China revises Company Law to lower threshold for company establishment
December 30, 2013--The Company Law of the People’s Republic of China has been revised and adopted at the Sixth Meeting of the Standing Committee of the 12th NPC on 28 December 2013. This move, aimed to further lower the threshold for establishing companies, reform the enterprise registered capital registration system and make market access easier for companies, is set to stimulate social investment, encourage innovation and entrepreneurship, and bolster economic development.
The amendments of the Company Law cover three aspects:
- Replacing the paid-up capital registration system by subscribed capital registration system;
- Relaxing the requirements for registered capital registration; and
- Streamlining the registration items and requirements for registration documents.
The revised law will take effect on 1 March 2014.
According to the State Administration for Industry and Commerce (SAIC), the revised Company Law provides the legal basis for implementing reform of the enterprise registered capital registration system. SAIC will now proceed to amend the relevant implementation rules such as the regulations on the administration of enterprise registration and will submit the suggested amendments to the State Council for deliberation and approval. The timeline is for the new implementation rules to take effect on the same date as the revised Company Law. SAIC will also devote efforts to establishing an enterprise credibility system whereby the records of business registration, annual reports, credentials and qualifications of enterprises will be made available to the public.
On 25 October the State Council made a decision to reform the enterprise registered capital registration system. Under this reform, the minimum registered capital requirements of Rmb30,000 for limited liability companies, Rmb100,000 for one-person limited liability companies, and Rmb5 million for joint-stock companies with limited liability will be scrapped. Meanwhile, the system of annual inspections will be replaced by the system of annual reports, and conditions for the registration of company premises will be eased in accordance with the principle of easy registration in a regulated and orderly manner.