Does a targeted capital reduction require the consent of all shareholders?
2025 03/06
Case Review
A. B, C, and D jointly invested to establish a certain trading limited liability company. The registered capital of the company is 600000 yuan, of which A and B each contribute 100000 yuan, and C and D each contribute 200000 yuan. The equity ratios held by A, B, C, and D are 16.7%, 16.7%, 33.3%, and 33.3%, respectively. The company's articles of association stipulate that shareholders exercise their voting rights in proportion to their capital contributions, and the resolution to reduce registered capital at the shareholders' meeting must be passed by shareholders representing more than two-thirds of the voting rights of all shareholders. Later, A wanted to withdraw through targeted capital reduction. Therefore, four shareholders held a shareholders' meeting, and with the consent of shareholders A, C, and D, a capital reduction of 100000 yuan was made. Shareholder A withdrew, and shareholders B, C, and D changed their shareholding ratios to 20%, 40%, and 40% respectively. Shareholder B signed and indicated on the shareholders' meeting resolution that "they do not agree with the capital reduction resolution, which constitutes an illegal capital reduction", and subsequently sued to the court, requesting confirmation that the aforementioned capital reduction resolution is not valid.
There are two different opinions on whether the shareholder resolution in this case is not valid.
One viewpoint holds that according to Article 66 (3) of the Company Law and the provisions of the company's articles of association, the resolution of the shareholders' meeting to reduce the registered capital should be passed by shareholders representing more than two-thirds of the voting rights. The resolution of the shareholders involved in the case was passed by shareholders representing more than two-thirds of the voting rights, therefore the resolution of the shareholders involved in the case is established.
Another viewpoint is that targeted capital reduction by shareholders, which changes their shareholding ratio, should be unanimously agreed upon by all shareholders. Therefore, the shareholder resolution involved in the case is not valid.
Lawyer analysis
There are two types of capital reduction: one is non targeted capital reduction, also known as year-on-year capital reduction, which refers to the company reducing capital according to the existing proportion of shareholders' contributions or shareholding, that is, the amount of contributions or the number of shares held by each shareholder is reduced in the same proportion. It can be seen that the year-on-year capital reduction will not change the shareholding ratio among shareholders, nor will it exceed the equity distribution situation at the time of company establishment. Another type is targeted capital reduction, also known as different ratio capital reduction, which refers to the adjustment of the reduced capital or shares of each shareholder during the capital reduction process, not according to their existing shareholding ratio, but according to special provisions of the company's articles of association or special agreements of all shareholders. The common situation is through targeted capital reduction, where individual shareholders realize the withdrawal of capital. It can be seen that targeted capital reduction usually changes the shareholding ratio among shareholders, breaking through the equity distribution situation at the time of company establishment. Due to the fact that equity is the basis for shareholders to enjoy the rights and obligations of the company, targeted capital reduction may change the structure of the equity ratio formed by the unanimous resolution of the initiators when the company was established, which may lead to a decrease in the company's debt paying ability and capital credit, and thus may pose risks to non reduced shareholders.
In judicial practice, it is believed that the provision in Article 66 (3) of the Company Law that the resolution of the shareholders' meeting to reduce registered capital "shall be passed by shareholders representing more than two-thirds of the voting rights" only applies to non targeted capital reduction and should not cover the distribution of equity among shareholders after the reduction. At the same time, according to Article 224, Paragraph 3 of the Company Law, "When a company reduces its registered capital, it shall correspondingly reduce the amount of capital contribution or shares held by shareholders in proportion to their contributions or holdings, except as otherwise provided by law, agreed upon by all shareholders of a limited liability company, or stipulated in the articles of association of a joint stock limited company." For a limited liability company, unless otherwise agreed upon by all shareholders or the company's articles of association, targeted capital reduction shall be unanimously agreed upon by all shareholders. Because if a targeted capital reduction resolution can be made with the approval of more than two-thirds of the voting rights of shareholders, it is actually a majority vote to change the structure of the equity ratio formed by the unanimous consent of the initiators when the company was established, which essentially increases the risks borne by non withdrawing shareholders and to some extent damages the interests of non withdrawing shareholders, especially in the case of external liabilities of the company.
After trial, the court believes that the resolution of the shareholders' meeting involved in this case involves the redistribution of equity proportion after capital reduction. Without the consent of B, it is deemed that the shareholders have not reached a consensus on the structure of equity proportion, and therefore the resolution of the shareholders' meeting involved is not valid.
A. B, C, and D jointly invested to establish a certain trading limited liability company. The registered capital of the company is 600000 yuan, of which A and B each contribute 100000 yuan, and C and D each contribute 200000 yuan. The equity ratios held by A, B, C, and D are 16.7%, 16.7%, 33.3%, and 33.3%, respectively. The company's articles of association stipulate that shareholders exercise their voting rights in proportion to their capital contributions, and the resolution to reduce registered capital at the shareholders' meeting must be passed by shareholders representing more than two-thirds of the voting rights of all shareholders. Later, A wanted to withdraw through targeted capital reduction. Therefore, four shareholders held a shareholders' meeting, and with the consent of shareholders A, C, and D, a capital reduction of 100000 yuan was made. Shareholder A withdrew, and shareholders B, C, and D changed their shareholding ratios to 20%, 40%, and 40% respectively. Shareholder B signed and indicated on the shareholders' meeting resolution that "they do not agree with the capital reduction resolution, which constitutes an illegal capital reduction", and subsequently sued to the court, requesting confirmation that the aforementioned capital reduction resolution is not valid.
There are two different opinions on whether the shareholder resolution in this case is not valid.
One viewpoint holds that according to Article 66 (3) of the Company Law and the provisions of the company's articles of association, the resolution of the shareholders' meeting to reduce the registered capital should be passed by shareholders representing more than two-thirds of the voting rights. The resolution of the shareholders involved in the case was passed by shareholders representing more than two-thirds of the voting rights, therefore the resolution of the shareholders involved in the case is established.
Another viewpoint is that targeted capital reduction by shareholders, which changes their shareholding ratio, should be unanimously agreed upon by all shareholders. Therefore, the shareholder resolution involved in the case is not valid.
Lawyer analysis
There are two types of capital reduction: one is non targeted capital reduction, also known as year-on-year capital reduction, which refers to the company reducing capital according to the existing proportion of shareholders' contributions or shareholding, that is, the amount of contributions or the number of shares held by each shareholder is reduced in the same proportion. It can be seen that the year-on-year capital reduction will not change the shareholding ratio among shareholders, nor will it exceed the equity distribution situation at the time of company establishment. Another type is targeted capital reduction, also known as different ratio capital reduction, which refers to the adjustment of the reduced capital or shares of each shareholder during the capital reduction process, not according to their existing shareholding ratio, but according to special provisions of the company's articles of association or special agreements of all shareholders. The common situation is through targeted capital reduction, where individual shareholders realize the withdrawal of capital. It can be seen that targeted capital reduction usually changes the shareholding ratio among shareholders, breaking through the equity distribution situation at the time of company establishment. Due to the fact that equity is the basis for shareholders to enjoy the rights and obligations of the company, targeted capital reduction may change the structure of the equity ratio formed by the unanimous resolution of the initiators when the company was established, which may lead to a decrease in the company's debt paying ability and capital credit, and thus may pose risks to non reduced shareholders.
In judicial practice, it is believed that the provision in Article 66 (3) of the Company Law that the resolution of the shareholders' meeting to reduce registered capital "shall be passed by shareholders representing more than two-thirds of the voting rights" only applies to non targeted capital reduction and should not cover the distribution of equity among shareholders after the reduction. At the same time, according to Article 224, Paragraph 3 of the Company Law, "When a company reduces its registered capital, it shall correspondingly reduce the amount of capital contribution or shares held by shareholders in proportion to their contributions or holdings, except as otherwise provided by law, agreed upon by all shareholders of a limited liability company, or stipulated in the articles of association of a joint stock limited company." For a limited liability company, unless otherwise agreed upon by all shareholders or the company's articles of association, targeted capital reduction shall be unanimously agreed upon by all shareholders. Because if a targeted capital reduction resolution can be made with the approval of more than two-thirds of the voting rights of shareholders, it is actually a majority vote to change the structure of the equity ratio formed by the unanimous consent of the initiators when the company was established, which essentially increases the risks borne by non withdrawing shareholders and to some extent damages the interests of non withdrawing shareholders, especially in the case of external liabilities of the company.
After trial, the court believes that the resolution of the shareholders' meeting involved in this case involves the redistribution of equity proportion after capital reduction. Without the consent of B, it is deemed that the shareholders have not reached a consensus on the structure of equity proportion, and therefore the resolution of the shareholders' meeting involved is not valid.
