Revised company law transforms investment landscape for foreign investors

Chongqing recently held a session on the newly revised Company Law, effective July 1. The major update, the first since 1993, includes 15 chapters and 266 articles, changing the landscape for current and potential foreign investors.

Chongqing has held the interpretation session of the new Company Law on July 30, 2024. (Photo/Chongqing Municipal Commission of Commerce)

"With the implementation of the new Company Law, we foresee numerous new opportunities for foreign enterprises in Chongqing," said Ye Lina, Deputy Director of the Chongqing Municipal Commission of Commerce. She highlighted efforts to integrate information resources and improve the business environment to attract more foreign investment.

Yao Yao, an official from Chongqing Market Regulation Bureau, analyzed the new law, highlighting updates in company registration. Key changes include a flexible limited-period subscription system for capital and clearer shareholder responsibilities.

The revised law requires full payment of registered capital for limited liability companies within five years. Companies established before June 30, 2024, with extended capital contributions, must adjust by June 30, 2027, to comply with the new rules. The minimum registered capital for a limited liability company is 30,000 RMB.

Yao noted that the new Company Law's limited-period subscription system enhances capital management flexibility. The updated capital reduction rules improve the use of registered capital, increase operational flexibility, and balance the interests of the company, shareholders, and creditors.

According to recent statistics from the Ministry of Commerce, most foreign-invested enterprises in China are organized as limited liability companies, with joint-stock companies making up only 0.3 percent of the total.

The city view of southwest China's Chongqing municipality. (Photo/Chen Yunyuan)

Additionally, the methods for reducing corporate capital have been updated to include two options: a shareholders' meeting resolution or a loss of authority. This dual approach helps companies lower overhead costs and improve operational efficiency.

Yao emphasized the importance of restructuring corporate structures, such as expanding the criteria for selecting legal representatives and clarifying the roles of the board of directors and supervisory board. These updates aim to create more streamlined and transparent governance. The new company law also simplifies equity transfer processes, enhancing overall market efficiency.

The session included a Q&A session where participants addressed specific issues and implementation challenges of the new Company Law. Yao and other officials provided detailed answers to clarify uncertainties and deepen understanding.

The session drew 158 local officials, business association representatives, and 116 foreign-invested enterprises. An online broadcast enabled remote participation.