China: Updated Company Law – July 2024
New PRC Company Law took effect on July 1, 2024, in which some new requirements were introduced for businesses operating in China regarding payment of registered capital, flexibility in Board of Supervisor requirements and designation of Executive Directors.
Key changes and requirements
Registered Capital
According to the New Company Law, the registered capital should be paid up within 5 years after the incorporation of a company. Whereas under the old Company Law, the company was given discretion to determine a schedule under which the registered capital could be injected. To reconcile the difference of capital injection timelines under two Company Laws, it has been determined that businesses established before July 1, 2024, are given a 3-year’s grace period to change the timeline of paying up the capital. These companies should change the capital injection timeline in the Articles of Association by June 30, 2027, and pay off the capital within 5 years after the Articles of Association are updated (latest by June 30, 2032).
Supervisor / Board of Supervisors
The New Company Law also introduces increased flexibility in corporate governance regarding the Board of Supervisor requirements. For instance, it is no longer required to appoint a Supervisor or a Board of Supervisors for small sized limited liability companies (i.e. fewer than 100 employees, and less than CNY 10M in revenue). This update has substantially reduced the risk exposure for senior executives and compliance associated with the performance of the duties for directors, supervisors, and senior management personnel.
Executive Director
The Company Law has historically allowed small size companies to appoint a sole director rather than a board of directors with the designation of executive director. Under the new Company Law, “executive director” is no longer used and the sole director is renamed “director.” As a result, the records filed previously with the authorities should be updated as well.
How can we help?
The Computershare Governance Services dedicated global team of governance professionals can advise on company set-up in line with the new requirement as well as supporting on advising on your existing legal entities regarding board composition requirements, changes to registered capital and changes to articles of association in accordance with the new requirements. Additionally, Computershare’s leading entity management system GEMS provides its clients with a robust online tool to manage and track capital for their entities in a format that is easy to access and update.
Contact:
Please contact your dedicated Computershare Relationship Manager or send an email to globalentityservices@computershare.com for more information about how Computershare may assist you in responding to these new requirements.
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