On December 29, 2023, the 7th Meeting of the Standing Committee of the Fourteenth National People's Congress voted to pass the newly revised "Company Law", which will be implemented from July 1, 2024.

1. The necessity of the 5-year contribution commitment period stipulated in the Company Law.

The amendment of the new Company Law to the contribution registration system adheres to both adhering to the rules and innovation, and takes problem-oriented approach. While retaining the contribution registration system, it strengthens the institutional constraints on the contribution period of shareholders, which will undoubtedly play a positive role in ensuring transaction security and protecting the interests of creditors.

2. The application of the 5-year period for capital contribution stipulated in the Company Law.

For companies with special circumstances governed by laws, administrative regulations, or State Council decisions, the provision of a 5-year subscription period may not apply. 

For companies with abnormal investment periods and amounts, the registration authority may require timely adjustments according to the law. The definition of "significantly abnormal" will be determined using scientific analysis of registration data and work situations. This will only apply to companies that clearly violate the authenticity principle and common sense.

To determine abnormal investment periods and capital amounts of existing companies, the company registration authority should carefully consider explanations from involved parties, assess the situation comprehensively, avoid a one-size-fits-all approach, and guide companies to fulfill investment obligations with integrity.

3. "Company Law" safeguards shareholders' timely fulfillment of capital contribution obligations.

The new "Company Law" specifies that the information of actual paid-in capital shall be disclosed as a mandatory requirement, and administrative penalties shall be imposed for violating the disclosure obligations. According to the new "Company Law", companies should disclose the amount, method, and deadline of the subscribed and paid-in capital of limited liability companies through the National Enterprise Credit Information Publicity System. This reinforces the company's duty to disclose information and states that failure to disclose accurate paid-in capital or engaging in fraudulent behavior will result in penalties imposed by the market regulatory department. These measures encourage timely and accurate disclosure by companies, promote social oversight, protect transaction safety, and foster an honest market environment.

Source: THE STATE COUNCIL THE PEOPLE'S REPUBLIC OF CHINA