For twenty-odd years, registered capital in China was something of a fiction. A company could declare RMB 50 million of registered capital and give its shareholders until 2099 to pay it. Counterparties saw a big number on the business licence and drew comfort from it; creditors who tried to enforce against it usually found nothing there.

The revised Company Law of the People’s Republic of China — adopted 29 December 2023 and in force from 1 July 2024 — ends that. This article sets out the new rule, the exposure it creates, and the transition arrangements for companies formed before the cut-off.

The core rule

Under Article 47 of the revised Company Law, the shareholders of a limited liability company must pay up their subscribed capital contributions in full within five years of the company’s establishment, in accordance with the articles of association.

Three points follow immediately:

  1. The five years runs from establishment, not from the date of the shareholders’ resolution or the date of registration of any capital increase.
  2. It is a hard ceiling, not a default. Articles of association may set a shorter period. They may not set a longer one.
  3. It applies to the subscribed amount, whatever that is. Reducing exposure means reducing registered capital through the statutory capital reduction procedure — with its creditor notification requirements — not simply extending the payment date.

Acceleration on insolvency

The more significant change for creditors is Article 54. Where a company is unable to pay its debts as they fall due, the company or a creditor whose claim has fallen due may demand that shareholders whose contribution deadline has not yet arrived pay up early.

Before the revision, accelerated maturity of capital contributions was possible but contested — it generally required bankruptcy or dissolution proceedings, or fitted within a narrow judicial exception. Article 54 now gives an individual creditor a direct statutory route.

For anyone litigating against a Chinese company with unpaid subscribed capital, this changes the calculus: the shareholders’ unpaid subscription becomes, in substance, a recoverable asset.

Transferring equity does not shed the liability

Article 88 addresses the obvious avoidance route. Where a shareholder transfers equity on which the contribution period has not yet expired, the transferee assumes the obligation to pay. If the transferee fails to pay in full and on time, the transferor bears supplementary liability for the shortfall.

The practical consequence: selling your shares to a shell company shortly before the deadline does not work. Due diligence on any acquisition of Chinese equity must now include a hard look at what has actually been paid in, and what remains outstanding.

What happens to companies formed before 1 July 2024

This is the question most existing investors ask, and the answer sits outside the Company Law itself.

The answer sits in the State Council Provisions on the Registered Capital Registration System under the Company Law (State Council Order No. 784, promulgated and effective 1 July 2024). Article 2 sets out the transition regime for companies already on the register. In broad terms:

  • Limited liability companies registered on or before 30 June 2024 whose remaining contribution period, measured from 1 July 2027, would still exceed five years must adjust that period to within five years by 30 June 2027.
  • The adjusted period then runs from 1 July 2027, which puts the practical long-stop for legacy companies at 30 June 2032.
  • Companies whose subscribed capital or contribution period is manifestly abnormal may be required by the registration authority to make adjustments earlier.

There is also a route most English-language commentary misses. Article 2 carves out companies engaged in matters concerning national interests or major public interests: on the opinion of the competent State Council department or a provincial-level government, such a company may continue to make its contributions on the original schedule. It is narrow, but for certain state-linked joint ventures it is worth knowing it exists.

Verification note. The 30 June 2032 long-stop is a computed date rather than one stated in Order No. 784 itself, and the market regulation authorities’ supporting rules on how the transition is administered continue to develop, with local registration practice varying. Before relying on any specific date for a particular company, confirm the current position with the competent local Administration for Market Regulation.

What this means in practice

If you hold equity in a Chinese company:

  • Establish the actual paid-in position. Not the registered figure — the paid figure, evidenced by capital verification records and bank receipts.
  • Where the gap is large and there is no realistic prospect of funding it, consider a capital reduction now rather than in 2027. Capital reduction requires a creditor notification and objection procedure and takes time; doing it under deadline pressure with a creditor already circling is materially worse.
  • Amend the articles of association to a compliant contribution schedule and register the amendment.

If you are contracting with a Chinese company:

  • Registered capital is now a more meaningful signal than it was, but it is still not paid-in capital. Ask for the paid-in figure and the contribution schedule from the articles of association.
  • Where the counterparty is thinly capitalised, the shareholders’ unpaid subscription is a potential recovery route under Article 54 — which is a reason to document the debt carefully and to date its maturity precisely.

If you are acquiring Chinese equity:

  • Price the outstanding contribution obligation into the deal, and allocate it expressly in the transfer agreement. Note that Article 88 makes the transferee primarily liable regardless of what the parties agree between themselves; a contractual indemnity from the seller protects you only to the extent the seller is good for it.

The wider signal

The revision is part of a broader move away from nominal capitalisation towards substantive shareholder accountability. Read alongside the provisions on shareholder liability for capital shortfalls and on director duties in company capital matters, the direction of travel is clear: the corporate veil in China is becoming harder to hide behind where the company was never genuinely funded.

For foreign investors, the practical takeaway is unglamorous but important — the registered capital figure chosen at incorporation is now a real financial commitment with a real deadline. Choose it accordingly.

Instruments referred to in this article: Company Law of the People’s Republic of China (revised 29 December 2023, in force 1 July 2024), Articles 47, 54 and 88; State Council Provisions on the Registered Capital Registration System under the Company Law (State Council Order No. 784, promulgated and effective 1 July 2024), Article 2.