(“AMENDMENT”), ISSUED BY THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS
The Amendment marks the first significant step in the reform of China’s capital registration systems, aiming to alleviate the financial burden on investors when starting up businesses. The Amendment:
- abolished minimum requiremnt for registered capital unless as otherwise required under special laws, administrative regulations or state council decisions;
- lifts the 30% minimum ratio of cash contribution under company law, to encourage investors to make capital contributions in kind (IP rights, land use rights or other non-monetary property); and
- removes statutory timeframe for capital contribution; investors will only have to pay the contribution according to the company’s articles of association
Therefore, since the Amendment comes into force, investors will be able to freely agree on the registered capital, capital contribution method and the capital contribution schedule in the articles of association.
It is still unknown how this Amendment will affect on foreign investors, whether the approving authority will still require a minimum registered capital based on the foreign investor’s business, or whether foreign-invested enterprises (“FIEs”) will benefit from the lifting of restrictions in the same way as domestic-invested companies under the principle of national treatment.
When the Amendment comes into force, some current laws and regulations will become inconsistent with the company law. However, government authorities are expected to amend these laws and regulations in the upcoming months. For example, SAIC has announced that it will soon adjust the Regulations of the People’s Republic of China on Registration Administration of Companies in accordance with the Amendment; laws and regulations relating to FIEs are likely to be affected; and PRC Criminal Law provisions relating to the offense of false capital contribution may also be revised.
Date of issue: December 28, 2013. Effective date: March 1, 2014.