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Registered Capital Registration System Reform

A series of reform measures have been implemented with regard to the registered capital of FIEs over recent years. In this connection, a number of regulatory documents were issued, including the amended Company Law (effective on 1 March 2014), the Circular of the State Council on Printing and Distributing the Reform Plan on the Registered Capital Registration System (Guo Fa No. 7 [2014]), and the Circular of the Ministry of Commerce on Improving the Administration of Foreign Investment Approval (Shang Zi Han No. 314 [2014]).

(a)  The restrictions or provisions on the ratio of initial capital contribution, ratio of monetary capital contribution and time limit for capital contribution to foreign-invested companies (including companies with investment from Taiwan, Hong Kong and Macau) have been removed. The amount of capital contribution subscribed, the method of capital contribution and the time limit for capital contribution are to be agreed by the investors in the company (shareholders and promoter) and written out in the equity joint venture (or cooperative joint venture) contract and articles of association. The liability of the shareholder of a limited liability company is limited to the amount of its subscribed capital contribution, while the liability of the shareholder of a joint-stock limited company is limited to the nominal value of its subscribed shares. The company should publicise the amount of the shareholder’s subscribed capital contribution or the nominal value of the promoter’s subscribed shares, method of capital contribution, time limit for capital contribution, and status of contribution via the market entity credit information publication system. Commerce departments at all levels should state the above information clearly in their official reply.

(b)  Restrictions on the minimum registered capital of companies have been lifted, unless otherwise stated in provisions governing the minimum registered capital of specific industries stipulated in relevant laws, administrative rules and State Council decisions. As the amount of paid-up capital is no longer a mandatory item in business registration and the status of contribution of registered capital is no longer checked, when a limited company applies for business registration, it is not required to submit a credit verification report.

(c)  It is stipulated clearly in existing laws, administrative rules and State Council decisions that certain industries are still subject to the paid-up capital registration system and not the subscribed capital registration system (listed below are the industries concerned). Before the relevant laws, administrative rules and State Council decisions are revised, the existing regulations will continue to apply.

 

Industries provisionally not subject to subscribed capital registration system and the relevant legal bases

No.DescriptionBasis
1Joint stock limited companies set up by way of fund raisingCompany Law
2Commercial banksLaw on Commercial Banks
3Foreign-funded banksRegulation on the Administration of Foreign-Funded Banks
4Financial asset management companiesRegulation on Financial Asset Management Companies
5Trust companiesBanking Supervision Law
6Financial companiesBanking Supervision Law
7Financial leasing companiesBanking Supervision Law
8Auto finance companiesBanking Supervision Law
9Consumer finance companiesBanking Supervision Law
10Currency brokerage companiesBanking Supervision Law
11Rural banksBanking Supervision
12Loan companiesBanking Supervision Law
13Rural credit cooperative associationBanking Supervision Law
14Rural mutual cooperativesBanking Supervision Law
15Securities companiesSecurities Law
16Futures companiesRegulation on the Administration of Futures Trading
17Fund management companiesLaw on Securities Investment Fund
18Insurance companiesInsurance Law
19Professional insurance agencies, insurance brokeragesInsurance Law
20Foreign-funded insurance companiesRegulation on the Administration of Foreign-Funded Insurance Companies
21Direct selling enterprisesRegulation on the Administration of Direct Selling
22Foreign labour cooperation enterprisesRegulation on the Administration of Foreign Labour Cooperation
23Financing guarantee companiesInterim Measures for the Administration of Financing Guarantee Companies
24Labour dispatch enterprisesDecision of the 28th State Council Executive Meeting on 25 October 2013
25Pawn shopsDecision of the 28th State Council Executive Meeting on 25 October 2013
26Insurance asset management companiesDecision of the 28th State Council Executive Meeting on 25 October 2013
27Small loan companiesDecision of the 28th State Council Executive Meeting on 25 October 2013

 

Apart from the above-mentioned industries to which the subscribed capital system for registered capital does not apply for the time being, the payment of the registered capital of companies is no longer subject to examination.

(d)  For foreign investment projects approved before 1 March 2014, investors should continue to perform their duty of capital contribution in accordance with the provisions in the original contract and articles of association. In the event that any changes are necessary, investors can apply to the commerce department at any level, which should proceed with examination according to the relevant requirements of existing policies.

(e)  The ratio of a company’s registered capital to its total investment should continue to comply with the Interim Provisions on the Ratio of Registered Capital to Total Investment of a Sino-Foreign Equity Joint Venture and other existing regulations.

Content provided by Picture: HKTDC Research
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