China Law Update

• Pages: 260-283

CHINA LAW UPDATE (DO NOT DELETE) 2014/7/7 8:44 PM

260 TSINGHUA CHINA LAW REVIEW [Vol. 6:257

CHINA LAW UPDATE

I. LAWS AND REGULATIONS

A. Amendments to the Company Law of the People’s Republic of

China

1. Introduction

On Dec. 12, 2013, the sixth meeting of the Standing Committee

of the 12th Session of the National People’s Congress amended 12

provisions of the Company Law of the People’s Republic of China.1

These changes to the Company Law (“the Amendments”) came into

effect on March 1, 2014. With the aim of stimulating social

investment and entrepreneurship, the Amendments lowered the

company establishment thresholds and reformed the company capital

registration regime.

The Amendment introduces three main changes: (1) removing the

minimum amount of registered capital for company establishment,

(2) replacing the paid-up capital registration system with a

subscribed capital registration system, and (3) canceling the

minimum cash requirement.

2. Removing the Registered Capital Requirements for Company

Establishment

The old Company Law set various thresholds on the amount of

registered capital to secure large capital investments. However, under

the Amendments, the minimum registered capital for limited liability

companies (￥30,000), single shareholder companies (￥100,000)

and limited joint stock companies (￥5,000,000) has been repealed.2

The Amendment has also canceled the requirement of a capital

contribution verification report for company establishment.3 Capital

contribution should now be in compliance with the provisions of the

articles of association, and promoters of a company now have

substantial discretion in deciding the contents of the company’s

articles of association.

1 Quanguo Renda Changweihui guanyu Xiugai “Zhonghua Renmin Gongheguo Haiyang

Huangjing Baohu Fa” Deng Qibu Falü de Jueding (全国人大常委会关于修改《中华人民共和国海洋

环境保护法》等七部法律的决定) [SCNPC’s Decision to Amend Seven Laws Including the Marine

Environment Protection Law of the People's Republic of China] (promulgated by the Standing Comm.,

Nat’l People’s Cong., Dec., 28, 2013, effective Mar. 1, 2014) (Chinalawinfo).

2 Gongsi Fa (公司法) [Company Law] (promulgated b y Nat’l. People’s Cong., Dec. 29, 1993,

effective Jul. 1, 1994) arts 23, 26 (Chinalawinfo).

3 Id. art. 29.

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3. Replacing the Paid-Up Capital Registration System with a

Subscribed Capital Registration System

Under the Amendments, shareholders of the company are able to

decide on the form and schedule for the subscription of contributions

as set forth in the articles of association. However, they will still be

liable for the authenticity and legality of the capital contribution and

be held accountable to the enterprise within the limits of their

respective subscribed capital or shares.4 As a general exception,

laws, administrative regulations, and decisions of the State Council

may provide otherwise with respect to the minimum registered

capital and the actual payment of registered capital. Moreover, the

paid-up capital contributions of a company will no longer have to be

registered to incorporate.5

4. Removing the Minimum Cash Requirement

Under the old Company Law, at least 30 percent of the registered

capital contribution had to be made in cash. This requirement has

been abolished by the Amendment.6

5. Conclusion

The Amendments ease company registration requirements,

benefiting both domestic and foreign companies. Zhang Mao, head

of China’s State Administration of Industry and Commerce, has

predicted the Amendments will increase the number of companies

and help control fraud.7 The Amendments are a solid start to an

effort to reduce governmental regulation so that businesses can have

more flexibility in their operations.

II. JUDICIAL INTERPRETATIONS

A. Provisions of the Supreme People’s Court on the Issuance of

Judgments on the Internet by the People’s Courts

1. Introduction

On November 13, 2013, the judicial committee of the Supreme

People’s Court in its 1595th meeting passed a regulation on releasing

judicial documents on the Internet, which came into effect on

January 1, 2014. The Provisions of the Supreme People’s Court on

4 Id. art. 27.

5 Id. art. 7.

6 Id. art. 27.

7 Zhang Mao (张茅), Zhuce Deng ji Gaige Youliyu Jifa Shichang Zhuti de Huoli (注册登记改革有

利于激发市场主体的活力) [Registration Reform Arouses Vitality of Market Entities], XINHUA NET,

(Nov. 7, 2013), http://news.xinhuanet.com/fortune/2013-11/07/c_118043252.htm.