Registered capital is the amount of capital contribution or the total amount of shares subscribed by shareholders or promoters at the time of company registration. During the company registration process, shareholders only need to pay the funds in installments according to the agreed time, and do not need to pay the funds in full at the beginning. The paid-in system requires that the amount of registered capital must be consistent with the amount of funds in the bank's capital verification account, while the subscription system does not require the actual payment of all funds.
According to the amendment of the Company Law in 2014, the paid-in system was changed to a subscription system, and the amount of registered capital does not need to be actually paid in place. The company can stipulate in the articles of association the time when the registered capital is in place, which can be 10 years, 20 years, or even 99 years, and in some places it can also be written as a long period. During this period, if there is no debt issue involved, the company does not need to actually pay the subscribed funds when it is deregistered.
The recent amendment to the Company Law changes the subscription system to a time-limited paid-in system, which is applicable to both newly established companies and existing companies. According to the new regulations, the company must complete the paid-in of registered capital within five years from its establishment.
Under the paid-in system, the funds of the registered capital must be paid in full in accordance with the articles of association, otherwise they will face liability for breach of contract and corresponding fines. After paying the funds, the shareholders cannot withdraw them at will, because the registered capital is the capital used by the company for business development.
In the process of company operation, the use of funds can be divided into outward spending and inward spending. Spending money refers to the company's expenses such as purchasing equipment and renting a house, and it is necessary to get an invoice with the company's name and company tax ID as the letterhead. Spending inward refers to internal expenses such as paying wages and social security to employees, and no invoices are required, but individual income tax needs to be declared.
If a shareholder needs to withdraw funds from the company's account, the accountant needs to record it as a loan, but it must be returned within a reasonable time. Generally speaking, the loan cannot be repaid before the end of the year; Otherwise, it will be regarded as a shareholder dividend and will need to pay personal income tax.
The arbitrary use of registered capital may be identified as a withdrawal of capital contribution, which will lead to the failure of the annual inspection of the enterprise, and shareholders may also face liability for breach of contract and fines. Therefore, shareholders need to comply with the relevant regulations and maintain valid reasons and records when using the registered capital. Subscribed registered capital