It shows that enterprises have abundant funds and the fundamentals of listed companies are good.
Prevent mergers and acquisitions of other companies in the market and concentrate the company's equity.
Buying back the cancelled stocks may not satisfy the market demand, which may lead to the stock price rising and the value of listed companies increasing.
Improve the capital structure of enterprises. If enterprises think that the proportion of shareholders' equity capital is too large and the capital structure is unreasonable, they can borrow money from abroad and buy back shares with the funds obtained from borrowing, so as to rationalize the company's capital structure.
Stock cancellation refers to the company recycling specific stocks and destroying them. As a result, the number of shares in the company will decrease.
The method of stock cancellation:
Compulsory cancellation: regardless of the wishes of shareholders, shareholders are required to provide shares by lottery, and the company returns its share capital and cancels the recovered shares.
Arbitrary cancellation: the company negotiates with the shareholders, and after obtaining the consent of the shareholders, the company takes back its own shares and cancels them.
Paid write-off: Write-off with equivalent funds paid to shareholders can be divided into two cases: write-off with company profits and write-off with company capital.
Free cancellation: cancellation without paying shareholders' funds, resulting in a decrease in the number of shares, but the company's capital does not decrease.
Stock cancellation can be divided into compulsory cancellation and arbitrary cancellation. Compulsory cancellation is the legal share extinction, which means that the company unilaterally destroys its issued shares by purchasing, drawing lots or other means. According to the agreement between the company and the shareholders, any cancellation is made in the articles of association, and both parties agree to destroy the shares.
Under normal circumstances, once the shares are issued, the shareholders may not withdraw their shares, and the issuing company may not purchase its own shares, but the cancellation of shares is allowed under the following circumstances:
When the company suffers heavy losses, it can reduce a certain amount of capital according to the shareholder's shareholding;
When the company is divided into several companies, the original shares can be cancelled and the new shares after the division will be delivered to the shareholders;
According to the Articles of Association, the shares are cancelled with the profits distributed by shareholders. If a mining company is about to be dissolved due to the exhaustion of mineral resources, it shall gradually repurchase shares with profits in advance according to the company's articles of association to simplify the final settlement procedure.
According to the redemption clause in the sales contract signed by the shareholders of the company, the principal and interest shall be repaid and the shares shall be recovered after the specified time. For any of the above cancellation methods, a general meeting of shareholders must be held in advance to make a special resolution on cancellation.
There are two ways to cancel the stock:
Share recovery, that is, the company purchases shares unilaterally or by agreement between the company and shareholders, and the recovered shares are no longer issued and cancelled;
Stock merger means that several shares are merged into one or several shares.