China Publishes Administrative Provisions on the Registration of the Registered Capital of Companies
Friday, August 15, 2014

On February 20, 2014, the State Administration for Industry and Commerce published the Administrative Provisions on the Registration of the Registered Capital of Companies (the Provisions), which became effective March 1, 2014. The Provisions are promulgated in the context of the recent changes to the PRC Company Law in respect to registered capital of companies. The main changes introduced by the Provisions are summarized below.

Minimum Requirements on Registered Capital Abolished

Article 9 of the Provisions provides that the registered capital of a company shall be stipulated in the articles of association, and the minimum requirements on the registered capital of the limited liability company, single-person limited liability company and joint stock limited company—RMB 30,000, RMB 100,000, and RMB 5,000,000, respectively—were eliminated. Switch from Paid-Up Capital Regime to Subscribed Capital Regime Article 2 of the Provisions provides that:

  • the registered capital of a limited liability company is the amount of capital contributions subscribed to by all the shareholders who have been lawfully registered in a company registration organ;

  • the registered capital of a joint stock limited company established by way of promotion is the total equity subscribed to by all the promoters who have been lawfully registered in a company registration organ.

Thus, a company’s registered capital will be based on the capital amount subscribed by its shareholders rather than the amount actually paid.

In addition, a company is no longer required to register the amount of paid-up capital with the company registration authority, or subject to a mandatory timetable for capital contribution. The capital contribution  schedule  is  now  determined  by  the  shareholders  as  documented  in  the  articles  of association. Moreover, capital verification on the paid-in capital is no longer required.

Equities as a Form of Capital Contribution Permitted

Article 6 of the Provisions specifies that a shareholder or promoter may make a contribution using its equity in another PRC company, so long as such equity has clear title, entails full powers and functions, and are transferrable according to the law.

Conclusion

The Provisions reduce the cost of establishing companies considerably and grant more discretion to the shareholders to decide the amount, timing and form of capital contributions.

 

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