find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
China reforms company law

China reforms company law

CHANGES TO China’s company law, which came into effect at the start of this year, will deliver commercial and governance improvements but are likely to create added complexities for foreign…

CHANGES TO China’s company law, which came into effect at the start of this year, will deliver commercial and governance improvements but are likely to create added complexities for foreign investors.

Georgette Leader, a senior lawyer in Deacons’ China group said companies looking to invest in China would have to be vigilant in determining the expectations on them, and how these might differ between authorities. Although in most cases the domestic company law would be overridden by the foreign investment rules, there is room for different interpretations by authorities across China.

One of the most important changes was to the incorporation threshold, she said. Under the old company law, the level of minimum registered capital varied depending on the business being carried out.

“The new law has abolished that and now there is just one standard minimum registered capital for a limited liability company,” she said. Also, the rates had been reduced to RMB30,000 for a limited liability company and to RMB500,000 for a company limited by shares.

Another change to this law will allow a single legal entity or citizen to set up a one member company, and the reduced threshold will assist domestic nationals who want to take that path, Leader said.

However, when it comes to foreign investors, she said, there was room for the government to impose thresholds higher than was stated in the company law. “Any foreign company looking to invest in China will still need to look at the relevant authority.”

Foreign investment enterprises such as equity joint ventures, cooperative joint ventures and wholly foreign owned enterprises were already able to contribute their registered capital in instalments, but under the old domestic company law, other companies were not. The changes allow contribution of registered capital to be made in instalments as long as the first instalment is not less than 20 per cent and the balance is paid within two years of the company’s incorporation.

Leader recently worked on a matter where the firm assisted a company that was setting up a joint venture in China, prior to the introduction of this rule, and advised that it would have to pay a 15 per cent instalment, and could pay the balance over three years, as set out by the joint venture laws. After the changes to the company law, they were advised that its new specifications would apply.

Enquiries revealed that most of the authorities in China were interpreting the company law to mean that this rule would also apply to foreign investors, which was inconsistent with legislation that said foreign investment rules would take precedence.

Also significant were the changes to inter-company investment laws that allow companies to freely invest in other companies. This change is likely to see an influx in the establishment of subsidiary companies.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

China reforms company law
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Applauds
07:00
LCA applauds proposed Modern Slavery Act
The Law Council of Australia has welcomed new recommendations for the development of a Modern Slaver...
Mentoring
07:00
Top-tier offers targeted mentoring for Indigenous law students
Students at Macquarie University will be the first to benefit from a new Indigenous mentoring progra...
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...