Research On Balance Of Value Of The Company Capital System Reform

At the end of 2013, the Amendment of Company Law was published. The amendment mainly involves three aspects: First, change the actual paid-in of registered capital into commitment to payment of registered capital, shareholders can freely make agreement about investment ways, period and amount in the charter. Second, provisions on minimum registered capital is deleted, establishment requirements of company was liberalize. Third, registration matters and documents have been simplified. At the time of establishment, paid-up capital is not required to be registered, capital verification report is no longer needed and annual reporting system will replace the previous inspection regime. The amendment relaxed the market access conditions and will help to stimulate the market vitality, improve efficiency and promote development of company. But on the other hand, these initiatives a threat to the security of transactions and does not achieve balance in terms of efficiency and safety.The company capital system constitutes an important part of the corporate system, including the formation, maintenance and quit of the company’s capital. The value-creation function and guarantee function determine that the company’s capital is in pursuit of efficiency and safety at the same time. Consider the context of this reform, relax the control in the capital forming stage is for the goal of encourage entrepreneurship, stimulate private investment initiative and other economic policies. However, our country now isn’t satisfied to relax strictly regulation of capital. The market economy is still in continuous improvement, a variety of risk factors still exist, while the self-resolve disputes mechanism and capacity of parties still lacked, the protection system on creditors is not fully constructed. In this case, the amendment of deregulation will inevitably bring risks to security value.In order to achieve balance of efficiency and safety and give full play to the company capital system in promotion of trade and protection of transaction, it’s necessary to explore improvement of corresponding supporting mechanisms after reform of the capital system.In the past, our country inherited strict rules of statutory capital system, requirements of capital adequacy is mainly reflected in setting the minimum registered capital. Capital adequacy is determined by whether the paid-up capital is the same with the registered capital. But, after the amendment abolish the minimum registered capital, a substantive judgment on the capital adequacy standards shall be established. The standard shall includes following aspects: First, capital adequacy principle regulate all assets of the company, not limited to the registered capital. Second, when make judgment, we should compare the company’s assets with its overall business risk, focused on whether the company can pay off its debts. Trading partners need the help of public balance sheets and other information on judging the company’s financial ability. At the same time, when design specific rules of capital adequacy, reduce improper deduction should be the focus, rather than to emphasize the amount of capital remain unchanged. And in the event of impairment of capital, it should be clear that who will be liable. In addition to the shareholders, directors shall also be liable on their own behavior to repay the creditors who can’t get paid from the company.In terms of directors’ duties, the relevant provisions of the law lack of maneuverability. Meanwhile, existing directors’ obligations to creditors only exist in the dissolution and liquidation process of a incorporated company, directors of limited liability company are not included. While in common law countries, directors take responsibility for the creditor has become a common phenomenon in practice and jurisprudence. In addition, the specific content of the directors’ obligations in the dissolution and liquidation process also lack clearly definition. Therefore, in order to protect the security of transactions, directors’ duties needed to be improved. First, in the course of business, the directors need to oversee that the company’s capital is used in maximize interests of the company and shall be subjected to undue erosion and impairment. Directors will have to take responsibility to creditors when failed to fulfill these obligations. Secondly, the directors also need to timely file liquidation in order to ensure the repayment of creditors in the liquidation process. Again, the judgment of the directors’ duties need more specific criteria, we can learn business judgment rule from common-law countries. Finally, we can also consider to let creditors hold the right to file lawsuit against directors.As an important initiative of modern company law, the disregard of corporate personality system played an important role in creditor protection. But the system in our company has two shortcomings:First,lack of maneuverability, in judging what is "abuse the independent status of shareholder and limited liability", there is only general requirements. Secondly, according to the company law, only in the case of "serious harm the interests of creditors" this system will be used, while what means “serious” are not clearly defined, all theses will inevitably lead to controversy. Therefore, in the context of the capital system reform, in order to protect the security of transactions, the disregard of corporate personality need to be improved. In particular, ”significant shortage of capital” case must be clearly defined and shareholders are jointly and severally liable, not limited to their subscribed capital. At the same time, we should improve the burden of proof mechanisms and train more high-quality judges to make accurate and appropriate discretion in different cases.Overall, after the implementation of the reform on registered capital system, both of the the concept of trading partners and the company’s governance mechanisms should be improved accordingly. People should emphasis the company’s assets on measure of credit capacity by using the company’s public information in the transaction to make judgment. While to the company itself, it should constitute sound governance mechanism, supervise the behavior of shareholders and strengthen the sense of responsibility of directors and executives, insure the security of the company’s assets and its independent responsibility ability. For creditors,we should provide diverse and effective accountability path for them, such as improve the disregard of corporate personality under significant capital shortage circumstance and improve the burden of proof mechanism. And finally, both legislative and judicial practice should be timely updated and improved, not only establish and improve laws and regulations to adapt new situations, but also let typical cases play more important roles and finally find the most reasonable design for the company’s capital system.