
China will implement new capital requirements under the revised Company Law from July.
China will implement the new Company Law on July 1, 2024. It mandates that shareholders of limited liability companies must fully pay up their subscribed registered capital within five years of the company’s establishment. For existing mainland Chinese companies, overdue capital that has not been subscribed must also be gradually adjusted. If there are significant abnormalities, the competent authorities in mainland China have the right to demand immediate payment.
Apart from changing the previous capital subscription system to require full payment within a five-year period, the new Company Law also grants creditors of overdue mainland companies the right to demand that shareholders promptly fulfill their subscribed contributions.
This means that if a Chinese company fails to pay its taxes when due, tax authorities, as creditors, also have the right to demand that shareholders of the tax-defaulting company promptly pay up their subscribed contributions. Shareholders should review their own capital subscription status in Chinese company registrations and consider reducing their subscribed registered capital to reduce the liability obligations arising from insufficient shareholder contributions.
Resource: CredereMedia