Newly revised "Company Law"
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On December 29, 2023, the seventh meeting of the Standing Committee of the 14th National People's Congress voted to adopt the newly revised "Company Law", which will come into effect on July 1, 2024. The new "Company Law" transform the subscription registration system of limited liability companies and clarifies that the capital contribution subscribed by all shareholders must be paid in full within five years from the date of the company's establishment in accordance with the provisions of the company's articles of association.
At the same time, the new "Company Law" for companies that have been registered and established before its implementation, if the capital contribution period exceeds the period stipulated in this Law, unless otherwise provided by laws, administrative regulations or the State Council, it shall be gradually adjusted to within the period stipulated in this Law; if the capital contribution period and amount are obviously abnormal. The company registration authority may require it to make timely adjustments in accordance with the law. Specific implementation measures shall be stipulated separately by the State Council.
1. The "Company Law" stipulates the necessity of a five-year subscription period
Since the "Company Law" was revised in 2013 and the country has fully implemented the registered capital subscription registration system, it has effectively solved the outstanding problems such as excessive market access capital thresholds restricting entrepreneurship and innovation,idle registered capital and false capital verification under the paid-in registration system. The registered capita subscription registration system relaxes market access restrictions, improves the efficiency of shareholder capital use, reduces capital registration transaction costs, strengthens the company's main responsibility, and promotes corporate governance modernization, consolidates the micro-foundation of economic development, and optimizes the business environment played a positive role in other aspects.
2.Application of the five-year subscription period provisions of the Company Law
In order to avoid inconsistencies in the legal system for registered capital applied to newly established companies and existing companies, strengthen the uniformity of legal application, and at the same time reduce the impact on the vast majority of existing companies operating normally, fully consider complex situations such as types of operating entities and industry sectors, and study Set a certain number of years and a relatively sufficient transition period for existing companies, and in accordance with the requirements of the new "Company Law", adjust the capital contribution period of existing companies in a classified, step-by-step, steady and orderly manner to within the period stipulated in the new "Company Law". For companies with special circumstances that are otherwise stipulated by laws, administrative regulations or decisions of the State Council,the five-year subscription period may not apply.
For companies whose capital contribution period and amount are obviously abnormal, the company registration authority may require them to make timely adjustments in accordance with the law. The definition of "obvious anomaly" will be scientifically stipulated based on objective analysis of company registration data and actual work conditions. Those affected will be a very small number of companies that clearly violate the principle of authenticity and are contrary to objective common sense. The above provisions are conducive to the smooth and orderly implementation of the new Company Law, effectively reducing the short-term concentrated impact on business entities, better boosting development confidence, and stabilizing social psychological expectations.
3. The "Company Law" ensures that shareholders perform their capital contribution obligations as scheduled
From the perspective of stimulating the vitality of business entities and ensuring transaction security, in order to standardize the company's capital subscription behavior and create an honest and trustworthy market environment, the new "Company Law" makes paid-in capital contribution information a mandatory disclosure matter for companies, and clarifies administrative violations of legal responsibilities for disclosure. punishment. The new "Company Law" stipulates that companies should disclose the amount of capital contribution subscribed and paid in by limited liability company, the method of capital contribution and the period of capital contribution through the National Enterprise Credit Information Publicity System.
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