Company Law and Economic Reform in China: Recent Developments

It is said that, to observe China, one always has to pay attention to the direction and trends. It is further generally regarded that the direction of China’s development since the end of the Cultural Revolution has been economic liberalization and market economy. China’s trading partners, especially the United States, have hoped that someday China will become a “normal country” which embraces capitalism, market economy, personal freedom, democracy, and American leadership.

The domestic policies of the XI Administration appear to be much more politically conservative than many observers originally expected. This is especially true with respect to the tightened control of press, speech, civil society, the legal profession, education, among others. It is fair to say that political reform has been scaled back significantly.

On the other hand, economic liberalization continues to advance at least in some aspects of the economic system. One such example is corporate law reform, which has been steadyfastly marching toward reducing governmental intervention and increasingly the autonomy of business Organisations.

The latest revision of the PRC Company Law in 2013 marks a further step in this regard. The following amendments were made to the Company Law in this round of revision:

  • Relaxed and Simplified Requirement on Registered Capital:
    (1) minimum registered capital for all forms of companies were removed;
    (2) No prescribed timeframe for shareholders to make full capital contribution;
    (3) Adoption of the capital subscription system: promised capital, not paid-up capita;
    (4) The 30% ratio on cash payment removed
  • Simplified Registration Procedure: Capital verification requirement removed.

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