Five-Year Transition Period for New Registered Capital Rules

At the end of 2023, China’s legislature adopted an amendment to the Company Law, which introduced new regulations on the term of payment for subscribed capital, as well as requirements to publicly disclose the amount of registered capital.

The amended Company Law comes into effect on July 1, 2024, meaning any companies established after this date must comply with the new rules on subscribed capital.

In order to accommodate companies that are established before the amended Company Law comes into effect and have subscribed capital payment terms exceeding the five-year time limit, a transitional period will be implemented. During this transitional period, these companies will be required to gradually adjust the contribution period to meet this requirement.

Transition period for implementation of the new registered capital system

For companies established before the amended Company Law takes effect, with a subscribed capital payment term (“contribution period”) exceeding five years, the transition period will extend from July 1, 2024, to June 30, 2027.

If an LLC is established before July 1, 2024, but the remaining contribution period for its shareholders is less than five yearsfrom July 1, 2027, the company does not need to make any adjustments during the transition period. However, if the remaining contribution period exceeds five years, then it must be adjusted to be within five years during the transition period. That is to say, the final date for LLCs established before July 1, 2024 to complete their capital payment is June 30, 2032.

Meanwhile, for joint stock companies established before the implementation of the amended Company Law, the funds for subscribed shares must be fully paid within the three-year transition period (before June 30, 2027).

In the past, in order to show the strength of the company, some entrepreneurs will choose to put a large registered capital, but in fact they never pay for this capital. According to the new law, this type of action will no longer be available!

So, if there are multiple companies under your name or you have put a large registered capital, you need to hurry up to deal with it, so as not to run into the red line of the law.


How to deal with it?

01 Actual capital injection

If the registered capital at the time of company registration is 500,000 RMB, then you need to deposit an amount of 500,000 into the company’s bank account.

02 Reduction of registered capital

If the amount of registered capital is too high, there is no way to inject so much money into the company, you can apply for reduction of registered capital. It is important to note that you should follow the legal minimum capital, as each company’s scope of business has an amount limit.

03 Cancel the company

Because the procedures for capital reduction can be complicated, if you do not intend to operate, the last option is to cancel the company.

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