum registered capital cancelled and subscribed capital replaced pay-in capital in Chinese company law, the autonomy of company has a significant growth, and capital operation also become more convenient. But in the context of lacking supporting measures, putting too much emphasis on the efficiency made the registered capital plays a extraordinary less important role in creditor debt guarantee, also increase the small shareholder’s risk of interests guarantee, especially when company decrease its capital reduction.Based on balancing the company’s efficiency and interests related parties’ interests, developed countries have adopted different interests protected mode in capital reduction. At present there are three main kinds of capital reduction interests protection mode. One is debt paying ability standard mode, by setting a financial bottom line to estimate the company’s ability to repay the debt so as to permit its capital reduction is legal or not. This mode emphases company efficiency and autonomy. The second one is strict creditor protection mode. This mode aims to protect the interests of other interests parties except the reduction party, by setting strict capital reduction procedures, and assisting with other procedures in disclosure, guarantee, to maximize the protection of other interests related parties. The third one is compromised mode. This model is the compromised mode of debt paying ability standard mode and strict creditor protection mode, by judicial intervention to protect the interests of interests related parties. In the perfection of Chinese capital reduction system, China should firstly clarify its value orientation of legislation, then set up the interests balancing mode specifically.This paper starts with exploring the fundamental content, such as the reasons of company capital generation, connotation definition and characteristics, then by paralleling the capital reduction content of representative countries, provides a reference for China to clarify its capital reduction content; Secondly, based on company law reform, this paper continue analyzes the flaws of the system itself and the interests imbalance caused by present capital reduction system; Thirdly, by comparing the different capital reduction mode of interests protection determined by different value orientation, provides a value orientation reference for Chinese capital system building; in the end, this paper trying to give some recommendations for perfection Chinese capital reduction system respectively from prior side and after side.After analyzed Chinese capital reduction system, in consideration of the reality, the perfection of Chinese company capital reduction should take balancing the interests of interests related parties as a goal, according to the existing legal framework, put more emphasis on maintaining the fairness and security of market transaction. Drawing on the experiences of other countries, in the enactment of company capital reduction action, it’s necessary for China to clarify the distinguish between substantial capital reduction and insubstantial capital reduction, build a complete capital system, increase the corresponding liability of responsible person. At the same time, combine with China’s reality, China should improve the application of Piercing the Corporate Veil, build a unified corporate information public platform and other supporting measures, effectively balance the interests of all interests related parties in company.