Legislative Choice Of Capital System For Limited Liability Company Under Credit Shortage

China adopts a strict statutory capital system for its limited liability companies. The choice of this mode has met the situation of our country so that it has boosted the development of limited lability companies in a certain degree and accelerated the growth of economic scale and economic returns. However, the corporation capital system of this mode, which shall be based on capital credit, has not realized anticipated effects completely. After the promulgation of the Corporation Law, various kinds of misconducts, such as making a false report of registered capital, making a false capital contribution, taking out contributed capital to evade debts, and abusing advantages of the corporation's separate personality, have occurred frequently, due to which creditors have suffered immense losses and the development of limited liability companies has also been hindered seriously. Besides those above, limitations of statutory capital system comparing with authorized capital system and eclectic capital system have caused doubts whether statutory capital system is necessary for the development of limited liability companies.The choice of any mode of corporation capital system shall undertake the cost of giving up advantages and values of others. Limited liability companies'separation of property and limitation of shareholders'labilities determine that it is more in favor of investors and takes less consideration for the benefits of corporations'transaction partners. In addition to that, limited liability companies have a weaker threshold for admittance than joint—stock limited corporations, and the social credit is bad on the whole in China. All mose above may lure investors of limited liability companies to abuse separate personality for swindling their transaction partners. A vicious circle will therefore come into being eventually because of faith breaking and mutual disbelief,and this will lead to the shrinking of transaction frequency and transaction scale and eventually lead to stagnation of economic development. Therefore, our legislation of capital system for limited liability companies shall mainly embody the value of safety.Under statutory capital system, it is shareholders and corporations who shall bear the risk of limited liability, and the protection to the benefits of creditors has been made in advance. Hence, statutory capital system has less demand for social credit mechanism, which indicates statutory capital system is more propitious to actualize the value of safety with the shortage of credit. Moreover, such factors as credit mechanism and legal environment, which may constrain advantages of authorized capital system or eclectic capital system, are still imperfect at present in China, and this can not be improved within a short term. Thus, the legislation on limited liability companies ought to continue adopting statutory capital system.