China has recently announced a new amendment to its Company Law. This new regulation is directly impacting foreign companies operating within its borders.
In this article, ALTIOS’ experts answer all your questions about this new regulation.
The National People’s Congress (NPC)’s Standing Committee adopted the new Amendment to China’s Company Law (applicable in Mainland China only) on December 23rd, 2023. It will take effect on July 1st, 2024.
This regulation will directly impact foreign companies operating within its borders. All private companies with the status of “Limited Liabilities Companies” (有限公司) will be concerned. The companies that refuse to comply with this new amendment will receive a fine.
Newly established entities in China are required to comply with the new capital requirements within a 5-year timeframe starting from July 1st, 2024. They must pay their full capital during this period.
Existing companies in China must comply with revised time limitations for the payment of their subscribed capital starting from July 1st, 2024. They need to pay the rest of the subscribed capital within 5 years, with an adjustment period between July 1st, 2024, and June 30, 2027.
Companies already established in China will have to choose between :
Quite common. This is because any changes to business licenses need approval, and the system before meant companies may include room for ambitious expansion. Also, some foreign companies have adjusted their plans since COVID or put plans on hold without revisiting their registered capital. The new regulations mean this is the right time to address these issues.
This change aims to enhance transparency and integrity within the corporate sector in China, attract more mature and sustainable projects, and ensure that Directors, supervisors, and management face greater personal liability. This also enhances corporate accountability and governance standards.
The amendment signifies China’s efforts to align its business environment with international standards and best practices by enhancing transparency through improved information disclosure and ensuring the solvency of companies. This reform protects the rights of companies and creditors and fosters a conducive environment for foreign investment.
Our corporate services team in China can help you smoothly fix these issues or can manage all your accounting and compliance requirements, so you do not need to worry about keeping on top of issues like this.
If you need assistance with the set-up of local entities, restructuring, or the closing of companies, we’ve got you covered. Additionally, we can support you with the relaunch of activities and planning, including studies and business plans.
If you have a dormant subsidiary, we can help you close it, or we can help you consolidate your China business in an effective way to hire and manage the right team to support your suppliers and distributors across Greater China.
We can assist foreign companies already set up in China or planning to expand there in adjusting their capital or re-editing a new business license in China.
