Equity Finance In China By Chuck Thunder At Isnare.com Ezine Articles

Minimum Investment and Capital Contribution Schedule

Minimum Capital Requirements

Chinese foreign investment law sets minimum Registered Capital requirements at 30,000 RMB (about US$ 4,000) for LLCs, which include Joint Ventures and Wholly Foreign Owned Enterprises (in practice, higher amounts are generally needed to secure approval), and minimum Registered Capital is RMB 5,000,000 (about US$600,000) for a Foreign Invested Company Limited by Shares. Note that industry-specific regulations may raise these requirements for certain types of businesses – in the insurance and securities industries, for example, minimum Registered Capital requirements are much higher.

Capital Contribution Schedule

There is currently a conflict between the Ministry of Commerce (MOFCOM) and the State Administration of Industry & Commerce (SAIC) as to which law is applicable in this area.

SAIC’s requirements:

20% of Registered Capital initially; remainder to be paid within 2 years of the establishment date set forth on the FIE’s Business License

MOFCOM’s requirements:

Either 15% of the total Registered Capital, or an amount equal to the minimum capital requirement (whichever is greater) must be contributed within 90 days of the date that the FIE’s business license is issued. The remainder must be contributed according to the following schedule:

Total Registered CapitalFull Payment Deadline
Up to US$500,000 1 year from issuance of business license
US$500,001 – US$1 million1.5 years from issuance of business license
Over US$1 million to US$3 million2 years from issuance of business license
Over US$3 million to US$10 million3 years from issuance of business license
Over US$10 million Up to examination and approval authority

Lump sum payments must be made within 6 months of the issuance of the FIE’s business license.

Industry-specific regulations may also modify the above requirements. Both minimum investment and capital contribution schedules are murky areas of Chinese foreign investment law, with regulations that seem to either contradict or supplement each other (no one can agree which), giving the authorities the effective ability to modify these requirements at will. The safest approach, then, would be to comply with industry-specific regulations and then look to the Company Law where these regulations are silent.

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