The Study Of Capital Paid By Stages Institution

The capital contribution institution is a key part of the company capital formation.Compared to capital paid at a time, payment by installment system has brought greatconvenience to investors. However, a lot of potential problems are exposed out of thissystem since it’s introduced with the revision of company law of china in2005. Thepaper focuses on the regulation of the capital contribution in the Company Law usinghistorical analysis method, comparative analysis method, and law interpretationmethod. The paper probes into the reasons of this system and proposes somesuggestions to consummate the regulation of the capital contribution on the basis ofdiscussion and study. The paper consists of three chapters expect the introduction andconclusion:Chapter I probes into the legislative reasons of the capital paid by installmentsfrom three perspectives. Firstly, the capital paid by installment institution can makethe formation of a company more efficient, attract more investment, and optimize theallocation of social resources as an independent mechanism. Secondly, compared tothe former system, paying capital by installments is consistent with the legislativeconcept of modern company law which prefers freedom to control in the view of theconnotation and the direction of the tradition three capital patterns. Finally, toestablish the capital paid by installments is a inevitability legislative design combinedwith the theoretical and practical background of the introduction.Chapter II specially arises some reasonable suggestions to the regulation of the capital paid by installments. This chapter points out the company and the periodwhich the paid by installments system applies to, considering the legislative purposeand interests balance. Shareholders who can’t fulfill the duty of paying the capitalbefore the due date should be gave administrative punishment in accordance with thecompany law. The due date refers only to the two-year maximum period, notincluding the company’s timing according to the articles of association. In addition,this part points out the necessity of the reminder mechanism. The last section refers tothe definition of the shareholders’ rights when the shareholders don’t pay all thecapital. The right of shareholders should be calculated according to the proportion ofthe shares which the shareholders should pay finally, except the rights of dividendsand surplus property distribution.Chapter III elaborates the responsibility system where the shareholder fails topay all the capital. This chapter sets forth the responsibility of the shareholder whoviolates the contribution obligation to other shareholders, company and creditors. Thebasis of liability and the way to bear responsibility are described in three sectionsaccording to different responsibility object. Shareholders’ liability for breach which isbased on the partnership relationship between investors exists only when the companyfails to be established. The responsibilities of shareholders to the company havedifferent natures, a statutory duty when the shareholder is initiator, on the other hand aliability for breach of contract as a subscriber. Ways to bear responsibility consist ofmaking a supplementary payment or filling the difference, depriving the shareholder’sright and damages. The direct responsibility of shareholders to creditors is dividedinto unlimited liability and limited liability. The former means unlimited joint andseveral liability when the formation of a company is invalid because of defectivecapital contribution in the stage of formation; the latter refers to supplement liabilityto creditors limited to the nonpayment of capital which shareholder should payparticularly when the company is unable to pay all the debt.