“French” Lifestyle丨Subscribed capital becomes paid-in capital, is your registered capital ready?
2024-08-07
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Dahe.com News: The new "Company Law of the People's Republic of China" (hereinafter referred to as the "Company Law") has been officially implemented since July 1, 2024. Within a month, many companies have experienced more or less "acclimatization". How to adjust the capital contribution period? Who can serve as the legal representative of the company? Can a natural person establish multiple one-person companies? What are the changes in the setting of directors and the board of directors? Many netizens raised their questions on social platforms.
Regarding the topics that have attracted much attention in the new "Company Law", Dahe.com will continue to invite professional lawyers to provide answers for everyone. This issue focuses on the actual payment of registered capital.
The registered capital is paid in full within 5 years? Read and act
Since the implementation of the new "Company Law", the most discussed issue is the 5-year paid-up of registered capital. Many "experts" have even emerged on the Internet platform, and various courses have appeared to teach you how to pay up. Capital reduction, cancellation, share transfer... "tricks" emerge in an endless stream. Are you, the boss in front of the screen, also ready to act upon hearing the news? Don't panic! It is important to understand the policy before taking action.
He Hongyi, chief lawyer of Henan Dili Law Firm, said that the full paid-in capital system implemented in the old company law has greatly increased people's investment enthusiasm, but it has also brought about problems such as "shell companies" and "too long subscription periods". These problems not only affect transaction security, but also damage the interests of creditors and disrupt the market order. In order to solve these problems, the new "Company Law" introduced a 5-year paid-in registered capital system to ensure real investment and reasonable planning of capital.
He Hongyi explained that not all types of companies are required to pay their registered capital within five years. Articles 47 and 98 of the new Company Law clearly state that the companies that need to pay their registered capital are mainly limited liability companies and joint stock limited liability companies, and other types of companies are not within the scope of the five-year payment.
He Hongyi gave a simple example: Wukong and Bajie both plan to set up a company after July 1, 2024. Wukong chooses to register a limited liability company, so Wukong needs to use the company's establishment date (the date registered on the business license) as the starting point and must pay up the registered capital within 5 years. Bajie chooses to establish a joint-stock company, so Bajie needs to pay the full amount of the shares he subscribed for before the company is established.
Don’t panic! Existing companies have a 3-year transition period
After the introduction of the new "Company Law", many companies have fallen into difficulties. They cannot afford to pay the taxes, and if they apply for cancellation, what should the companies and their employees do?
He Hongyi pointed out that in order to ensure a smooth transition for existing companies and avoid confusion in the early stages of the law's implementation, the new Company Law has introduced a three-year transition period (from July 1, 2024 to June 30, 2027). For limited liability companies established before the implementation of the new Company Law, if the remaining contribution period is less than five years from July 1, 2027, there is no need to adjust the contribution period; if the company's contribution period exceeds the period prescribed in the Company Law, it should be adjusted during the transition period.
So, how should the three-year transition period be calculated? For example, Tang Seng, Sha Seng, and White Dragon Horse are all companies established before July 1, 2024. Tang Seng's limited liability company was established in 2012. If the remaining subscribed capital contribution period of his company exceeds 5 years from July 1, 2027, it should adjust its remaining subscribed capital contribution period to within 5 years before June 30, 2027, and pay the capital contribution in time within the adjusted subscribed capital contribution period.
Bailongma’s company is also a limited liability company, but his company was established in 2023. The remaining investment period is less than 5 years from July 1, 2027, and there is no need to adjust the investment period.
Sha Seng's company is a joint-stock limited liability company. According to the three-year transition period policy of the new "Company Law", Sha Seng needs to pay the full amount of subscribed shares within the three-year transition period, that is, complete the actual payment before June 30, 2027.
The paid-in funds can of course be spent
"Can the paid-in capital be used?" "Where can it be used?" ... The withdrawal and use of paid-in capital are the most concerned issues for entrepreneurs who start to pay their registered capital after the release of the new "Company Law".
"Simply speaking, the paid-in money is equivalent to the company's operating funds and can be spent." He Hongyi explained that it is just a matter of transferring the money from the original boss's personal account to the company's public account, which can be used to purchase equipment and facilities, as well as to pay employees wages, bonuses, and social security.
He Hongyi reminded that as long as the paid-in registered capital is withdrawn and used with corresponding and reasonable bills, expenditure records, purchase contracts, etc., all processes and procedures are legal and compliant. However, if the money is transferred immediately after the actual payment, and the legal use of the money cannot be explained, this behavior is suspected of capital flight and the corresponding legal responsibility must be borne.
Should I pay or not? The consequences are serious!
What will happen if the payment is not made in full by the due date? He Hongyi said that the five-year paid-in registered capital and three-year transition period provide a long preparation time for enterprises to pay the registered capital. Shareholders or entrepreneurs who fail to pay the registered capital on time will face corresponding legal liabilities such as compensation liability, joint and several liability, loss of shareholder rights and administrative penalties. Therefore, both limited liability companies and joint stock companies must pay the registered capital in a timely manner as required.
Under the guidance of the new "Company Law" policy of paying registered capital within 5 years, the business community and investors are welcoming a more standardized capital operation environment. This policy not only provides a clear legal framework for enterprises, ensuring the real investment and reasonable planning of capital, but also effectively combats dishonest investment behavior through institutional constraints, maintaining market order and economic stability. (Photo by Zhao Meng and Liu Sijia/Fan Hongye)
