How to change registered capital for a company is a common problem for enterprises and business owners. In China, the Company Law stipulates that all enterprises, foreign-invested or otherwise, must register a fixed level of operational capital (deemed as the company’s “registered capital”) with the relevant authorities as part of the basic corporate establishment process.
Increase of Registered Capital
In general, companies increase their registered capital for three types of reasons: financial, strategic and regulatory, in which, financial reason is the most common due to the fact that companies often underestimate their capital requirements and simply run out of money to conduct operations in China. The following are the main steps for applying for increase of registered capital. If successful, the company will be issued a new business license.
Step 1: The company must provide a reasonable explanation for the increase in registered capital to Ministry of Commerce of the People's Republic of China (MOFCOM) and obtain its approval.
Step 2: The company should file an initial application with the original Administration of Industry and Commerce (AIC) of registration within 30 days of the decision to increase registered capital.
Step 3: The company must apply to the original AIC of registration for a new business license.
Step 4: The company should transfer the additional capital directly into its capital account. The company must also pay a fee for the increase of registered capital.
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Decrease of Registered Capital
Due to potential risks, the procedure to decrease the registered capital of a company is slightly more complex than to increase it.
Step 1: The company should convene a shareholder meeting, and prepare a balance sheet and a list of assets.
Step 2: The company must notify its creditors within ten days of the shareholder resolution and publish a newspaper announcement within 30 days.
Step 3 : The company must provide a reasonable explanation for the decrease in registered capital to MOFCOM and obtain its approval.
Step 4: The company must apply to the original AIC of registration for a change of registered information within 45 days of the newspaper announcement and within 90 days of the original resolution.
All in all, changing the registered capital of a company in China is not easy and requires the coordination of various types of documentation, governing authorities and company personnel. Therefore, companies are strongly advised to seek for professional tax and legal advise.
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If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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