9 July 2014
Online CBA: Can Shareholders Make Capital Contributions with Their Equity Interests in Companies Incorporated in China?
Q: Can Shareholders Make Capital Contributions with Their Equity Interests in Companies Incorporated in China (hereinafter Referred to as Equity Companies)?
A: Article 6 of the Administrative Provisions on the Registration of Registered Capital of Companies promulgated by the State Administration for Industry and Commerce stipulates that shareholders or promoters may make capital contributions with their equity interests in equity companies. Equity used for capital contribution purposes should have clear legal title, be free from encumbrances and be legally transferable. However, equity may not be used for capital contribution purposes under the following circumstances:
(1) If the equity has been pledged;
(2) If the equity is non-transferable according to the company's articles of association;
(3) If it is specified by law, administrative regulation or State Council decision that the transfer of equity by the shareholders of an equity company is subject to approval and no approval has been given; and
(4) If it is otherwise specified by law, administrative regulation or State Council decision that the equity cannot be transferred.
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