Questions on running a company in China (11-20)
Time:2024-07-17 14:02:35Source:Click:次
11. Can a partnership or sole proprietorship be a shareholder of a single-shareholder limited liability company?
Answer: Yes, it can.
12. Can minors become company shareholders?
Answer: Yes, minors can be shareholders, with their rights exercised by their legal guardians.
13. Can elderly or illiterate individuals become company shareholders?
Answer: Yes, as long as they are not legally restricted from civil conduct.
14. Can the shareholder status of a natural person be inherited after their death?
Answer: Yes, the shareholder status can be inherited unless otherwise stated in the articles of association.
15. What are the regulations for shareholders who fail to pay their contributions on time?
Answer: If a shareholder fails to pay the capital contribution in accordance with the date stipulated in the articles of association, and the company sends a written reminder to call for the payment of the capital contribution, the company may set out a grace period for the payment of the capital contribution; the grace period shall not be less than sixty days from the date of the reminder sent by the company. If the grace period expires and the shareholder still fails to fulfill the obligation to make the capital contribution, the company may, by resolution of the board of directors, issue a notice of forfeiture of rights to the shareholder, which shall be issued in written form. From the date of issuance of the notice, the shareholder loses his/her shareholding in the unpaid capital.
16. Is an internal transfer of shares among shareholders considered a change registration or filing matter?
Answer: It is a filing matter as it does not change the shareholders, only updates the articles of association with the latest shareholding.
17. Who is responsible for unpaid capital contributions in the event of a share transfer?
Answer: Article 88 of the Company Law provides that: “Where a shareholder transfers an equity interest for which he has made a capital contribution but before the expiry of the period for which the capital contribution is due, the transferee shall assume the obligation to pay the capital contribution; if the transferee fails to pay the capital contribution in full by the due date, the transferor shall assume supplementary liability for the capital contribution that the transferee has failed to pay by the due date. If a shareholder who fails to pay the capital contribution in accordance with the capital contribution date stipulated in the articles of association, or if the actual value of the non-monetary property used as capital contribution is significantly lower than the amount of the capital contribution subscribed, the transferor and the transferee shall be jointly and severally liable to the extent that the capital contribution is insufficient; if the transferee does not know and should not have known of the existence of the aforesaid circumstance, the transferor shall be held liable.”
18. Is other shareholders' consent required for the transfer of shares?
Answer: Article 84 of China's new Company Law deletes the rule on the right of consent of other shareholders in the event of an outward transfer by a shareholder of a limited liability company. If a shareholder transfers equity interests to a person other than the shareholder, the shareholder shall notify the other shareholders in writing of the quantity, price, method of payment and period of time for the transfer of equity interests, and the other shareholders shall have the right of first refusal under the same conditions. If a shareholder fails to respond within thirty days from the date of receipt of the written notice, he or she shall be deemed to have waived the right of pre-emption. If two or more shareholders exercise the right of first refusal, they shall negotiate to determine their respective purchase ratios; if the negotiation fails, the right of first refusal shall be exercised in accordance with the ratio of their respective capital contributions at the time of the transfer. However, it is also stipulated that if the articles of association of the company provide otherwise for the transfer of equity, the provisions shall apply.
Special Note: If a shareholder transfers equity to a person other than the shareholder, the applicant is not required to submit a document that a majority of the other shareholders agree.
19. What about equity transfers involving untrue capital contributions?
Answer: If a shareholder transfers its subscribed shares that has been due for contribution at the time of the transfer, the transferor and the transferee shall be jointly and severally liable for the obligation to make a full contribution if the transferor has not actually made the contribution or if the contribution is not genuine. If the transferee is truly unaware of the fact, it may be exempted from liability.
20. Does the five-year investment period apply to non-company enterprises such as sole proprietorships or partnerships?
Answer: No, it does not apply.
(to be continued...)
