The fourth draft of the amended Chinese Company Law further enhances the system of corporate capital contribution.
The draft amendment to the Company Law was submitted for the fourth review at the seventh session of the 14th National People’s Congress Standing Committee on the 25th. The fourth draft further refines the system of corporate capital contribution, specifying the procedures for resolution on disqualification and the objection process for disqualified shareholders.
Compared to the third draft, the fourth draft of the amendment further improves the corporate capital contribution system and strengthens shareholder responsibility. Firstly, it clarifies that the contribution payment period for shareholders of limited liability companies should not exceed five years. It also allows specific regulations on the contribution period for shareholders of limited liability companies to be established by laws, administrative regulations, and State Council decisions, providing flexibility for shorter payment periods in key industry sectors. Secondly, it mandates that promoters of a joint-stock limited company should fully pay the subscription price for the subscribed shares before the establishment of the company. Thirdly, it introduces penalties for failure to disclose or inaccurately disclose contribution-related information according to the regulations.
Original Article 26 of the Company Law:
The registered capital of a limited liability company is the total capital subscribed by all shareholders as registered with the company registration authority. In cases where laws, administrative regulations, or decisions of the State Council have separate provisions regarding the actual paid-up registered capital of a limited liability company or the minimum limit for registered capital, such provisions shall prevail.
After the amendment, Article 47:
The registered capital of a limited liability company is the total capital subscribed by all shareholders as registered with the company registration authority. The total capital subscribed by all shareholders shall be fully paid within five years from the date of the company’s establishment, as stipulated by the company’s articles of association. In cases where laws, administrative regulations, or decisions of the State Council have separate provisions regarding the actual paid-up registered capital of a limited liability company, the minimum limit for registered capital, or the contribution period for shareholders, such provisions shall prevail.
The fourth draft of the amendment also specifies the procedures for resolution on disqualification and the objection process for disqualified shareholders. It introduces a provision allowing the board of directors to issue disqualification notices to shareholders who fail to make contributions on time and stipulates that shareholders who object to disqualification should file a lawsuit with the People’s Court within thirty days from the date of receiving the disqualification notice.
The current Company Law of China was enacted in 1993, with specific amendments made in 1999 and 2004 to individual provisions. A comprehensive revision was undertaken in 2005, and two significant modifications related to the company capital system were made in 2013 and 2018.