China company capital injection can be understood as the paid-in capital injected for the China company, it is required to arrange the paid-up capital to the China company before 2014 in order to get the company to be registered, nowadays the China central government has carried out some amendments and several related administrative regulations have been amended or newly promulgated, such as the Regulations on Registration Administration of Companies and the Administrative Provisions on the Registration of the Registered Capital of Companies.
The major changes in the registered capital system applicable to all FIEs in China are as follows:
Certain Registered Capital Requirements Have Been Eliminated
In general, minimum registered capital for establishing an enterprise in China is no longer required under the amended PRC Company Law, unless laws, administrative regulations, or the decisions of the State Council provide otherwise. Further, the amendments to the Implementing Rules on WFOE Law deleted the requirement that "the amount of registered capital of an FIE shall match the company's operational scale," meaning that it is the foreign investor of an FIE, rather than the approving authority, that has the discretion in determining the amount of registered capital for its operation in China based on business needs.
The 20 percent initial capital contribution (or 15 percent for WFOEs) has been eliminated, and the 30 percent minimum cash contribution is no longer required. In addition, the amendments to the Implementing Rules on WFOE Law eliminated the 20 percent cap for in-kind capital contribution with industrial property rights and proprietary technology.
"Capital Paid-In System" Replaced by "Capital Subscription System"
Before implementation of the new registered capital system, domestic and foreign investors were required to contribute or pay up the first installment of registered capital within 90 days and the remainder within two years from the date of incorporation. Starting from March 1, 2014, an investor has the sole discretion in determining, as provided in the Articles of Association, the amount, form, and contribution schedule of the company's registered capital. Accordingly, companies are no longer required to engage an accounting firm to verify mandatory capital contribution and register (subject to public disclosure) the paid-in capital amount with the company registration authority.
However, companies should disclose the amount, form, and contribution schedule as well as the paid-in capital amount via a public disclosure system. The State Administration of Industry and Commence ("SAIC") has set up the National Enterprises Credit Information Publication System (the "Public System"), through which anyone can check the shareholding and capital contribution information of all companies incorporated in China. Therefore, although the PRC government no longer mandates paid-in capital of a company under the current PRC law, the company should still carefully plan its capital injection into its China entity, because the capital contribution information will be publicly available and will be used as one of the major criteria by third parties to determine the company's creditworthiness.
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