Viewpoint. The legal liability and consequences of the shareholders of a limited liability company under the new Company Law for failing to pay the capital contribution in full and on time.

1. To make up the capital contribution to the company and to be liable for the company's losses (new)

The third paragraph of Article 49 of the new "Company Law" stipulates: "If a shareholder fails to pay the capital contribution in full on time, in addition to paying the company in full, he shall also be liable for the losses caused to the company." This provision is an amendment to Article 28 of the old "Company Law", amending "shall be liable for breach of contract to shareholders who have paid their capital contributions in full and on time" to "shareholders who fail to pay their capital contributions in full and on time and cause losses to the company." Liability for compensation ", the amendment of this clause clarifies the liability of shareholders who fail to pay their capital contributions in full and on time for the company's losses.

Before the revision of Article 49 of the new "Company Law", the judicial practice on the issue of "whether the company can require shareholders who have not paid their capital contributions in full to bear the loss of overdue capital contributions without agreement" is not uniform. There is a view that the second paragraph of Article 28 of the "the People's Republic of China Company Law" stipulates that "if shareholders do not pay their capital contributions in accordance with the provisions of the preceding paragraph, they shall pay in full to the company, it should also bear the liability for breach of contract to the shareholders who have paid their capital contributions in full and on time." According to the literal meaning of this clause, the right subject requiring the defective capital contribution shareholders to bear the liability for breach of contract is the shareholders who have paid their capital contributions in full and on time. The company is not the proper subject of the claim right. There is no legal basis for the company to claim the defective capital contribution shareholders to bear the loss of overdue capital contribution. Compared with the old Company Law, the provisions of Article 49, paragraph 3, of the new Company Law provide a clear legal basis for the company to claim liability to shareholders who fail to pay their capital contributions in full and on time, making the path for the company to claim rights from shareholders clearer.

2. Liability for agreed breach of contract to other shareholders of the company

As mentioned earlier, the third paragraph of Article 49 of the new Company Law adds a new provision on the liability of shareholders who fail to pay their capital contributions in full and on time for the company's losses, and deletes the liability of shareholders who fail to pay their capital contributions in full and on time for breach of contract by shareholders who have paid their capital contributions. It should be noted that the deletion of the liability for breach of contract clause in the new Company Law does not mean that shareholders who fail to pay their capital contributions in full and on time can be exempted from the liability for breach of contract to other shareholders. Under the circumstances of express agreement (including investment cooperation agreement, articles of association, resolution of shareholders' meeting, etc.), other shareholders may still claim liability for breach of contract against shareholders who fail to pay their capital contributions in full and on time in accordance with the relevant provisions of the Civil Code and the agreements between the parties.

3. Additional liability to the company's creditors

The second paragraph of Article 13 of the "(III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law" stipulates: "The company's creditors request shareholders who have not fulfilled or have not fully fulfilled their capital contribution obligations to pay the company's debts within the scope of the principal and interest of the unfunded capital contribution. If the part of the company bears supplementary liability, the people's court shall support it". Accordingly, if the shareholders fail to pay their capital contributions in full and on time, they shall bear supplementary liability to the creditors for the company's unliquidated debts within the scope of the unfunded principal and interest.

Article 50 of the new "Company Law" stipulates: "When a limited liability company is established, if the shareholder fails to actually pay the capital contribution in accordance with the company's articles of association, or the actual value of the non-monetary property actually contributed is significantly lower than the amount of capital contribution paid, the other shareholders at the time of establishment and the shareholder shall bear joint and several liability within the scope of insufficient capital contribution." Compared with Article 30 of the old Company Law, Article 50 of the new Company Law adds the responsibility of shareholders' capital enrichment at the time of the establishment of a limited liability company with monetary capital contribution.

Regarding the liability of shareholders when a limited liability company fails to fulfill its capital contribution obligations as required, the new "Company Law" incorporates the provisions of Article 22, paragraph 2, of the (II) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law and the provisions of Article 13, paragraph 3, of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law, specifying whether capital contribution is in monetary or non-monetary form, the other shareholders of a limited liability company at the time of its establishment are jointly and severally liable to the extent that the outstanding capital contribution or the defective capital contribution of the shareholders is insufficient.

Article 88 of the new Company Law stipulates: "If a shareholder transfers an equity interest that has been paid but has not been paid for the period of the capital contribution, the transferee shall bear the obligation to pay the capital contribution; if the transferee fails to pay the capital contribution in full and on time, the transferor shall bear supplementary liability for the capital contribution that the transferee fails to pay on time. If the shareholders who fail to pay the capital contribution in accordance with the capital contribution date stipulated in the articles of association or the actual value of the non monetary property as the capital contribution is significantly lower than the capital contribution, the transferor and the transferee shall bear joint and several liability within the scope of insufficient capital contribution; if the transferee does not know and should not know the existence of the above situation, the transferor shall bear the responsibility." Compared with the old Company Law, Article 88 of the new Company Law further clarifies the liability for the transfer of shares of unfunded or defective capital contribution, and clearly distinguishes the liability of the transferor and the transferee when the term of capital contribution expires and the transfer of shares in the case of non-expiration.

1. Liability after the transfer of shares for unfunded or defective contributions at the expiration of the term of contribution

For the transfer of equity by shareholders who have reached the period of capital contribution but have not made capital contribution or defective capital contribution, the amendment of paragraph 2 of Article 88 of the new Company Law is consistent with the basic logic stipulated in paragraph 1 of Article 18 of the (III) of the provisions of the Supreme people's Court on the Application of the the People's Republic of China Company Law, that is, the transferring shareholder and the informed transferee shareholder shall bear joint and several liability within the scope of insufficient capital contribution. It should be noted that as to whether the transferee should bear joint and several liability, according to the provisions of Article 18 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law, "the transferee shall bear joint and several liability with the transferring shareholder if it knows or should know," while Article 88 of the new Company Law is amended to "the transferee does not know and should not know the existence of the above circumstances, and the transferor the transferor the transferor the transferor", it can be seen that the transferee should bear the burden of proof as to whether the transferee knew or should have known of the transferring shareholder's unfunded or defective contribution.

2. Liability after the transfer of shares for the unexpired capital contribution period

Article 88 of the new Company Law adds a new provision on the liability for capital contribution after the transfer of shares for the period of unexpired capital contribution, which makes it clear that the subject of the performance of the capital contribution obligation after the transfer of shares for the period of unexpired capital contribution is the transferee shareholder, and at the same time, the transferring shareholder shall bear supplementary liability for the capital contribution that the transferee shareholder fails to pay on time.

Article 51 of the new "Company Law" stipulates: "After the establishment of a limited liability company, the board of directors shall verify the capital contributions of the shareholders, and if it is found that the shareholders fail to pay the capital contributions stipulated in the company's articles of association in full and on time, the company shall issue a written reminder to the shareholders to pay the capital contributions. If the company fails to perform the obligations stipulated in the preceding paragraph in time and causes losses to the company, the responsible directors shall be liable." The new "Company Law" adds the duties and obligations of the board of directors to verify shareholders' capital contributions and call for capital contributions. If this obligation is not fulfilled, the responsible directors shall be liable to the company for losses.

If the shareholders of a limited liability company fail to pay their capital contributions in full and on time, in addition to the above-mentioned corresponding legal liabilities, in accordance with the relevant provisions of the new "Company Law" and the "(III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law", It may also face legal risks and certain administrative penalties of loss of shareholder rights, restriction of shareholder rights, and dissolution of shareholder qualifications.

Article 52 of the new Company Law stipulates: "If a shareholder fails to pay his capital contribution in accordance with the date of capital contribution stipulated in the articles of association, and the company issues a written reminder to pay the capital contribution in accordance with the first paragraph of the preceding article, the grace period for the payment of the capital contribution may be stated; the grace period shall not be less than 60 days from the date of the company's issuance of the reminder. If the grace period expires and the shareholder has not fulfilled his obligation to contribute capital, the company may, by resolution of the board of directors, issue a notice of loss of power to the shareholder, which shall be issued in writing. From the date of issuance of the notice, the shareholder loses the equity of his unpaid capital contribution.......". Accordingly, if the shareholder fails to pay the capital contribution in full and on time, the shareholder shall lose the equity corresponding to the unpaid portion of the capital contribution after the company has fulfilled the procedures of collection, resolution of the board of directors and notice of loss of power. The introduction of the system of shareholders' collection and loss of rights strengthens the responsibility of shareholders' capital contribution, which is conducive to supervising the performance of shareholders' capital contribution obligations and the maintenance of the company's capital enrichment.

Article 16 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law stipulates: "If a shareholder fails to perform or fully perform its capital contribution obligations or evades capital contribution, the company shall request profit distribution in accordance with the company's articles of association or the resolution of the shareholders meeting. The rights of shareholders, such as the right to subscribe for new shares, and the right to request the distribution of surplus property shall be reasonably restricted. The people's court will not support." Article 17 stipulates: "if a shareholder of a limited liability company fails to fulfill his obligation of capital contribution or withdraws all his capital contribution, and has not paid or returned his capital contribution within a reasonable period of time after being urged to pay or return by the company, if the company rescinds the shareholder's qualification by resolution of the shareholders' meeting, and the shareholder requests to confirm that the cancellation is invalid, the people's court shall not support it."

Accordingly, if the shareholders of a limited liability company fail to pay their capital contributions in full and on time, their shareholder rights such as the right to request profit distribution, the right to subscribe for new shares, and the right to request the distribution of surplus property may be restricted by the company.

Article 252 of the new "Company Law" stipulates: "If the promoters and shareholders of a company make false capital contributions, fail to deliver or fail to deliver the currency or non-monetary property as capital contributions on time, the company registration authority shall order corrections and may be punished. A fine of not less than 50,000 yuan but not more than 200,000 yuan; if the circumstances are serious, a fine of not less than 5% but not more than 15% yuan for false capital contributions or unfunded amount shall be imposed; the directly responsible person in charge and other directly responsible persons shall be fined not less than 10000 yuan but not more than 100000 yuan." Compared with the old Company Law, Article 252 of the new Company Law increases the administrative penalty liability for insufficient capital contribution of shareholders, adds a fixed amount of penalty from 50000 to 200000, and increases the provisions on fines for directly responsible supervisors and other directly responsible persons.