Introducing the One-Yuan Chinese Company: Impacts of the 2014 PRC Company Law Amendments on Shareholder Liability and Creditor Protection

Abstract

This article critically engages the international debate on regulatory approaches to corporate creditor protection. It analyses recent reforms to the PRC Company Law in 2014, which removed minimum capital requirements for most limited liability companies in China. Using Chinese court cases, the article demonstrates that previous high mandatory minimum capital levels protected creditors by making shareholders who abused the capital rules personally liable for unpaid corporate debts. To ensure that removal of minimum capital levels does not lead to a spate of cases involving empty shell companies defrauding creditors, the Chinese government needs to fully and rapidly implement its proposed “Rules for Public Disclosure of Information by Enterprises”.

Keywords: China, company law, creditors, shareholder liability, registered capital

JEL Classification: K22