In the final days of 2023, China made significant amendments to its company law. The “Company Law of the People’s Republic of China,” revised during the 7th session of the 14th National People’s Congress Standing Committee on December 29, 2023, Alice will summarize the key amendments in this article.
Key Amendments to China's New Company Law
1. Article 6: Emphasizes the legal protection of company names.
2. Article 47: Specifies that the registered capital of a limited liability company is the total amount subscribed by all shareholders registered with the company registration authority. Shareholders must fully contribute the subscribed amount within five years from the establishment of the company, following the company’s articles of association.
3. Overall Changes: The revised law comprises 15 chapters and 266 articles, with approximately 70 substantive additions and modifications. The amendments can be categorized as follows:
– (i) Affirming the Communist Party’s leadership over state-owned enterprises.
– (ii) Enhancing regulations for state-funded companies.
– (iii) Improving procedures for company establishment and withdrawal.
– (iv) Optimizing organizational structures within companies.
– (v) Refining the capital system for companies.
– (vi) Strengthening the responsibilities of controlling shareholders and management personnel.
– (vii) Emphasizing corporate social responsibility.
4. Transition Period for Existing Companies: For companies registered before the implementation of this law with contribution periods exceeding the stipulated limits, adjustments should be made gradually unless specified otherwise by laws, regulations, or the State Council. Registration authorities may request timely adjustments for companies with significantly abnormal contribution terms or amounts. Specific implementation measures will be determined by the State Council.
5. Effective Date: The amended law will come into effect on July 1, 2024.
Response Measures
If the registered capital after the completion of company registration is excessively high, Easy Marketing recommends adopting a reduction plan. According to the provisions of the “Company Law of the People’s Republic of China,” including Article 43, Article 46, Item 6, Article 66, Article 103, Article 177, Article 179, Item 2 of Article 204, Item 2 of Article 31, Article 69, etc., the company needs to follow these procedures when implementing a reduction:
1. The board of directors formulates a reduction plan.
2. The shareholders’ (general) meeting passes a resolution on the reduction.
3. The company compiles a balance sheet and a list of assets and liabilities.
4. Within 10 days from the date of the reduction resolution, the company notifies creditors and publishes the reduction announcement in newspapers within 30 days. Creditors have the right to demand debt settlement or provide corresponding guarantees within 30 days from receiving the notice, or within 45 days from the date of the announcement if they did not receive the notice.
5. 45 days after the announcement, the company applies for a change in registration and submits relevant certificates of the reduction announcement published in the newspaper, along with an explanation of the company’s debt settlement or guarantee situation.
Company Registration Service
Whether you’re launching a new venture or expanding your business horizons in China, our dedicated team in Easy Marketing ensures a hassle-free and expedited registration process. From navigating legal intricacies to streamlining paperwork, we’ve got you covered.
Read More: Company Registration Service in China.
