The newly amended Company Law of the People's Republic of China was formally adopted by the Seventh Session of the Standing Committee of the 14th National People's Congress on 29 December 2023 and promulgated by Presidential Order No. 15 signed by the President of the People's Republic of China. The bill will come into force on July 1, 2024. As shown below:
The newly amended Company Law deletes 16 provisions of the 2018 Company Law and adds and amends 228 provisions, of which 112 provisions are substantively amended. 
This revision highlights the word "amendment" and shows that the Company Law is constantly improving and progressing. The revised Company Law redefines the responsibilities of legal representatives and other personnel, protects their rights and interests, and also clarifies their duties and responsibilities. This improvement contributes to the healthy health of the company and social justice.
However, there are also some professionals who believe that these terms are not new, but rather pre-existing provisions. Nonetheless, the significant improvements to the newly revised Company Law are still positive, especially the amendments that will come into force in July 2024.
Newly amended Company Law
It is expected that in 2024, a large number of companies will choose to deregister for a number of reasons:
With the implementation of the newly revised Company Law, the boss of the actual controller can no longer pass on the legal liability to the legal representative. Those who are not shareholders of the company and have little understanding of operation and management, and who are pulled by the boss of the actual controller to serve as the legal representative of the company, will no longer need to bear legal responsibility for the boss. The boss of the actual controller can no longer rely on such a "backstabber" to evade responsibility. In order to avoid potential legal risks, the boss of the actual controller may choose to deregister such companies.
Under the newly amended Company Law, the registered capital must be fully paid up within the prescribed period. This provision is undoubtedly a huge challenge for those owners who have registered a large number of shell companies. They will need to invest a lot of money to make a paid-in contribution, which will undoubtedly increase their financial pressure.
Considering the problem of capital occupation, these actual controller bosses may choose to cancel these shell companies to avoid unnecessary financial pressure. Deregistration of these companies not only frees up the funds that are tied up, but also reduces potential legal risks.
Under the newly revised Company Law, the boss of the actual controller can no longer easily withdraw capital contributions, which brings new challenges to corporate governance. In order to supervise and restrain this behavior, the company's board of directors, supervisory board and senior management will assume greater responsibility. This change may lead to the actual controller's boss facing a situation of insufficient liquidity and difficulties in capital turnover.
In this case, the boss of the actual controller may consider deregistering some unimportant companies to reduce capital occupation and alleviate financial pressure. The deregistration of these companies will help to free up the tied up funds, optimize the allocation of resources, and improve the efficiency of the use of funds.
What is even more worrying is that the newly revised Company Law stipulates that the debtor company not only needs to bear the debt liability with all its own assets, but may also cause the actual controller boss and other companies to jointly bear the debt liability. If the boss of the actual controller has a large number of shell companies in his name, and these companies have paid-in funds on their accounts, once it is determined that they are related to the debtor company, these funds may be used to repay the debts of the debtor company.
In order to prove that the other companies have nothing to do with the debtor company, the boss of the actual controller needs to provide sufficient evidence. However, this is often a daunting task, as proving the correlation requires exhaustive evidence and sound explanations.
Due to the above reasons, many bosses choose to deregister their companies in 2024, especially those shell companies. First of all, with the strengthening of supervision, the industrial and commercial authorities have stricter requirements for the registration and operation of companies. Secondly, the newly revised company law puts forward higher requirements for compliance and transparency of companies. This makes it increasingly difficult to hide those who used shell companies to carry out fraud, money laundering and other illegal activities.
In this case, in the future, companies registered with the industrial and commercial authorities will pay more attention to actual operations and compliance. They will pay more attention to business ethics and social responsibility, and actively participate in healthy business competition. This will play a positive role in promoting the healthy development of the entire economy and society.
Predictably, withNew revisionsImplementation of the Companies Act andNew regulationsThe future business environment will become fairer, more transparent and more standardized. This will provide more opportunities and protections for honest and trustworthy entrepreneurs, and at the same time crack down more severely on illegal behavior. This will contribute to a more stable, prosperous and sustainable business environment.
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