New "Company Law" Paid-in Capital System: Challenges and Compliance Strategies for Business Operations

## Core Changes in the Paid-In Registered Capital System under the New Company Law

Under the new Company Law, shareholders of a limited liability company must pay in full their subscribed registered capital within five years, while promoters of a joint stock company must pay in full before the company is established. This provision brings a definitive end to the indefinite capital contribution model under the subscription system, exposing enterprises to concentrated funding pressure and credit management challenges. For existing companies, the law establishes a three-year transition period (until June 30, 2027), requiring a gradual adjustment of capital contribution schedules. Enterprises must immediately assess their capital structure and cash flow to avoid liability for breach of contract or administrative penalties resulting from failure to make capital contributions in full on schedule.

## Three Strategies for Companies to Respond to the Paid-In System

First, reasonable capital reduction is an effective way to ease financial pressure. Companies can reduce registered capital through shareholder resolutions to lower the paid-in threshold, but must comply with obligations to notify creditors and make public announcements during the reduction process. Second, non-monetary contributions can activate assets, such as intellectual property or equity, which can be used as contributions after evaluation, reducing cash outlay. Finally, transferring equity or dissolving inactive companies can optimize resources. It is recommended that companies hire legal advisors for compliance audits and develop customized plans, while also considering tax implications, such as personal income tax issues in capital reduction. Through proactive adjustments, companies can not only avoid risks but also enhance their credit ratings and financing capabilities.