Deadline for Adjusting Capital Contribution Period of LLC in China
Prior to the revised Company Law of the PRC which came into force on 1 July 2024 (hereinafter referred to as the "2024 Revised Company Law"), the registered capital of limited liability companies (LLCs) established and registered under the revised Company Law which came into force on 1 March 2014 were subscribed by all shareholders, except for those required by laws and regulations to have their registered capital paid in immediately. The capital contribution period for the shareholders can be freely stipulated in the company’s articles of association without statutory upper limit. Thus, lots of limited liability companies have chosen an excessively long capital contribution period at the stage of establishment.
The 2024 Revised Company Law has changed the previous comprehensive subscribed capital system to a subscribed capital system with time limit, which requires that the registered capital subscribed by the shareholders of a limited liability company must be fully paid by the shareholders within 5 years from the date of company establishment. If a limited liability company was established and registered before the 2024 Revised Company Law came into force, whose registered capital subscribed by the shareholders has not been fully paid up, and the remaining capital contribution period exceeds 5 years from 1 July 2027, then the remaining capital contribution period must be adjusted to be within 5 years before 30 June 2027 (the deadline for adjustment). Shareholders must fully pay their subscribed registered capital within the adjusted capital contribution period (no later than 30 June 2032).
Companies that fail to complete the adjustment of their capital contribution period before the deadline will be specially marked by the company registration authority on the National Enterprise Credit Information Disclosure System and publicly disclosed. The company will also face punishments such as administrative penalties. It will have severe adverse impacts on the company's credit, bidding, financing, and other business activities. Additionally, if the company has debt disputes, acceleration of shareholder’s capital contribution obligation may be triggered due to non-compliance with legal requirements on the capital contribution period, and thus being required by the creditors to immediately make up the shortfall of registered capital or provide supplementary compensation.
The deadline for adjusting the capital contribution period is less than one year now. Limited liability companies whose registered capital has not been fully paid up should submit an application to the company registration authority as soon as possible to adjust the capital contribution period, or require the shareholders to pay up their subscribed registered capital as soon as possible, to avoid affecting the company's credit and normal operation. If the registered capital subscribed by the shareholders is too large to be fully paid within the statutory capital contribution period, the company may consider to apply for a reduction of registered capital with the company registration authority in order to comply with the compliance requirements of the Company Law.
KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.
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