China Issues Regulations to Promote Implementation of the Registered Capital Management System of Company Law

On July 1, 2024, the Chinese government released the Regulations of the State Council on Implementing the Registered Capital Management System of the Company Law of the People’s Republic of China (the “Regulations”), which will come into effect on July 7, 2024.

Consisting of 13 articles, the Regulations clarify arrangements during the transitional period of adjusting the time limit for shareholders to pay in their subscribed capital at existing companies, stipulate on the handling of abnormal activities in a company’s capital contributions, and refine regulatory measures. According to the Regulations, if there are abnormal activities in a company’s capital contributions and registered capital, company registration authorities shall require the company to make timely adjustment according to law after conducting thorough investigations on the enterprise and its shareholders. Where a company adjusts the amount of capital contribution subscribed and paid by its shareholders, the method and data of capital contribution, or the number of shares subscribed by its promoters, it shall make a public announcement. Company registration authorities conduct supervision and inspection on companies’ announced subscribed and paid-in capitals and implement classified regulation based on companies’ credit exposures.