Research On A Company' Call-up Obligations Under The Subscription System

The Company Law of PRC was revised at the end of 2013,marking the transformation of the country's capital payment system into a fully subscribed one.In addition,the statutory restrictions on the payment period of capital contributions were cancelled and left to the discretion of companies and their shareholders.Such revisions have aroused heated discussions in the academic community since released.Some scholars believed that they were in line with the reform in the capital system and would stimulate the vitality of China's markets.Some criticized that there existed many weaknesses in the revised rules,such as a lack of restrictive measures and supporting regulations,which could easily allow shareholders to falsely increase capital credit under the subscription system,and to get great gains with little pains.Under the registered capital subscription system,a company's founders or shareholders have the autonomy to contribute capital and to agree on the time for actual capital contribution on their own.Therefore,there exists a time lag between subscription and payment.In other words,they are divided into two phases.In terms of the Company Law revised at the end of 2013,the biggest problem is that the rules to ensure the authenticity of capital and shareholders' performance of investment obligations as well as other relevant provisions are not amended.Therefore,under the subscription system,shareholders' violation of capital contribution obligations,i.e.,subscription but no payment,has become a major challenge for the company.If noeffective call-up system is established,funds will be under the control of shareholders.Also,companies may find it difficult to obtain timely capital investment when lacking money,which will only cause themselves to fall into in-fighting instead of operation.At the same time,interests of external creditors may not be protected.Under the subscription system,whether shareholder's contribution obligations can be expedited under certain conditions for debtors' settlement has become a heated issue in the academic community.But due to the lack of corresponding legal provisions,the "way to accelerate the expiry date" has encountered difficulties in judicial application.Therefore,an innovative and reasonable legal system is urgently needed in China to coordinate with the subscribed capital system as a whole by means of learning advanced experience in supporting rules of the capital payment system in foreign countries.Subscription and actual payment are made in two phases,and problems in each phrase are individual.But regarding China's corporate legal community,no regulation on the call-up system has been made,and provisions concerning capital payment are few.A reasonable and effective call-up system is a necessary supporting facility under the subscription capital system.Compared with the accelerated expiry with high costs,the process of expiry accelerated by bankruptcy is lagging,and the expiry not accelerated by bankruptcy is currently difficult to be practically applied.At present,no legal basis for such application is found.There are also major controversies in the academic community and legal and judicial obstacles in accelerated funding expiry also exist.A call-up system can help put settlement pressure on shareholders,urge them to perform their payment obligations and reduce their intentional damage to creditors' interests,so as to fill the loopholes in the rules under the "accelerated expiry" system.This article is divided into five parts,i.e.,why a call-up system is needed,what the system is,when to make a call-up,who makes it,and its legal consequences,to discuss the necessity of establishing the company's call-up system.The first part introduces the legal basis of a company's call-up contribution under the subscription system.It briefly describes the subscription capital system,of whichcapital payment is a major branch,and the risks of lacking supporting systems under the full subscription system from a theoretical perspective.This leads to the necessity of establishing the call-up system,which will be analyzed from the company's internal and external perspectives,as well as the balance of the interests of different parties.The second part discusses the identification of subjects who assume call-up obligations in a company under the subscription system.Considering foreign systems and directors' fiduciary duty,directors are defined as the subjects who are responsible for call-up in a company.The third part,from the effectiveness of shareholders' capital contribution period,analyzes the application of the call-up system in the following two conditions:(i)when the capital contribution period has not expired;(ii)and when such period has been expired.The fourth part is the design of specific procedures for call-up.Through learning from the directors' call-up rules under Common Law,the article explores relevant procedures suitable for China's judicial environment from procedural requisites and legal preparation period of the system.The fifth part introduces the liabilities under the call-up system.The article explores the legal consequences of directors' not performing such obligations,and the liabilities of improper acts such as shareholders' not paying capital after being called up.To build a complete corporate call-up system,not only procedural requisites,but also the regulation of its legal consequences is essential,otherwise the system will become a dead letter.