The Reform Of Company Capital System And The Protection Of Creditors

The revision of Company Law in 2013 mainly focused on the reform of company capital and registration system, which has abolished the legal minimum capital and the paid-in rules of registered capital. To comprehend it the contents and backgrounds of this reform must be reviewed. Legally speaking, the company capital system in China is still an authorized capital system.The legal minimum capital system has long been criticized and its positive as well as negative impacts deserve to be considered seriously. The change of the social and economic environment globally has contributed to the cancellation of legal minimum capital system that is rational for our country to follow such trends. However, related laws and regulations must be reinforced to protect creditors. Moreover,countries worldwide have taken the spirits of American law for reference, more or less, especially in the EU, where the topic on whether the authorized capital system should be abandoned has been heatedly debated. However, differences between the United States and our country cannot be overlooked with the "Capital Maintenance Rule" in the American law and its special operation environment being introduced and analyzed. Then we can see that the loose and flexible system in American law is built on the protection rule of company board, special spirits of insolvency law and different strategies of creditor protection. Due to our unique social environment, a fairly strict capital maintenance rule should be maintained and the authorized capital system should be adhered to, the reform of company capital system must be carried out gradually on a step-by-step basis.The limited liability owned by shareholders and creditor protection are two aspects of one issue. The protection of creditors admits of no negligence. A package of laws must be implemented and reinforced while company capital system gets looser in order to fill up the blank owing to the retreat of capital system. As for the protection of creditors, it is not the extent that has changed, but the ways, changing from protection only by company law to protection by laws in different aspects with different perspectives. As for the design of specific systems, primarily, there are two ways for creditor protection, including mandatory protection and bail-in protection. Only by cooperating with each other can the whole system really work. Secondly, there are two levels of creditor protection, including precautionary rules and disclosure rules.