The “Provisions of the State Council on Implementation of the Registered Capital Management System under the Company Law” has come into force since July 1, 2024.

In 2013, the revised “Company Law” stipulates the subscribed capital system for limited liability companies. However, during the past 10 years, a large number of companies with inflated registered capital have emerged, which brought more commercial risks for business transactions. In order to deal with such risks, the “Company Law” was revised on December 29, 2023, and it stipulates that the registered capital should be fully paid within 5 years after the establishment of a company. In addition, the newly revised version also stipulates that for the companies already registered for establishment before this Law comes into force, if their capital contribution period exceeds the period stipulated herein, such period shall be gradually adjusted to within the period prescribed in this Law, and the specific implementing methods shall be prescribed by the State Council.

On July 1, 2024, the State Council issued the “Provisions of the State Council on Implementation of the Registered Capital Management System under the Company Law” (hereinafter referred to as the “Provisions”), which clarified specific rules.

1. For limited liability companies registered and established before June 30, 2024, the latest subscription period is June 30, 2032. Specifically, if the subscribed capital period stipulated in the company’s articles of association does not exceed June 30, 2032, the subscribed capital period stipulated in the company’s articles of association shall be implemented; If the articles of association stipulate that the subscribed capital period exceeds June 30, 2032, the company shall revise the articles of association to adjust the capital period to June 3, 2032 or earlier.

2. For joint-stock limited companies registered and established before June 30, 2024, the latest subscription period is June 30, 2027. Compared to limited liability companies, joint-stock limited companies do not have an additional 5-years transition period.

3. For special industries, such as the production or operation of a company involves State interests or major public interests, and the relevant competent department of the State Council or the provincial people’s government concerned gives an opinion, the market regulatory authority of the State Council may approve to make capital contributions within the original capital contribution period. In addition, the “Provisions” also provides rules for companies to change the subscribed capital contribution time, random inspections by administrative enforcement inspectors, punishment methods for failing to adjust the capital contribution period, and etc.