China Issues Implementation Measures for the Administration of Company Registration

Introduction

On 20 December 2024, the State Administration for Market Regulation (“SAMR“) of the People’s Republic of China (“PRC“) promulgated the Implementation Measures for the Administration of Company Registration (公司登记管理实施办法, “Implementation Measures“) to implement the new PRC Company Law (中华人民共和国公司法) and the Implementation of the Administrative System for the Registration of Registered Capital under the PRC Company Law (国务院关于实施《中华人民共和国公司法》注册资本登记管理制度的规定, “Registered Capital Regulation“).

The Implementation Measures came into effect on 10 February 2025, aimed at standardising company registration administration, ensuring transaction security, and optimising the business environment. Below is a summary of the key highlights of the Implementation Measures.

Clarifying Relevant Provisions of New PRC Company Law and its Supporting Administrative Regulations

Capital Contribution Period and Transition Period for Adjustment

According to the new PRC Company Law and the Registered Capital Regulation, the subscribed registered capital of a limited liability company shall be paid in full within five years of its establishment, with the same rules applying to any increase in capital.

The Implementation Measures are consistent with the Registered Capital Regulation, stipulating that companies incorporated before 30 June 2024 (“Existing Companies“) shall change the capital contribution schedule to five years before 30 June 2027, if the remaining time period for their shareholders to contribute their subscribed registered capital is more than five years from 1 July 2027. The shareholders shall fully contribute their subscribed registered capital within the adjusted deadline. Effectively, this makes 30 June 2032 the deadline for the full capital contribution of companies incorporated before 30 June 2024.

The new PRC Company Law stipulates that the capital of a joint-stock company established by offering shares to the general public shall be verified by a legally recognised capital verification institution and a capital verification report shall be issued. The Implementation Measures clarify that such capital verification reports shall be submitted when applying for registration. In addition, the Implementation Measures set out that a limited liability company or a joint-stock company established by offering shares only to promoters or to specific offerees is not required to submit a capital verification report when applying for the registration. 

Form of Capital Contribution

Consistent with the new PRC Company Law, it is regulated in the Implementation Measures that the shareholders may contribute capital in monetary terms or in the form of non-monetary property that may be appraised in monetary terms and legally transferred, such as contributions in kind or with intellectual property rights, land use rights, equity interests, or creditor’s rights.

Article 6 of the Implementation Measures introduces for the first time data and network virtual property as a form of capital contributions, expanding the scope for the non-monetary property capital contribution as listed in the new PRC Company Law. However, the Implementation Measures have also excluded property that may not serve as capital contributions as prescribed in law or administrative regulations.

Non-monetary capital contributions shall be appraised and verified according to the law and may not be overvalued or undervalued.

Supervision by Company Registration Authority

According to Article 266 of the new PRC Company Law and Article 3 of the Registered Capital Regulation, the company registration authority may require the company to make timely adjustments according to the law when the capital contribution period and amount are found obviously abnormal. The Implementation Measures further specify the standard of what is considered “obviously abnormal” for companies registered before 30 June 2024, including:

• The period for subscribed capital contribution exceeds 30 years;
• The registered capital exceeds RMB 1 billion;
• Other circumstances that obviously fail to conform to objective common sense.

Under these circumstances, the company registration authority shall conduct comprehensive research and judgment on the authenticity and rationality of the registered capital.

Compared to the provisions of the new PRC Company Law and the Registered Capital Regulation, it is noteworthy that the Implementation Measures set a higher obligation for the registration authority, by changing the word from MAY to SHALL. This indicates that, in matters of registration administration, the company registration authority will no longer adopt a passive stance but will take a more proactive approach to verify the rationality of the contribution period and the authenticity of the registered capital.

Specifying Filling Requirements for Company Registration

Audit Committee

The new PRC Company Law stipulates that a company may set up an audit committee under the board of directors to exercise the functions and powers of the board of supervisors, dispensing with supervisors or a board of supervisors.

Since the members of the board of supervisors are subject to filing with the registration authority, Article 13 of the Implementation Measures clarifies that the company shall indicate which directors serve as members of the audit committee if such committee is established by the company. 

Registration Liaison Officer

The new PRC Company Law does not require the filing of a registration liaison officer. The PRC Regulations for the Administration of Market Entities Registration (中华人民共和国市场主体登记管理条例 promulgated by the PRC State Council on 27 July 2021, and effective as of 1 March 2022) and the Detailed Rules for the Implementation of the PRC Regulations for the Administration of Market Entities Registration (中华人民共和国市场主体登记管理条例实施细则, promulgated by SAMR on 1 March 2022 and effective as of the date of promulgation) provide for the first time that a registration liaison officer falls within the scope of the information to be filed with the authority, but they do not specify the details of the requirements for filing the registration liaison officer.

It is worth noting that the Implementation Measures take further steps regarding the filing of the registration liaison officer, providing that the information of the registration liaison officer to be filed includes the registration liaison officer’s telephone number, e-mail address and other commonly used contact information, and that the registration liaison officer is responsible for the liaison work between the company and the registration authority to ensure effective communication.

The Implementation Measures clarify that the registration liaison officer may be the company’s legal representative, directors, supervisors, senior management, shareholders, employees and other personnel. In the event of a change in the registered liaison officer, the company shall file the change with the company registration authority within 30 days from the date of the change.  

Removal of Director, Supervisor and Senior Executive

According to the new PRC Company Law, a director, supervisor, or senior executive shall be removed where any of the following circumstances set out in Article 178 of the new PRC Company Law occurs:

• A person has no or limited capacity for civil conduct;

• If a person has been sentenced for embezzlement, bribery, encroachment of property, misappropriation of property or disruption of the socialist market economic order, or has been deprived of his/her political rights for a crime, and it has not exceeded five years since the completion date of the execution of the penalty; or if he/she has been pronounced to be on probation, it has not exceeded two years from the date of the expiration of the probation period;

• A person, who is a director, factory director or manager of a company or enterprise in insolvency or liquidation, is personally liable for the insolvency of the company or enterprise, and three years have not elapsed since the date of the completion of the insolvency or liquidation of the company or enterprise;

• A person is the legal representative of a company or enterprise whose business license has been revoked or ordered to be closed due to a violation of law, for which he or she is held personally liable, and three years have not elapsed since the date on which the company or enterprise was revoked or ordered to be closed; or

• A person is listed as a “dishonest party subject to enforcement” by the People’s Court for failure to pay a relatively large amount of debts when they become due.

The PRC Company Law provides that a person is not qualified to be appointed as a director, supervisor, or senior executive under the above-mentioned circumstances and shall be removed when any of the above-mentioned circumstances occurs during his/her term of office. However, the PRC Company Law does not provide the time period when the person shall be removed. The Implementation Measures stipulate that the removal shall be made in a timely manner in accordance with the law, not exceeding 30 days in principle from the day that the company knows or should have known, and that the company shall undergo the recordation formalities with the registration authority according to the law within 30 days from the date of removal. 

Circumstances where Establishment or Change of Registration and Filing Will Not be Processed

The Implementation Measures set out the following specific circumstances where the establishment or change of registration and filing shall not be processed:

• The company name does not comply with the relevant provisions of the enterprise name registration administration;

• The company’s registered capital, the period of shareholders’ capital contribution or the amount of capital contribution are obviously abnormal and the company refuses to adjust them;

• The business scope falls within the licensed business areas which are required to be approved under law before registration and has not been approved;

• A person directly involved in false registration applies for registration again within three years from the date of revocation of the earlier registration;

• It may jeopardise national security, social public interests; or

• Other circumstances apply that do not comply with the provisions of laws and administrative regulations.

Furthermore, according to Article 20 of the Implementation Measures, where there is evidence to prove that the applicant has obviously abused the independent status of the company as a legal person and the limited liability of the shareholders, which may jeopardise the public interest, by: (i) changing the legal representative, shareholders, or registered capital of the company or cancelling the company; (ii) maliciously transferring the company’s property; or (iii) evading debt or circumventing the administrative punishment, the company registration authority shall not handle the relevant registration or recordation according to the law, or the registration or recordation shall be withdrawn if it has been registered or filed. Such a provision is quite new in China and poses controversial issues in practice. It remains to be seen how this provision will be implemented in practice.

Optimising the Procedures for Company Registration

Avoiding Company Deregistration Dilemma

According to Article 22 of the Implementation Measures, where a shareholder of a company has passed away, has been deregistered or has been cancelled, resulting in the company’s inability to handle deregistration, all the legal successors of the shareholder’s equity or all the investors of the shareholder may handle the relevant matters of deregistration on behalf of the company according to the law. Article 22 also explains the relevant processes for handling deregistration on behalf of the company in the deregistration resolution. This provision avoids the widely discussed dilemma of the company being unable to process its deregistration due to the death, deregistration, or revocation of a shareholder. 

Introduction of an Erasing System

Before the Implementation Measures come into effect, there would be practical difficulties if a court issues an enforcement order requiring the company registration authority to remove a director, supervisor or senior executive when no replacement has been appointed, as the company registration authority would normally state that they cannot cooperate with the court order due to there being no legal basis for them to remove such person when no replacement is appointed.

The Implementation Measures have introduced for the first time an erasing system to solve this difficulty and provide that when the People’s Court serves a notice of assistance in enforcement to the company registration authority, requesting assistance in the erasure of the information of legal representatives, directors, supervisors, senior management, shareholders, or responsible persons of branch offices when the company fails to fulfil the legal obligations related to the registration and filing matters specified in the effective legal instruments, the company registration authority shall, in accordance with the law, publicly announce the erased information through the National Enterprise Credit Information Publication System.

Conclusion

The Implementation Measures represent a significant step forward in implementing company registration practices under the new PRC Company Law and its supporting regulations. By introducing some new systems, enhancing the role of the company registration authority, and optimising registration procedures, the Implementation Measures aim to create a more transparent, efficient, and secure business environment. As the Implementation Measures came into effect on 10 February 2025, companies operating in China should take note of these changes and are encouraged to review their current registration and compliance practices, to ensure compliance and avoid potential legal risks.