On December 29, 2023, the 7th meeting of the Standing Committee of the National People’s Congress approved the newly revised Company Law of the People’s Republic of China (hereinafter referred to as the Company Law), which will come into effect on July 1, 2024. Among them, the company’s registered capital registration system is an important revision.

The Company Law adheres to the principles of integrity and innovation, clarifying that limited liability companies shall pay their registered capital in full within five years from the date of establishment. At the same time, it requires existing companies registered and established before the implementation of the Company Law to gradually adjust their capital contribution periods. If the capital contribution period or amount is significantly abnormal, the company registration authority shall promptly require the company to make adjustments.

In order to effectively implement the new requirements for the registration and management of registered capital under the new Company Law, and standardize the management of registered capital by companies, the State Administration for Market Regulation has organized the drafting of the "Provisions of the State Council on the Implementation of the Registration and Management System for Registered Capital under the Company Law of the People’s Republic of China (Draft for Comments)" (hereinafter referred to as the draft for comments), guiding companies to adjust their registered capital in an orderly manner in accordance with the law and maintain market transaction security, Continuously optimizing the business environment.

Set up a three-year transition period to facilitate limited liability companies to adjust their capital contribution period and joint-stock limited companies to pay their full share capital. The transition period starts from July 1, 2024 and ends on June 30, 2027. A limited liability company can adjust its investment period to within five years during the transition period, and completing the investment before June 30, 2032 meets the requirements. At the same time, it is clarified that if the remaining subscribed capital period of a limited liability company is less than five years from July 1, 2027, there is no need to adjust the capital contribution period. In addition, a limited liability company can fully pay the subscription amount for its shares before June 30, 2027.

Accurately classify and implement policies, prudently determine the abnormal contribution period and amount of existing companies. In order to reasonably define companies with significantly abnormal investment periods and amounts, the draft for soliciting opinions includes companies with investment periods of more than 30 years and investment amounts of 1 billion yuan in the scope of whether they belong to the abnormal judgment.

Strengthen the strong constraints of company information disclosure, improve the transparency and accuracy of company investment information, and promote shareholders to contribute in accordance with the law through social supervision. The draft for soliciting opinions clearly requires companies to timely disclose the subscribed and paid up capital, the method and date of capital contribution, the number of shares subscribed by the initiators, and other information on the national enterprise credit information disclosure system, and upload relevant explanatory materials such as shareholder register and financial statements on the actual contributions made by shareholders. At the same time, based on flexible supervision, special labeling and public disclosure should be made to companies that do not make legal adjustments.

Resource from: SAM

22nd.Feb.2024