Sharp Corp. has radically altered its ambitious capital reduction plan after government criticism of the attempt to ease its tax burden, sources familiar with the matter said Wednesday.
The struggling electronics maker had planned to reduce its capital from around ¥120 billion to ¥100 million or less, putting it into the tax category of small to medium-sized companies.
However, this will now be changed to a capital cut to ¥500 million, the sources said.
It would still slash its capital by 99 percent, an unusual move by a blue-chip company.
The Osaka-based firm had already won consent from its major creditor banks for its initial plan, which would have seen saved taxes used for its turnaround efforts.
The abrupt about-face followed criticism from people including the industry minister, the sources said.
Economy, Trade and Industry Minister Yoichi Miyazawa told a news conference Tuesday that he had "a sense of discomfort" over Sharp's plan as a means of corporate rehabilitation.
Sharp is said to be staring at a net loss of about ¥200 billion in the year that ended March 31 amid a struggling liquid crystal business and mounting restructuring costs, with the red ink expected to continue this year.
The company has proposed extensive restructuring measures to its banks, including big job cuts and plant closures, which have effectively been given the green light for financial support.
Unlike in the case of 100 percent capital reductions by bankrupt firms, a 99 percent cut will keep existing shareholders' voting rights intact.