Yageo (2327-TW), Evergreen (2603-TW),friend(2409-TW) and other large companies have successively announced capital reductions. In the first quarter of this year (2022) alone, 17 listed OTC companies have proposed cash capital reduction plans, especially Yageo’s fourth capital reduction in 10 years. “Cut the leeks” and call on the competent authorities to strictly review and raise the threshold for capital reduction in order to protect the rights and interests of most investors.
According to the Public Information Observatory, 17 listed OTC companies have proposed cash capital reduction plans in the first quarter of this year alone. Legislators Guo Guowen and Shen Fahui held a press conference today (1), saying that the capital market has recently experienced a “capital reduction” trend and entered the era of large capital reductions. Although it is said that not all companies that reduce capital have arbitrage intentions behind them, but in order to avoid corporate vicious operations , calling on the FSC to make good use of its administrative penalty powers, strengthen its administrative guidance, and return capital reductions to a “neutral” nature.
Today is April Fool’s Day, Guo Guowen said that to prevent small shareholders from becoming fools, he put forward the following three demands, hoping that the government can review and improve: 1. Capital reduction should be a neutral means. Currently, capital reduction cases need to be reviewed and approved by the Securities and Futures Bureau. Directing the enterprise through administrative discretion and returning the capital reduction to a neutral strategy. 2. At present, there is only a reminder that new shares cannot be issued for one year before and after the capital reduction, and the time limit should be increased to three years to avoid the contradictory decision of the same session of the board of directors to reduce capital and increase capital. 3. The capital reduction plan is related to all shareholders, and the threshold for passing the shareholders meeting should be changed to 2/3 attending and 1/2 agreeing, according to the standard of amending the articles of association.
Guo Guowen emphasized that Yageo’s behavior of bullying small shareholders is notorious, and the current regulations are difficult to restrict other companies from following suit. Even like Evergreen’s capital reduction of 60%, it obviously earns 45.5 yuan per share, but only 18 yuan; Through private placement or other actions to dilute minority shareholders’ equity, Guo Guowen is worried that more “stock market grievances” may be created.
Shen Fahui said that the necessity and rationality of the capital reduction case must be checked, and neutral corporate governance behaviors should not be maliciously used, causing market volatility and impacting investment confidence, and even causing panic, which will affect the financial investment order and market activity. It is not conducive to maintaining the stability of the capital market.
In this regard, an official of the Securities and Futures Bureau stated that in accordance with the “Company Law”, the cash capital reduction must be approved by the shareholders’ meeting. From the standpoint of the competent authority, the company should be asked to explain the reasons for the capital reduction and the impact on shareholders’ rights and interests; even if the company’s shareholders’ meeting is approved, it will also be It must be reported to the competent authority, and “strengthening the examination has always been the focus of our (Securities and Futures Bureau)”.
In response to the legislator’s request that the company cannot “reduce and increase capital” within 3 years, an official of the Securities and Futures Bureau said that although there are currently regulations, new shares should not be issued within 1 year before and after the capital reduction, but there is no way to restrict the company from reducing capital and increasing capital within 3 years. Because this is a neutral corporate governance behavior, we cannot restrict all companies from doing so just because some companies are controversial, but we can think about improving them in the direction of strengthening scrutiny.