A Guide to China’s New Company Law for Foreign Investors – New Publication Out Now

Posted by Written by Qian Zhou Reading Time: 3 minutes

The latest issue of China Briefing Magazine, “Navigating China’s New Company Law: A Guide for Foreign Investors, is now available as a complimentary download on the Asia Briefing Publication Store.

In this issue:

  • The New Company Law in China: An Overview
  • Considerations for Foreign Stakeholders and FIEs
  • Tax Implications Under the New Company Law

The sixth revision of China’s Company Law represents the most extensive amendment in its history. From stricter capital injection rules to enhanced corporate governance, the changes introduced in the New Company Law have far-reaching implications for businesses, including foreign invested enterprises (FIEs) operating in or entering the China market.

Since January 1, 2020, the Company Law has governed both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs), following the enactment of the Foreign Investment Law (FIL). Most FIEs must align with the provisions of the New Company Law from July 1, 2024, while those established before January 1, 2020 have bit more time for adjustments due to the five-year grace period provided by the FIL. The final deadline for their alignment is December 31, 2024.

FIEs are advised to thoroughly understand the provisions of the New Company Law in how it will affect them, and initiate necessary adjustments to ensure compliance and optimize strategic planning. It is crucial that companies commence preemptive assessments and actions early on, recognizing that several aspects may involve lengthy processes, including reporting to overseas headquarters, seeking board-level approvals, adjusting agreements, and negotiating with domestic partners (in the case of JVs).

In this publication, we guide foreign investors through the implications of the New Company Law for existing and new FIEs and relevant stakeholders. We begin with an overview of the revision’s background and objectives, followed by a summary of key changes. Our in-depth analysis, from a foreign stakeholder perspective, illuminates the practical implications. Lastly, we explore tax impacts alongside the revisions, demonstrating how the New Company Law may shape future business transactions and arrangements.

If you or your company require assistance with Company Law adjustments in China, please do not hesitate to contact Dezan Shira & Associates. For more information, feel free to reach us via email at china@dezshira.com.

Chapter summaries

Chapter 1: China’s New Company Law aims to create a more robust legal framework for businesses operating in China. Foreign invested enterprise operating in or entering the China market should pay close attention to the major revisions in corporate governance and capital injection rules, among others. In this article, we discuss major changes introduced by China’s New Company Law, explore the prevailing corporate governance trends, and underscore why these developments matter to foreign investors.

Chapter 2: The New Company Law brings substantial changes with implications for new and existing foreign invested enterprises and stakeholders. Foreign investors must assess if adjustments to existing structures or new business negotiations are necessary. In this article, we summarize key issues that foreign investors should pay attention to in the New Company Law, explore their potential impact, and propose preliminary strategies that can be adopted.

Chapter 3: Under the New Company Law, companies and stakeholders face new tax challenges. Before committing capital to a new company, deciding the contribution form, choosing to buy or sell the equity in a company, or planning to reduce capital to make up losses, companies and individual investors are advised to carefully consider the corresponding tax implications and adopt a cautious yet proactive approach for tax planning and financial strategy development.

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About Us

China Briefing is one of five regional Asia Briefing publications, supported by Dezan Shira & Associates. For a complimentary subscription to China Briefing’s content products, please click here.

Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.