Regulatory update – China
The Company Law of the People’s Republic of China (2023 Revision) is set to take effect on July 1, 2024. Passed in December 2023, it the most comprehensive recent revision of the country’s company law.
- Matias Barreiro
With 70 new or heavily revised articles, the new Company Law aims at making the corporate legal framework more business-friendly and at promoting transparency, accountability, and fairness in corporate decision-making and governance practices. Changes include, among others, the following items:
Company capital systems
- Shareholders of limited liability companies are required to pay their subscribed capital in full within 5 years from the incorporation of the company. The law provides for a transition period and existing companies will need to adjust by June 30, 2027.
Corporate governance structure
- Any director or the general manager executing the company’s affairs may be appointed as legal representative. In the event of a director resigning while serving as legal representative, the resignation automatically covers the role of legal representative and a new legal representative must be appointed within 30 days.
- A separate board of supervisors may be replaced by an audit committee composed of directors. Smaller limited liability companies can dispense with the board of supervisors through unanimous approval of all shareholders.
Company registration and reporting obligations
- Corporate changes including changes of legal representatives or registered address should be submitted to the State Administration of Market Regulation (“SAMR”) in a timely manner to avoid administrative penalties.
- Companies are required to disclose authentic, accurate and complete information on the National Enterprise Credit Information Publicity System on:
- the amount of capital contribution subscribed for and paid up by shareholders as well as the methods of, and dates of capital contributions;
- any amendments to shareholders’ equities;
- any information related to the approval, modification or deregistration of company licenses and/or permits.
- The revised law also includes a simplified deregistration procedure for companies which have “not incurred any debts during [their] existence, or [have] paid off all [their] debts”.
Additional changes include shareholders’ rights, responsibilities and liabilities, such as access to corporate and financial documents, the right to take legal action against management of a company’s wholly-owned subsidiaries, the ability to act against a shareholder’ abuse of rights, and liability for unpaid capital contributions.
