June 2024 - Key Revisions to the 2023 China Company Law - Chapter of Capital Contribution

Key Takeaways – Capital Contribution

1.     New Capital Contribution Deadlines

A notable change is the introduction of a five-year deadline for the full payment of subscribed capital contributions by shareholders^[ref1]. This applies to both newly established and existing companies, with a three-year transition period for adjustments^[ref2].

2.     Transparency in Capital disclosure

Companies are mandated to disclose through the National Enterprise Credit Information Publicity System the subscribed and paid-in capital contributions, methods of contribution, and dates of contribution by limited liability company shareholders, as well as the number of shares subscribed by joint-stock company sponsors.

3.     Certificate of Capital Contribution

The Company is obligated to issue a capital contribution certificate to its shareholder(s) upon receipt of their contributions. This certificate shall be affixed with the Company stamp and signed by the legal representative.

4.     Legal Responsibility for Unpaid Contributions

Shareholders who fail to fully pay their contributions on time are subject to legal responsibilities as stipulated.

The company may be fined from CNY 10,000 to CNY 50,000 for the infraction. In severe cases, the fine can range from CNY 50,000 to CNY 200,000.

Responsible officers and other directly liable personnel may face fines ranging from CNY 10,000 to CNY 100,000.

Action required:

• Review your Company's Articles of Association
• Plan for Capital Payment Schedule
• Update Registration Information
• Prepare for Capital Adjustments

These revisions are crucial for foreign-invested enterprises (FIEs) operating in China, as they bring about changes that affect corporate governance, shareholder rights, and operational compliance. We remain available should you have any questions. Please do not hesitate to reach out to your Forvis Mazars point of contact.