The new "Company Law" will come into effect on July 1, 2024——
The registered capital is “real” and the business environment is more optimized.
Our reporter Wang Junling
Companies are the most important market entities. The newly revised "Company Law of the People's Republic of China" (hereinafter referred to as the "New Company Law") will come into effect on July 1 this year.
Many companies have noticed a major change: the new "Company Law" has improved the subscription registration system for limited liability companies and clarified that the capital contribution subscribed by all shareholders shall be determined by shareholders in accordance with the provisions of the company's articles of association within five days from the date of establishment of the company. It is paid in full within the year, and at the same time, the amount of investment, method of investment, information disclosure, etc. are clearly regulated.
What are the impacts of “real investment” in registered capital? How do market parties view it? Reporters conducted interviews on related topics.
Say "no" to arbitrary setting of registered capital
Beijing Lingpao International Trading Co., Ltd. is a foreign trade export company in the footwear industry, with customers in the United Kingdom, France, Denmark, Australia, Canada and other places. In recent years, products such as Chelsea rain boots created by the company for customers have been selling well overseas. "The healthy development of enterprises depends on being down-to-earth. The new "Company Law" improves the subscription registration system, which helps the majority of enterprises to focus on their main business and stimulates everyone's vitality to start a business." Talking about the new "Company Law" , General Manager Xia Di expressed his approval.
Why does the new Company Law modify the subscription registration system for enterprise registration?
According to the relevant person in charge of the State Administration for Market Regulation, since the "Company Law" was revised in 2013 and the country fully implemented the registered capital subscription registration system, it has effectively solved the problem of excessive market access capital thresholds under the paid-in registration system, which restricts entrepreneurship, innovation, and registration. Prominent problems include idle funds and false capital verification. The registered capital subscription registration system relaxes market access restrictions, improves the efficiency of shareholder capital use, reduces capital registration transaction costs, strengthens the company's main responsibility, and promotes the modernization of corporate governance, consolidates the micro-foundation of economic development, and optimizes the business environment played a positive role in other aspects. At the same time, prominent problems such as blind subscriptions, sky-high subscriptions, and too long terms have also arisen in practice. Some companies’ investment periods even exceed 50 years and the amount of investment exceeds hundreds of billions, which violates the principle of authenticity and goes against objective common sense.
"The above problems, on the one hand, blur the role of registered capital in expressing the company's financial credit, increase the cost of judgment and evaluation of market transaction credit, resulting in the phenomenon that the company's actual capital contribution is 'zero' for many years; on the other hand, it weakens the legal system level Legal constraints on the capital contribution of company shareholders objectively affect the authenticity and effectiveness of the investment, and increase the probability of debt and equity disputes," the person in charge said.
Zhou Xin, a partner at King & Wood Mallesons, said in an interview with this reporter that for enterprises, registered capital is the most basic and intuitive strength information of the company, and it should be "realized". In practice, some companies do not set the amount of registered capital and investment period based on the actual situation of their production and operations, some lack professional knowledge and set the registered capital at will, and a few companies deliberately exaggerate the company's strength. These are exactly the institutional shortcomings that the new Company Law aims to fill.
"Promoting the 'solidification' of registered capital will help enterprises establish an image of integrity and improve business reputation; it will help entrepreneurs plan their own business behaviors realistically and truly use their energy to start a business; it will help other market entities to more intuitively judge counterparties. We can make scientific and reasonable business decisions based on our credit standing,” Zhou Xin said.
The new "Company Law" also imposes "real and practical" restrictions on companies' illegal activities in the field of subscription registration. For example, the new "Company Law" clearly stipulates that "if a company is registered by falsely reporting registered capital, submitting false materials, or using other fraudulent means to conceal important facts, the company registration authority shall cancel the company in accordance with the provisions of laws and administrative regulations." If a person or shareholder withdraws his or her capital after the company is established, the company registration authority shall order it to make corrections and impose a fine of not less than 5% but not more than 15% of the amount of the withdrawn capital."
Tens of thousands of companies have reduced their registered capital
The new "Company Law" will come into effect on July 1, 2024, but the clear guidance it conveys has already caused many companies to take the initiative to correct problems with registered capital. Data provided by Qichacha shows that from December 29, 2023 to January 16, 2024, more than 12,000 companies across the country completed the reduction of registered capital in more than half a month.
Promoting a more honest and orderly business environment has made the new Company Law highly praised by Chinese and foreign companies.
Shao Haoqing, chairman of Hans Hill Trading (Shanghai) Co., Ltd., said that the "real" registered capital of a company is an important basis for the authenticity of market operations and an important reference for evaluating partners. During the China Exhibition process, SYR will conduct a multi-dimensional evaluation of the partner's past growth history, existing product quality, service support capabilities and project execution reliability to ensure that the "best partner" is found.
"We have participated in the China International Import Expo for six consecutive years and have fully felt the charm of China's economy and large-scale market. The introduction of the new "Company Law" has provided important strengthening measures in the field of subscription registration, which is conducive to creating a trustworthy and trustworthy market." This is a positive signal for the vast number of Chinese and foreign enterprises." Shao Haoqing told this reporter.
According to Ma Hui, deputy general manager of Ningxia Juneng Robot Co., Ltd., when a company is looking for a partner, registered capital is an important factor in judging whether the partner is "reliable". The new "Company Law" improves the company's registered capital subscription system, legally blocks market entities from engaging in false and malicious competition, and creates a fair, just and open business environment and an honest and trustworthy market environment.
Ma Hui said that a high-quality business environment is the basic condition for high-quality development of enterprises. In 2024, Juneng Robot will take the positive changes brought about by the implementation of the new "Company Law" as an opportunity to continue to deepen its efforts in the field of intelligent manufacturing system solutions, continue to expand and innovate new technologies of digital intelligence integration, and work with more honest, pragmatic, and Innovative companies grow together. "We will also give full play to the advantages of the industrial chain and work with more partners to innovate and develop cooperatively."
Cao Lixia, general counsel of Sany Group Co., Ltd., said that "leather companies" and "shell companies" often have higher risks of commercial fraud, which seriously affects the enthusiasm of formal market entities to carry out commercial cooperation. The new "Company Law" is conducive to strengthening the responsibility-bearing capacity of commercial transaction objects, conducive to ensuring the transaction security of commercial entities, conducive to reducing corporate shareholders' abuse of the company's subscription system to evade corporate debts, and conducive to enhancing the authenticity and effectiveness of investments. It released an important positive signal to the market.
"For us, the introduction of the new "Company Law" will allow Sany to obtain more extensive, safe and efficient business cooperation opportunities and reduce the risk of accounts receivable." Cao Lixia told this reporter that Sany will next Pay more attention to partners' registered capital payment status, deadlines, default events and other aspects, and guide the healthy development of industry supply chain companies while continuing to provide higher-quality products to global customers.
Balance stimulating vitality and ensuring safety
Market entities are the main participants in economic activities, the main providers of employment opportunities, and the main promoters of technological progress. Data from the State Administration for Market Regulation shows that the number of companies in my country has increased from 13.03 million in 2014 to 48.39 million by the end of November 2023, an increase of 2.7 times, of which 99% are small and micro enterprises.
Nowadays, the introduction of the new "Company Law" has added confidence to entrepreneurs. Mr. Shen, a post-80s entrepreneur from Hefei, Anhui, runs a bidding agency. In his view, "real" registered capital will bring certain financial pressure to the establishment of new companies, but the new "Company Law" has institutionally improved the subscription registration system and optimized the business environment. "In my several entrepreneurial experiences, I have been exposed to companies with various registered capitals. From my experience, the new "Company Law" takes into account both stimulating the vitality of business entities and ensuring transaction security, and has formed a solid foundation for people who are serious about starting a business. provide stronger protection," he said.
At the same time, the new "Company Law" has also boosted the development expectations of foreign companies in China. Liu Sirui, a global partner and Beijing managing partner of the US law firm Dorsey, told this reporter that the capital payment systems adopted by various countries are diverse and closely related to the market environment of each country, the history of corporate system development, corporate governance traditions and other factors. Judging from the practice of some developed countries, "real" registered capital can effectively regulate market order, enhance market mutual trust, and accordingly reduce damage to the interests of creditors.
"Revising and improving the registered capital subscription system will help expand the right to know and choose of commercial entities, and provide strong support for relevant units to carry out due diligence and promote commercial projects. In the future, Dehui will give full play to the golden character of a century-old store With its brand name and cross-border service team advantages, it actively serves more foreign investors to invest, start businesses, and develop businesses in China." Liu Sirui said.
It is worth noting that the relevant departments have also provided a corresponding transition period for the new Company Law to take effect.
The relevant person in charge of the State Administration for Market Regulation said that in order to avoid inconsistencies in the legal system for registered capital applied to newly established companies and existing companies, strengthen the uniformity of legal application, and at the same time reduce the impact on the vast majority of existing companies operating normally, full consideration must be given to operating In complex situations such as entity type and industry field, the relevant departments will study to set a certain number of years and a relatively sufficient transition period for existing companies. In accordance with the requirements of the new "Company Law", the capital contribution period of existing companies will be adjusted step by step, steadily and orderly to the new one. Within the time limit specified in the Company Law.
Zhou Xin suggested that, on the one hand, existing companies should make reasonable plans based on their own actual conditions, standardize capital subscription behavior, and make rational adjustments to their capital structure by amending their articles of association, paying in capital, registering capital reduction, shortening the capital contribution period, etc. On the other hand, newly established companies should start from their own actual production and operation needs, comprehensively consider the company's development positioning, business model, financing amount, etc., reasonably plan the investment period and amount, and reduce legal risks. (People's Daily Overseas Edition)