Viewpoint...............................................................................................
Published:
2024-10-08
Article 54 of the new "Company Law" stipulates that if a company cannot pay off its due debts, the company or the creditors of its due creditor's rights have the right to require shareholders who have subscribed their capital contributions but have not reached the deadline to pay their capital contributions in advance. Among them, there are still many interpretations in the application of judicial practice on the conditions for accelerating the maturity, the subject of the request for accelerating the maturity, and the path of paying the capital contributions, which need to be further clarified.
Abstract
The recent implementation of the new "Company Law" has made major adjustments to the capital contribution system of limited liability companies, including the rules for accelerating the maturity of shareholders' capital contributions. Article 54 of the new "Company Law" stipulates that if a company cannot pay off its due debts, the company or the creditors of its due creditor's rights have the right to require shareholders who have subscribed their capital contributions but have not reached the deadline to pay their capital contributions in advance. Among them, there are still many interpretations in the application of judicial practice on the conditions for accelerating the maturity, the subject of the request for accelerating the maturity, and the path of paying the capital contributions, which need to be further clarified.
The accelerated maturity rule of 1. capital contribution obligation involves multi-party value balance.
Whether and how to set the rules of accelerated maturity of capital contribution obligations is essentially how to balance the interests of the company, shareholders, creditors and other parties. The accelerated maturity rule needs to consider a variety of factors, mainly related to current market conditions, corporate governance structure, the relationship between creditors and shareholders, and the overall economic environment, to determine when and how to apply the accelerated maturity rule.
Problems in 2. Judicial Practice
There are differences in the criteria for judging (I) "unable to pay off debts as they fall due".
According to Article 54 of the Company Law, "inability to pay off debts due" is the only condition for accelerating the maturity of the capital contribution obligation, how to define this condition has been controversial since December 2021, when the Company Law (First Review of the Revised Draft) was publicly solicited for comments until the Company Law was considered and adopted. Mainly reflected in whether the standard is to stop payment standard, or to meet the bankruptcy payment standard, or to take the intermediate standard, how to define the standard for judicial practice to balance the interests of shareholders and creditors has an important impact.
The procedure for (II) companies to request accelerated maturity of contributions is not clear.
Although Article 52 of the Companies Act provides for the collection procedure when the shareholders of a limited company fail to pay their capital contributions on time, Article 54 does not provide for the procedure for the company to request an acceleration of maturity, and its applicable procedures, legal liability and other matters are yet to be confirmed.
The flow of property contributed by the (III) of "early contribution" needs to be determined urgently.
In addition to the accelerated maturity conditions and the subject of the request, section 54 of the Companies Act also deals with the flow of contributed property. There is a major dispute as to whether the "early payment of capital contributions" referred to in this article is a creditor or a company. The former has efficiency advantages but lacks fairness, while the latter is the opposite.
3. related recommendations
(I) to strengthen the rules of accelerated maturity of contributions and the convergence of insolvency proceedings.
"Inability to pay off debts as they fall due" has different meanings and different emphases in the Company Law and the Enterprise Bankruptcy Law. The judiciary should provide a uniform interpretation of the accelerated maturity rule and key concepts in insolvency proceedings, such as the need to clarify specific criteria for "failure to pay debts as they fall due", in order to ensure consistency in the application of the law. And it is suggested that when the company transitions from accelerating the expiration of capital contribution to bankruptcy proceedings, clear rules should be formulated to guide the specific operations of the company, shareholders, creditors and the court; a special coordinating body or procedure should be set up to accelerate the convergence between the expiration of capital contribution and bankruptcy proceedings, such as information sharing, procedural docking, interest coordination and other matters.
(II) to further clarify the connection between the accelerated maturity of capital contributions and the rules of collection and loss of rights.
The accelerated maturity of capital contribution obligation and the system of collection and loss of right have their own emphasis in design. The accelerated maturity of capital contribution obligation is mainly aimed at the company's temporary insufficient solvency, with the purpose of rapidly increasing the company's capital and enhancing the company's solvency. The latter is mainly aimed at the situation that shareholders fail to make capital contributions as agreed in the articles of association, which is intended to maintain the principle of fairness among shareholders and ensure the integrity of the company's capital.
It is recommended to clarify the convergence between the rules of accelerated maturity and collection of lost rights, and to provide that in the event that shareholders fail to respond to the company or creditors' request for early payment of capital contributions, the collection of lost rights system can be applied to ensure the balance of the interests of the company, shareholders and creditors, to ensure the rigor of the law and to meet the actual needs of the company's operations.
(III) clarify the procedures for the company as a subject to require accelerated maturity of capital contributions.
Clarify the procedures for "the company requires shareholders to accelerate maturity", including the decision body for the company to request accelerated maturity, the notification procedure for requiring shareholders to pay their capital contributions in advance, the form of notification, and the time limit for the payment of capital contributions. Recommendation: First, since requiring shareholders to accelerate maturity involves the interests of the company, shareholders and creditors, it is reasonable to give decision-making power to the board of directors, taking into account the logic of the allocation of the board's power in the company law. Second, the manner of notification should be in writing, consistent with the company's call for capital contributions and notice of loss of authority. Third, in the grace period setting, set a reasonable preparation time.
(IV) clear "advance payment of capital contribution" capital contribution property flow
"Early payment of capital contribution" is directly to the creditors to pay off the debt or first to the company to fulfill the obligation of capital contribution, and then by the company to pay off the debt to its creditors, there is a big difference, it is suggested that the introduction of judicial interpretation as soon as possible to clarify the flow of capital contribution property, unified judgment standards.
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