Pillsbury Winthrop Shaw Pittman

PRC Company Law amendment

By Woon-Wah Siu, Julian Zou and Liang Tao

China recently adopted new amendments to the PRC Company Law. They took effect on 1 March 2014. The amendments eliminate the minimum capital requirements and ease statutory procedures for company establishment. How the amendments will be put into practice will be known when the implementing rules are published.

The amendments will remove the minimum registered capital requirements, which are, under prior law, RMB30,000 (approximately £3,000) for most limited liability companies and RMB5m (approximately £488,000) for joint stock limited companies. Thus, investors may determine the registered capital of companies solely based on their business objectives and arrangements, except for companies subject to minimum registered capital requirements imposed by any other applicable law. For instance, a company in the value-added telecom service industry will have to comply with the minimum registered capital requirement of no less than RMB1m (£98,000) under the rules of the State Council.

The amendments will eliminate the requirement that no less than 30 per cent of the registered capital of a limited liability company be cash. Investors may make 100 per cent of their capital contribution in non-cash assets such as intellectual property or land use rights. However, it remains to be seen whether this is more than a theoretical possibility, as the implementing rules may include some minimum ratio of cash to non-cash contribution…

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