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Abstract
Is There Fourth Type of Capital System? Rethinking the Classification of Corporate Capital Systems
Highlights
In 2013, China modified its Company Law, and this modification created a new capital system, which is not exactly the same as legal capital system in the Germany or the authorized capital system in the Anglo-American countries
In the year of 2013, China modified its Company Law and offered a new capital system, which lead to a controversy about the category of the new capital system
Some argued that the new system belonged to the legal capital and some argued compromise capital system
Summary
In the end of 2013, NPC of China modified Company Law on the system of capital. Basically, the modification happened in four aspects: Firstly, it cancelled the minimum proportion of initial contribution and prolonged the period of the contribution. The Article 26 of 2013 Company Law says that: The registered capital of a limited liability company shall be the amount of capital contributions subscribed for by all its shareholders as registered with the company registration authority. According to Article 3 of Company Law, in the case of a limited liability company in China, a shareholder is liable to the company to the extent of amount of the shareholders’ capital contribution. A part of Chinese scholars called them closely held companies as in Anglo-American countries After the modification, both the requirement of registered capital disappeared, which results that the difference became vaguer between the two types of companies. Scholars pointed out that the modification might cause some new problems in the context of Company Law. The more challenging question is the capital deficiency’s influence on piecing the corporate veil and liability of shareholders’ contribution. The scholars’ more important staff is to interpret the new rules and to prevent the bad influence of the modification instead of criticizing it
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