The new Company Law requires registered capital to be paid in full within 5 years. The law has prompted hundreds of companies to announce capital reductions, with some planning to reduce their registered capital significantly. The law, effective from July 1, 2024, hopes to create a more honest and trustworthy market environment.
Previously, the Company Law allowed for an indefinite investment period with no legal deadline for shareholders to contribute capital. This led to cases of companies setting capital contribution periods of up to 50 or 100 years, raising concerns about transaction security and harming the interests of creditors.
Under the new law, the registered capital of a limited liability company must be paid in full within 5 years from the date of establishment. This change has prompted many companies, including some with high registered capital but almost no paid-in capital, to consider their options. Some are considering reducing their capital through legal procedures, while others are contemplating cancellation.
The law has already had an impact, with hundreds of companies announcing reductions in registered capital on different platforms. This includes well-known companies such as Huawei Technologies Co., Ltd., as well as listed companies like Xianfeng Holdings, which announced a significant reduction in its subsidiary’s registered capital.
The new law is seen as a necessary supplement and improvement to the previous subscription system. It aims to restrict the setting and implementation of subscription commitments, promoting the rationality and integrity of market entities. The law hopes to ensure transaction safety, protect the interests of creditors, and create an honest and trustworthy market environment.
In response to the new law, companies are taking swift action to adjust their registered capital, with many announcing reductions. Legal experts are advising companies with high registered capital and almost no paid-in capital to consider reducing their capital or opting for cancellation as a way to address the new requirements. The law has prompted companies to act quickly to create a more honest and trustworthy market environment.