New Company Law: "Five-year paid-in registered capital"

The newly revised "Company Law," passed on December 29, 2023, will come into effect on July 1, 2024.

The most significant change in the new Company Law is the improvement of the subscribed registration system for limited liability companies, which clearly stipulates that the subscribed capital contribution amounts by all shareholders shall be paid up by the shareholders within five years from the date of establishment of the company, according to the provisions of the company's articles of association.

At the same time, it is stipulated that companies registered before the implementation of the new Company Law, if the contribution period exceeds the period stipulated by this law, should gradually adjust to the period stipulated by this law, except as otherwise provided by law, administrative regulations, or the State Council.

For existing companies that have been registered, the new Company Law requires these companies to gradually adjust their contribution period to comply with the period stipulated by the new law.

According to the "Regulations on the Implementation of the Registered Capital Registration Management System of the Company Law of the People's Republic of China (Draft for Comments)" drafted by the State Administration for Market Regulation, existing companies will have a three-year transitional period, that is, from July 1, 2024, to June 30, 2027, to gradually adjust their contribution period to no more than five years. However, the new rules for the transitional period have not yet been officially promulgated, and the specifics still need to be confirmed.

For companies that have not yet paid up the registered capital, they should gradually complete the paid-in according to their own situation.

If the registered capital is large and cannot be paid in full, it is recommended to reduce the capital as soon as possible to avoid facing fines and deprivation of shareholder qualifications due to inability to make capital contributions.

Enterprises should reasonably plan their paid-in plans and respond cautiously in various aspects such as capital management and risk control to ensure their stable operation under the new Company Law.