Member Article

The State Council issued the Regulations of the People's Republic of China for the Administration of the Registration of Companies on 18 December 2005. The Regulations have replaced 1994 regulations of the same name with effect from 1 January 2006. The revisions to the Regulations bring the rules for company registration in line with the amended Company Law of the People’s Republic of China (“Company Law”) (as discussed in issue 2005.3 of China Legal Update). Payment of registered capital The Regulations follow the revised provisions of the Company Law on the payment schedule for the registered capital of limited liability companies. The shareholders in a limited liability company with foreign investment shall pay up the total amount of registered capital within two years from the date on which the company has obtained its business licence. In the case of a holding company, the time for paying up the capital contributions is five years. The two-year time limit does away with the practice to date that allowed the shareholders in most types of foreign investment vehicle such as the equity and cooperative joint venture and wholly foreign-owned enterprise to contribute capital over a longer period of time, subject to approval of the contribution schedule. The Regulations fail to clarify whether foreign investment enterprises which have been approved before the date on which the Regulations entered into effect are required to comply with the new requirements or can follow the relevant provisions on the payment schedule in their constitutional documents. Other provisions The Regulations introduce company registration by means of mail, fax or email. The Regulations lower the establishment registration fee from 0.1% to 0.08% of the amount of registered capital. If the registered capital is more than RMB 10 million, the registration fee payable on the portion of the registered over this amount shall be 0.04% while no fee shall be payable on the portion over RMB 100 million. The Regulations further alter the period during which the local administrations for industry and commerce are to carry out the annual inspection of companies. Starting from this year, the inspection will take place during the period from 1 March to 30 June rather than from 1 January to 30 April as was previously the case.