The main reason for a capital reduction is to offset the impact of economic losses on equity.
14 June 2022, Iberinform
According to Iberinform's monitoring of the data published in the Mercantile Register, the number of capital reductions in the business fabric registered a year-on-year decrease of -1.4% in May. For the year as a whole, the number of reductions recorded a fall of -1.5%. Although the number of transactions hardly changed, their amount did vary significantly. The aggregate balance reflects year-on-year growth of 83% in May and 100% for the first five months of the year.
The main reason for a capital reduction is to offset the impact of economic losses on equity. In this sense, the company can reduce it in order to establish a financial structure more in line with its new situation.
Madrid (55% of the total) and Andalusia (another 28%) are the Autonomous Communities with the highest concentration of capital reductions by amount. They are followed by Catalonia (5%) and the Valencian Community (3%). By sector, operations in the construction and real estate sector predominated (46% of the total), followed by the financial sector (34%).
With regard to capital increases, according to Iberinform's monitoring of the data published in the Mercantile Register, the business fabric recorded a year-on-year fall in May of -2.2% in the number of operations and -0.5% for the year as a whole. The Mercantile Register data not only show that fewer capital increase operations are registered but also that their amounts are considerably more modest: the aggregate balance of these operations that reinforce business solvency reflects year-on-year falls of -3% in May and -33% for the first five months of the year.
In most cases, capital increases are injections of liquidity through the raising of new equity by means of contributions from shareholders. In other cases, when they arise from the offsetting of claims against the company or the conversion of reserves or profits, no such injection of liquidity takes place. Companies raise capital primarily for two reasons: to rebalance their financial structure in the course of an economic crisis in which the accumulation of losses threatens their continuity, or to increase their investment and growth capacity in the expansionary phases of the cycle.
Madrid (41% of the total) and Catalonia (another 19%) are the Autonomous Communities with the highest concentration of capital increases by amount. They are followed by Andalusia (8%) and the Valencian Community (8%). By sector, operations in the construction and real estate sector predominated (34% of the total), followed by finance (25%) and business services (11%).
Iberinform helps companies to identify business opportunities and possible risks of non-payment. Its advanced analytics solutions and predictive algorithms facilitate decision making with practical and useful information for the areas of marketing, international finance and risk. Its main sources of information are 500,000 interviews per year with companies and the self-employed, the commercial register and other public sources. It is a subsidiary of Crédito y Caución, one of the leading global credit insurance operators with a direct presence in more than 50 countries.
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