I. Introduction.
On 29 December 2023, the 7th Session of the Standing Committee of the 14th National People's Congress passed the newly revised Company Law of the People's Republic of China (hereinafter referred to as the "New Company Law"), which will come into force on 1 July 2024.
Article 47 of the New Company Law stipulates that the registered capital of a limited liability company shall be the amount of capital contribution subscribed by all shareholders registered with the company registration authority. The amount of capital contribution subscribed by all shareholders shall be paid in full by the shareholders within five years from the date of establishment of the company in accordance with the provisions of the articles of association.
Since the implementation of the registered capital subscription registration system in China in 2013, the registered capital subscription period of enterprises is generally as long as decades, and even hundreds of thousands of years. At the same time, in order to demonstrate the strength of the company, entrepreneurs often tend to increase the registered capital of the enterprise, and the subscribed capital is often tens of millions. With the promulgation of the new company law, entrepreneurs are facing difficult challenges, and the paid-in registered capital seems to have become a sword of Damocles hanging over their heads. On the first day after the 2024 New Year's Day holiday, newspapers and magazines around the country published announcements of capital reductions of major enterprises.
2. Interpretation of the registered capital provisions of the New Company Law.
Does Article 47 of the New Company Law "Paid-up Registered Capital within Five Years" only apply to new companies established after the implementation of the New Company Law, i.e. after July 1, 2024, or does it also apply to existing existing companies? Many entrepreneurs have doubts about this. The answer is provided in Article 266 of the New Company Law, which stipulates that this law will come into force on July 1, 2024. If a company registered and established before the implementation of this Law has a capital contribution period that exceeds the period specified in this Law, it shall be gradually adjusted to the time limit specified in this Law, except as otherwise provided by laws, administrative regulations or others; If the term and amount of capital contribution are obviously abnormal, the company registration authority may request timely adjustment in accordance with the law. The specific implementation measures shall be provided by ***.
From the above provisions, it can be seen that there are three different types of registered capital payment: first.
1. For newly established companies established after July 1, 2024, it is required to pay up the registered capital within five years from the date of establishment of the company; Clause.
2. For existing stock companies, if the term and amount of capital contribution are obviously abnormal, the company registration authority may request timely adjustment in accordance with the law; Clause.
3. For existing stock companies, if the term of capital contribution exceeds 5 years from the date of establishment of the company, it shall be gradually adjusted to the period specified in this Law, except as otherwise provided by laws, administrative regulations or ***.
3. The setting of the transition period and the adjustment of the subscription period of the registered capital.
The law does not provide for a one-size-fits-all application of the five-year period, nor does it provide for a transitional period in which the law does not apply retroactively. As for how long the transition period will be, the new company law itself does not clearly stipulate how long. **Article 3 of the Provisions on the Implementation of the Registered Capital Registration Management System of the Company Law of the People's Republic of China (Draft for Comments) stipulates that in accordance with Article 266 of the Company Law, a three-year transition period will be set from July 1, 2024 to June 30, 2027. If the capital contribution period of a company established before the implementation of the Company Law exceeds the period specified in the Company Law, it shall be adjusted during the transitional period. If a limited liability company established before the implementation of the Company Law has a remaining capital contribution period of less than five years from July 1, 2027, there is no need to adjust the capital contribution period; If the remaining capital contribution period exceeds five years, the remaining capital contribution period shall be adjusted to five years during the transition period. The adjusted shareholder's capital contribution period shall be recorded in the company's articles of association, and shall be announced to the public on the national enterprise credit information publicity system in accordance with law.
According to the above provisions, for companies established before July 1, 2024, the adjusted registered capital payment period may be before June 30, 2032 at the latest. This means that entrepreneurs need to gradually complete the paid-in registered capital in the next ten years. In the face of this new challenge, entrepreneurs need to formulate a reasonable capital plan to ensure that the paid-in registered capital is completed within the specified time limit to avoid possible legal risks.
IV. Conclusions. The implementation of the new company law is both a challenge and an opportunity for entrepreneurs. The adjustment of the subscription period of registered capital requires entrepreneurs to pay more attention to the company's capital management and planning. Only by being fully prepared and responding can we ensure the steady development of the company in the new legal environment, and turn the sword of Damox hanging over our heads into the driving force that drives the company forward.