China’s new Company Law introduces stricter capital contribution rules for partlypaid shares, while retaining the dominance of paid-up capital as the basis for profit distribution and pre-emption rights in share allotments. This reform appears to contrast with the global trend of relaxing legal capital regimes, thereby prompting a reexamination of the corporate legal regulation surrounding partly-paid shares. While paid-up capital quickly loses its relevance once a company begins operations, unpaid capital represents a future payment obligation on which creditors may reasonably rely. In this sense, China’s tightened capital contribution rules appear justifiable. That said, the complete elimination of partly-paid shares in public companies, along with the continued prioritization of paid-up capital as the basis for distribution, may unnecessarily restrict legal flexibility. This is particularly relevant given that partly-paid shares can facilitate customized financial and governance arrangements – especially for shareholders facing short-term financial constraints. This research may offer valuable insights for comparative company law, given the divergent approaches to partlypaid shares across jurisdictions.
European Business Law Review