Starting from scratch will no longer be a dream for business starters as the amended PRC Company Law takes effect on March 1.
The amendments involve 12 articles and bring about three prominent changes: 1) the original mandatory paid-up capital registration system is replaced by a subscribed capital registration system; 2) minimum registered capital requirements are eliminated; 3) registration items and files are reduced and streamlined, e.g., shareholders' subscribed capital contributions and paid-up capital are no longer required for registration, and companies do not have to go through capital verification procedures.
These changes aim at encouraging entrepreneurship and reducing start-up expenses. However, according to Qiao Lu, an attorney from Dacheng Law Offices, though the threshold for starting a business is much lower than before, with the decrease of government regulation, a lot of the so-called "bogus companies" will emerge, posing a serious challenge to creditor protection and China's credit system. He suggests companies set up credit records and the government offer assistance for relevant parties to consult these records.
Mr. Qiao also alerts existing businesses to revise their articles of association according to the new Company Law.
As the new law came out not long ago and there is no precedent to refer to, Mr. Qiao says that enforcement of the law may vary from place to place before new registration measures are formulated by relevant administrative departments, which will be a hard test of their wisdom and power of execution.
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