Picture: Xue Jingwen, Registration and Licensing Section of Jing'an District Market Supervision and Administration Bureau
Editor's note: The newly revised Company Law (hereinafter referred to as the "New Company Law") was voted and passed by the seventh meeting of the Standing Committee of the 14th National People's Congress on December 29, 2023, and will come into force on July 1, 2024. The new Company Law has undergone major changes in terms of style, corporate capital system, corporate governance system, shareholders' responsibility for capital contribution and protection of rights and interests. Among them, from the current "Company Law" stipulates that shareholders independently agree on the time limit for subscribing to capital contributions, to the new "Company Law" specifies that it is paid in five years, this system adjustment has aroused great concern. The first issue of "Hu Xiaoshi Says Registration" focuses on the registered capital system of the new "Company Law" to answer the doubts of society and enterprises.
Q: Which business entities are applicable to the requirement that the subscribed capital contribution should be paid in full within five years from the date of establishment?
A: First of all, the Company Law does not involve business entities such as unincorporated enterprise legal persons, partnership enterprises, sole proprietorship enterprises, individual industrial and commercial households, and professional farmer cooperatives. Secondly, the "five-year full payment" applies to a limited liability company, and the promoter and subscriber of a company limited by shares shall pay the shares in full and in full respectively before the inaugural meeting of the company, and apply for establishment registration after the inaugural meeting.
Basis: Articles 47, 98 and 103 of the new Company Law.
Q: The new Company Law will come into effect on July 1, 2024, and the Company has been established for many years, is it affected by the new "five-year full payment" rule?
A: The "five-year full payment" requirement applies to both companies established after the implementation of the new Company Law and companies established before the implementation of the new Company Law. The State Council is formulating specific implementation measures on how companies established before the implementation of the new Company Law will be gradually adjusted to meet the requirements of "five-year full payment". According to the Provisions of the State Council on the Implementation of the Registration and Management System for Registered Capital of the Company Law of the People's Republic of China (Draft for Comments), a three-year transition period will be set for companies registered before the implementation of the new Company Law. For limited liability companies, if the remaining capital contribution period is less than five years from July 1, 2027, there is no need to adjust the capital contribution period, and if the remaining capital contribution period exceeds five years (i.e., more than June 30, 2032), the remaining capital contribution period shall be adjusted to five years (i.e., June 30, 2032) during the transition period (i.e., June 30, 2027). The adjusted shareholder's capital contribution period shall be recorded in the articles of association of the company, and shall be announced to the public on the national enterprise credit information publicity system in accordance with law. For a company limited by shares, the share payment for the subscribed shares shall be paid up within the three-year transition period (i.e., June 30, 2027).
Basis: Article 266 of the new Company Law and Article 3 of the Provisions of the State Council on the Implementation of the <中华人民共和国公司法>Registration and Management System for Registered Capital (Draft for Comments).
The above Q&A is based on the draft for comments, and the final version is subject to the official release.
Q: If the shareholders have agreed in the articles of association that they have paid up their capital contributions in three years, what is the maximum payment period of three years or five years?
A: First of all, "five-year full payment" is the maximum statutory period, and if the company's articles of association stipulate a shorter period than five years, the shareholders should pay up within the shorter period. In addition, if laws, administrative regulations and decisions of the State Council have other provisions on the paid-in registered capital of a limited liability company, the minimum amount of registered capital, and the period of capital contribution by shareholders, such provisions shall prevail. Secondly, shareholders can subscribe for the amount of capital contribution in batches within the period of no more than 5 years as agreed in the articles of association.
Basis: Article 47 of the new Company Law.
Q: What are the ways in which shareholders can make capital contributions?
Answer: First of all, shareholders can make capital contributions in monetary terms, or they can use non-monetary assets such as physical objects, intellectual property rights, land use rights, equity, creditor's rights, etc., which can be valued in monetary terms and can be transferred in accordance with the law. However, the property that is not allowed to be used as capital contribution according to laws and administrative regulations (e.g., cultural relics that cannot be bought and sold, etc.). Second, the equity or creditor's rights used for capital contribution cannot be judicially frozen or pledged. Finally, the non-monetary property used as a capital contribution shall be appraised and verified, and shall not be overvalued or undervalued. Where laws and administrative regulations have provisions on appraisal valuation, follow those provisions.
Basis: Article 48 of the new Company Law and Article 13, Paragraph 3 of the Detailed Rules for the Implementation of the Regulations on the Registration and Administration of Market Entities.
Q: How can shareholders pay up the subscribed capital contribution to the company?
Answer: First of all, if the shareholders of a limited liability company make a monetary contribution, they shall deposit the full amount of the monetary contribution into the bank account opened by the limited liability company; if they make a capital contribution with non-monetary property, they shall go through the procedures for the transfer of their property rights in accordance with the law, such as transferring the real estate to the name of the company and the trademark right to the name of the company. Secondly, before the registration of a company limited by shares, the promoter shall pay up all the subscribed shares.
Basis: Articles 49, 98 and 103 of the new Company Law.
Q: Is it necessary for shareholders to submit a capital verification report to the registration authority after paying their capital contributions, and is it necessary to go through procedures such as change of registration?
Answer: First of all, except for a company limited by shares established by public offering, other companies do not need to submit a capital verification report to the registration authority when they go through registration. Secondly, after the shareholders pay the capital contribution on time, the company shall make corresponding adjustments to the contents of the shareholders' capital contribution certificate and the shareholder register. Finally, the company does not need to apply to the registration authority for change of registration, and shall truthfully publicize the paid-in capital contribution, the method of capital contribution, and the date of capital contribution through the national enterprise credit information publicity system.
Basis: Articles 40 and 101 of the new Company Law, and <中华人民共和国公司法>Article 2, paragraph 3 of the Provisions of the State Council on the Implementation of the Registration and Management System for Registered Capital (Draft for Comments).
The above Q&A is based on the draft for comments, and the final version is subject to the official release.
Q: What will be the consequences if the capital contribution is not fully paid and the false paid-in information is publicized by itself?
Answer: In addition to bearing the legal responsibility for failing to pay the full amount on time, the disclosure of false paid-in information must also be ordered by the company registration authority to make corrections in accordance with Article 251 of the new "Company Law", and a fine of not less than 10,000 yuan but not more than 50,000 yuan may be imposed. where the circumstances are serious, a fine of between 50,000 and 200,000 RMB is to be imposed, and a fine of between 10,000 and 100,000 RMB is to be imposed on the directly responsible managers and other directly responsible personnel.
Basis: Article 251 of the new Company Law.