Capital Reform Legal Issues

Corporate capital system is one of the key systems for corporation law, and forms thecore content of corporate law together with corporate governance system, and plays a keyrole in the corporate business activities as well as in the whole economical activities. Thedesign of corporate capital system has great impact on the economic development of onecountry, it is not exaggerated to say that the arrangement of the corporate capital systemdirectly determines whether the corporate law of one country is scientific, rational, andthus determines one country's economy has international competitiveness or not. Awareof the above-mentioned importance of the corporate capital system, countries has beganto rethink and reform its own corporate capital system since the fifth and sixth decades oflast century in a effort to make the corporate capital system response to the practicalneeds of business activities, to improve the investment environment of the country andthe competitiveness of the countries enterprises.The 18th meeting of PRC National Congress Standing Committee passed theamendments ("Amendment") to "Corporation Law of PRC" on October 27th, 2005, andthe Amendment has reformed the corporate capital system to some extent. What kind ofreformation has the Amendment made to corporate capital system? Why shall suchreformation be conducted? And what is the effect of these reformations? Is it necessary tofurther reform the corporate capital systems? These are the questions this article is goingto answer. Based on a general introduction and study of corporate capital system as wellas a discussion and research of the corporate capital systems and its reformation of thetwo legal systems, this article intends to study and comment on the reformation to thecorporate capital system of our country by the Amendment, and raise some proposal andsuggestions to further perfect and reform the corporate capital system of our country.This article is made up of three parts. The first part conducts a general introduction andstudy to corporate capital system,and describes in detail the incentives of creation ofcorporate capital system and the role and significance of corporate capital system for thepurpose of providing a base for the following writing of this article. The second partconducts a comparative study and research on the corporate capital system of the legalsystems from the aspects of "formation of corporate capital" and "maintenance ofcorporate capital", and spells out the advantages and disadvantages of "Legal CapitalSystem" and "Authorized Capital System". Based thereon, the second part briefs therespective reformation of the corporate capital system under the two legal systems,followed by the description of the reasons why "Compromised Authorized CapitalSystem" comes into being and the advantages and disadvantages thereof. On the basis ofthe second part, the third part is dedicated to introduce the contents of the reformation toour country's corporate capital system by the Amendment, and provide proposals andadvices to further reform and polish the corporate capital system designed the CorporateLaw of PRC.