◎Concept and function of capital increase:

  • Company capital increase means expand company business scale, business development, increase company credit and increasing the registered capital under the law. The significance lies in: preparing capital to keep existing operations, decrease revenue distribution of shareholders, adjusting shareholders’ structure and shareholding ratio, increase company credit to obtain statutory qualifications. The main function of increased capital is to change the capital structure of enterprise to enhance enterprise-strength, more convenient financing of the external world.

◎Application for a capital increase of China company:

  1. Invitation to invest, changing the original contributive proportion. If a company’s original contributive amount was ten million, shareholder A contributed five million(Accounted for 50% of total investment), shareholder B contributed three million(Accounted for 30% of total investment), shareholder C contributed two million(Accounted for 20% of total investment). Now the company increases five million, shareholders A subscription of 1 million, shareholders B subscription of three million and shareholders C subscription of 1 million, changing the original contributive proportion. After increase capital, shareholders A and B each accounted for 40% of the total amount and shareholder C accounted for 20% of the total amount. This method of increase is applicable to the shareholders, it may also be used in the case of a cooperative company except for shareholders.
  2. Setting up a company in China, increase the amount of contribution according to the original proportion of capital contribution, but do not change the proportion of capital contribution. This manner of increased capital can only be used by internal shareholders.

◎The procedure to apply capital increase:

  • The company increased capital must through the shareholders meeting(Must be adopted by shareholders representing the voting rights of 2/3), the increased capital must be verification by CPA firm, alteration of articles of association and processing registration procedures change.

◎Conditions of capital increase:
1.Shareholders’ meeting resolutions in which shareholders agree to increase capital.
2.Modify or supplement the capital increase charter.
3.Investing in capital increase funds.
4.Engaged an accounting firm to issue a capital verification report.
5.Companies established in China apply for registration of changes in industry and commerce, taxation, etc.

◎Relevant laws to apply China capital increase:

  1. Resolutions of the shareholders’ meeting to amend the articles of association and increase or decrease the registered capital and resolution of the company’s merger, division, dissolution, or alteration of the company’s form must be adopted by shareholders representing more than 2/3 voting rights.
  2. When a company issues stock must get approval from a department authorized by the State Council or Provincial People’s Government. Those who are publicly raised shall be subject to approval by the securities regulatory authority under the state council.
  3. When a limited liability company increases registration capital, shareholders receive capital contribution due to the relevant provisions of the establishment of a limited liability company to pay capital contribution shall be carried out.

Inter Area has years of experience in China company registration, we can provide clients not only with China company registration and changing, but also with complete consultation, application document-making, registration of local industry and commerce to follow up with accounting service agents. Inter Area provides clients a one-stop service, clients can operate a business in China is our duty, also take care of business affairs for clients, investors can contentedly invest and focus on business development.



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