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China's company law changes helpful, risky

[CLI Code] CLI.N.16765364(EN) 

  • Release Date:12-31-2013
  • Source:Global Times

The amendments to the company law made by China's top legislature easing company registration will greatly encourage investors and the economy but may also trigger more bogus companies, industry experts said on Sunday.

The Standing Committee of the National People's Congress approved amendments to the company law Saturday, canceling some registration capital limits and simplifying registration, the Xinhua News Agency reported over the weekend.

The amendments canceled capital thresholds for setting up some types of limited companies, including 30,000 yuan ($4,947) for limited liability companies, 100,000 yuan for limited liability companies formed by a single person and 5 million yuan for joint-stock limited companies, according to the report.

The capital thresholds cancellations were introduced by an executive meeting of the State Council held on October 25, and the report said the latest amendments affirmed the administration decisions as law.

In an interview in October about the State Council's decision, Zhou Dewen, president of the Wenzhou Council for the Promotion of Small and Medium-sized Enterprises, told the Global Times that it showed the determination of the government in providing a better environment for small and medium-sized enterprises.

The amendments, especially the canceling of capital thresholds, make setting up a company much easier, in a bid to encourage investors to start business, Yao Zengkun, a lawyer at Yingke Law Firm, told the Global Times Sunday.

It is a good measure to boost the economy and it shows ­China is catching up with developed countries, Yao said, noting that developed countries do not maintain company founding capital thresholds.

There are also no limits on the amount as well as currency ratio of investors' first-time investment, nor on payment deadline of investment from shareholders, the report said.

The amendments also simplified registration procedures by canceling the requirement of a capital contribution verification report, the report said.

With these measures, the companies will be supervised by not only regulators but also the whole of society, Zhou Shi­ping, head of Enterprise ­Registration Bureau under State Administration for Industry & Commerce, told China Central Television Saturday.

These measures also mean the market will be more at risk of bogus companies which don't have enough capital and assets, Zhuang Zhi­ming, a Yangzhou-based lawyer at Fazhize Law Firm, told the Global Times Sunday, noting it may be easier for fraudsters to establish bogus companies.

These amendments will come into force in March next year, Xinhua reported.

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