China Revised the Paid-in Period of Company Registered Capital

#China

I. Introduction

Recently, the newly revised Company Law of the People’s Republic of China （“New Company Law”）was effective on July 1, 2024, which requires that the registered capital of a limited liability company shall be fully paid within five years from the date of the company’s establishment and that the registered capital of a joint stock limited company shall be paid in full before the establishment of the company. In this regard, what should be done for companies that exist before the New Company Law comes into effect?

II. Adjusting the Capital Contribution Period

The New Company Law authorizes the State Council to formulate specific implementation measures for the aforementioned gaps, thereby clarifying the ways and means of “gradually adjusting”. Accordingly, the State Council promulgated the Provisions of the State Council on Implementing the Registered Capital Registration Management System under the Company Law of the People’s Republic of China (hereinafter referred to as the “Management Provisions”). In conjunction with the Management Provisions, adjustment systems are provided for companies in different situations. We organized the following table for reference.

Company Type	Conditions	New Regulations
Limited liability company	Registered for establishment before June 30, 2024, and the remaining period for subscribed capital contributions exceeds 5 years from July 1, 2027, i.e. exceeds the date June 30, 2032.	3-year transition period, which means before June 30, 2027, such remaining period for subscribed capital contributions shall be adjusted to be within 5 years from July 1, 2027 and recorded in the company’s articles of association
Joint stock limited company	registered for establishment before June 30, 2024	shall pay the full amount of share capital for the shares they have subscribed for before June 30, 2027
company whose production and operation involve national interests or major public interests	the relevant competent authority under the State Council or provincial people’s government raises an opinion	the State Administration for Market Regulation (SAMR) may agree to allow the company to make capital contributions according to the original contribution period

III. Legal Consequences for Violation

The Management Provisions also clarify the legal consequences of violation accordingly: firstly, in the event of an apparent abnormality in the contribution period or registered capital of a company, the company registration authority may decide based on the company’s business scope, operating status, shareholders’ ability to make contributions, primary business activities, asset scale, etc., and may, by the law, require the company to make timely adjustments if it is found to violate the principle of authenticity or reasonableness; and, secondly, for the violating companies that fail to adjust their capital contribution period and registered capital by regulations, the company registration authority shall order them to make corrections, and they will face penalties such as corporate credit disclosure.

IV. Conclusion

In summary, the current rules have imposed higher requirements on corporate governance and compliance. In addition to adjusting the capital contribution period according to the rules, shareholders shall also assess the ability to make contributions based on the actual situation of the company, such as the paid-in status, the status of claims, the status of registered capital, etc., and reduce the amount of the contribution through the capital reduction procedure, if necessary. In specific studying and planning, companies may seek solutions from law firms and other professional organizations when encountering difficult problems.