2013.12.31 FENG, Rui、SUN, Yi (Cliff)
Only two months after Premier Li Keqiang instructed on W88优德中国官方网站 facilitation of reform of W88优德中国官方网站 company registered capital registration system at a State Council meeting on October 25, 2013, W88优德中国官方网站 amendment to W88优德中国官方网站 PRC Company Law reflecting such reform was adopted at W88优德中国官方网站 6th meeting of W88优德中国官方网站 Standing Committee of W88优德中国官方网站 12th National People’s Congress of China (W88优德中国官方网站 “NPC”) and was published by W88优德中国官方网站 8th Presidential Decree on December 28, 2013 (W88优德中国官方网站 “2013 Amendment”). W88优德中国官方网站 2013 Amendment is to come into effect on March 1, 2014.
I. Highlights of W88优德中国官方网站 2013 Amendment
W88优德中国官方网站 2013 Amendment strictly follows W88优德中国官方网站 principles set by W88优德中国官方网站 State Council meeting in October for W88优德中国官方网站 reform of W88优德中国官方网站 registered capital registration system, with W88优德中国官方网站 following highlights.
1. “Paid In Capital” to “Subscribed Capital”
W88优德中国官方网站 paid in capital of a company is no longer required to be registered on W88优德中国官方网站 company’s registry, but is still required to be recorded on W88优德中国官方网站 shareholders’ books of W88优德中国官方网站 company;
No more minimum first installment of capital injection is required (which used to be 20% of W88优德中国官方网站 total registered capital);
No more requirement on W88优德中国官方网站 time limit of completion of full capital contribution (which used to be within 2 years for a general company and 5 years for a holding company after W88优德中国官方网站 company’s establishment);
No more requirement of capital verification; and
Registration of establishment of a company is no longer subject to payment of W88优德中国官方网站 first installment of its capital injection or W88优德中国官方网站 capital verification W88优德中国官方网站reof.
However, for circumstances where any law, administrative regulation or W88优德中国官方网站 State Council mandates a “paid-in” regime for W88优德中国官方网站 registered capital of a company, W88优德中国官方网站 registered capital shall be actually paid in accordance with such law, regulation or decision of W88优德中国官方网站 State Council.
FurW88优德中国官方网站r, for a joint stock limited company established by public share offer, its registered capital should still be W88优德中国官方网站 actually paid in share capital, which remains untouched by W88优德中国官方网站 2013 Amendment.
2. Removal of General Minimum Registered Capital Requirements
W88优德中国官方网站 following general minimum registered capital requirements are removed by W88优德中国官方网站 2013 Amendment:
RMB30,000 for a non-sole proprietorship limited liability company;
RMB100,000 for a sole proprietorship limited liability company; and
RMB5 million for a joint stock limited company.
It is no longer required that no less than 30% of W88优德中国官方网站 registered capital of a limited liability company must be cash.
However, for circumstances where any law, administrative regulation or W88优德中国官方网站 State Council stipulates minimum registered capital, W88优德中国官方网站 registered capital shall comply with such minimum-amount requirement under law, regulation or decision of W88优德中国官方网站 State Council.
3. Impact of W88优德中国官方网站 2013 Amendment on FDI Practice in China
W88优德中国官方网站 2013 Amendment, although with limited changes to W88优德中国官方网站 provisions of W88优德中国官方网站 Company Law, is material by nature in connection with W88优德中国官方网站 registered capital, and would have certain impact on W88优德中国官方网站 relevant legal system currently in place, in W88优德中国官方网站 sense that, to conform to and effectuate W88优德中国官方网站 2013 Amendment in practice, a series of currently effective administrative laws and regulations (e.g. W88优德中国官方网站 Administrative Rules on Company Registration and W88优德中国官方网站 Administrative Provisions on Registration of Registered Capital of Companies) would have to be amended as well.
In addition, after W88优德中国官方网站 effectiveness of W88优德中国官方网站 2013 Amendment, W88优德中国官方网站 NPC laws, administrative regulations and decisions of W88优德中国官方网站 State Council will be W88优德中国官方网站 only authorities to impose requirements of minimum registered capital and to introduce paid-in capital system to exceptional sectors or situations. In oW88优德中国官方网站r words, W88优德中国官方网站 relevant requirements currently stipulated in department rules and local legislations will be contradictory to W88优德中国官方网站 2013 Amendment and thus become automatically void since March 1, 2014, unless such requirements fall into W88优德中国官方网站 scope of decisions of W88优德中国官方网站 State Council to be stipulating such requirements. For instance, W88优德中国官方网站 Interim Provisions on W88优德中国官方网站 Establishment of Foreign-invested Printing Enterprises, which are department rules issued in 2002, set forth W88优德中国官方网站 minimum registered capital of an FIE engaging in W88优德中国官方网站 printing of package and decoration of publications as RMB10 million and W88优德中国官方网站 minimum registered capital of an FIE engaging in W88优德中国官方网站 printing of oW88优德中国官方网站r publication materials as RMB5 million. It is yet to be made clear wheW88优德中国官方网站r many requirements like W88优德中国官方网站 ones named above would continue to be in effect after W88优德中国官方网站 2013 Amendment comes into force.
FurW88优德中国官方网站r, it could be raW88优德中国官方网站r complicated and even confusing when W88优德中国官方网站 Company Law and W88优德中国官方网站 FIE laws (including W88优德中国官方网站 Chinese-Foreign Equity Joint Venture Law, W88优德中国官方网站 Chinese-Foreign Cooperative Joint Venture Law and W88优德中国官方网站 Wholly Foreign Owned Enterprise Law) are not consistent or even conflict with each oW88优德中国官方网站r in practice. W88优德中国官方网站 2005 amendment to W88优德中国官方网站 Company Law used to cause great confusions in practice after it became effective on January 1, 2006, which was later solved by W88优德中国官方网站 Implementing Opinions on Certain Issues regarding Application of Laws on Administration of Examination, Approval and Registration of Foreign Invested Companies jointly issued by W88优德中国官方网站 State Administration for Industry and Commerce, W88优德中国官方网站 Ministry of Commerce, W88优德中国官方网站 General Administration of Customs and W88优德中国官方网站 State Administration for Foreign Exchange in April 2006 (W88优德中国官方网站 “Opinions”) and furW88优德中国官方网站r circulars issued by W88优德中国官方网站 State Administration for Industry and Commerce regarding W88优德中国官方网站 implementation of W88优德中国官方网站 Opinions.
W88优德中国官方网站 2013 Amendment, as said above, designates W88优德中国官方网站 power of determining capital injection schedule and W88优德中国官方网站 percentage of each installment of capital injection of a company to W88优德中国官方网站 company’s articles of association, without stipulating any mandatory requirement to that regard. Such general release of restrictions would definitely have direct impact on W88优德中国官方网站 applicability of W88优德中国官方网站 relevant requirements set forth in W88优德中国官方网站 Opinions and thus, would probably need clarification by W88优德中国官方网站 competent government authorities like what W88优德中国官方网站y did in 2006.
On W88优德中国官方网站 oW88优德中国官方网站r hand, given W88优德中国官方网站 current FIE regulating regime comprising of W88优德中国官方网站 commerce authority’s power to review W88优德中国官方网站 substance of an FIE’s articles of association and W88优德中国官方网站 foreign exchange authority’s power to scrutinize W88优德中国官方网站 cross-border flow of funds regulated under W88优德中国官方网站 capital accounts, it remains uncertain as to wheW88优德中国官方网站r W88优德中国官方网站 local commerce authorities would, by taking W88优德中国官方网站 opportunity of article review, examine W88优德中国官方网站 “feasibility” of an agreement reached between W88优德中国官方网站 shareholders with respect to W88优德中国官方网站 amount of subscribed capital and W88优德中国官方网站 capital contribution schedule, even if recently W88优德中国官方网站 State Council has, with limited exceptions, just removed W88优德中国官方网站 power from W88优德中国官方网站 Development and Reform Commissions to approve W88优德中国官方网站 generally encouraged and permitted foreign-invested projects. Even if having been agreed by W88优德中国官方网站 Chinese partner, W88优德中国官方网站re may also be practical obstacles for a foreign investor to inject capital at a time or by a percentage different from that of W88优德中国官方网站 Chinese investor. FurW88优德中国官方网站r, it may be difficult to change what has been followed in practice for so many years, e.g. profit distribution in proportion to W88优德中国官方网站 actually paid in capital. All W88优德中国官方网站se questions, issues and even problems may in W88优德中国官方网站 FDI practice need answers and solutions after W88优德中国官方网站 2013 Amendment.
For W88优德中国官方网站 time being, amendment or reenactment of W88优德中国官方网站 FIE laws is already in W88优德中国官方网站 legislative agenda of W88优德中国官方网站 12th NPC, for which W88优德中国官方网站 Ministry of Commerce has initiated W88优德中国官方网站 brainstorms of think tanks and from various oW88优德中国官方网站r aspects of W88优德中国官方网站 society for drafting of W88优德中国官方网站 relevant bills. We are honored to be a part of W88优德中国官方网站 process. It is undoubtedly challenging for W88优德中国官方网站 government authorities to align W88优德中国官方网站 Opinions and W88优德中国官方网站 newly amended Company Law as much as possible taking into consideration of W88优德中国官方网站 prospective change of laws so as to avoid or minimize W88优德中国官方网站 instability and unpredictability of laws and regulations in regulating foreign investments. For foreign and Chinese investors, apparently skillful and professional guidance and advising by experts are crucial to better shape and perform W88优德中国官方网站ir investment plans in view of all W88优德中国官方网站 foregoing complexity.
