For international businesses partnering with Chinese companies, verifying registered capital is critical. Under China’s new Company Law (effective July 1, 2024), shareholders must fully pay subscribed capital within 5 years. Failure risks financial instability, legal liability, or even dissolution. Here’s how to verify a Chinese company’s actual capital contribution in 3 steps:
Step 1: Check the National Enterprise Credit Information Publicity System (NECIPS)
What it is: China’s official registry (gsxt.gov.cn) discloses key corporate data.
What to look for:
- Subscribed capital: Total capital pledged by shareholders.
- Paid-in capital: Amount actually paid.
- Payment deadlines: Dates for capital installments (per Article 47 of the new Company Law).
- Non-monetary contributions: Details of assets (e.g., real estate, IP) used as capital (Article 48).
How to verify:
- Search the company’s Chinese name or registration number on NECIPS.
- Navigate to the “Registered Capital” section.
- Compare “Subscribed Capital” (认缴出资额) vs. “Paid-in Capital” (实缴出资额). A large gap signals risk.
- Check “Shareholder Contribution Details” for payment timelines and methods.
⚠️ Red flags:
- Overdue payments (beyond 5-year limit).
- Underpaid non-monetary assets (e.g., property valued above market rate).
Step 2: Analyze Financial Statements & Supporting Documents
NECIPS data alone isn’t enough. Cross-reference with financial documents:
- Audit reports: Confirm cash/assets are deposited in company bank accounts (Article 49).
- Bank payment records: Trace capital transfers from shareholders.
- Asset valuation reports: For non-monetary contributions, verify third-party appraisals (Article 48).
Key focus areas:
- Consistency: Paid-in capital in financials must match NECIPS records.
- Timing: Payments should align with deadlines in the company’s Articles of Association.
- Shareholder liability: Unpaid capital exposes shareholders to joint liability (Article 50).
💡 Tip: For private companies, request these documents via:
- A formal letter to the board (Article 57 grants shareholders inspection rights).
- Legal demand (if denied).
Step 3: Engage Professional Verification Services
Most Chinese SMEs won’t share sensitive financials. Here’s where experts add value:
- On-the-ground checks:
- Validate bank records and asset ownership.
- Interview local suppliers/creditors for undisclosed liabilities.
- Regulatory access:
- Obtain official Business Credit Reports from Chinese authorities.
- Verify NECIPS data with local Administration for Market Regulation (AMR) branches.
- Risk assessment:
- Identify shareholders at risk of “loss of rights” (失权通知) for non-payment (Article 52).
- Evaluate if unpaid capital affects debt repayment capacity (Article 54).
✅ Case study:
A European importer discovered a supplier’s “paid-in capital” of $2M was actually $200K via NECIPS and bank record checks. Verification prevented a $1.5M order loss.
Why This Matters Under China’s New Company Law
- Strict deadlines: Shareholders have 5 years to pay capital. Companies with unpaid capital face fines, dissolution, or director liability (Articles 251–253).
- Creditor protection: Unpaid capital = higher bankruptcy risk. Creditors can demand early payment from shareholders (Article 54).
- Due diligence imperative: 63% of Chinese SMEs have capital shortfalls (2023 KPMG report).
Need Authoritative Verification?
At ChinaBizInsight, we help global businesses:
- Verify capital status through NECIPS and AMR channels.
- Obtain notarized/Apostilled reports for court or contractual use.
- Deliver risk intelligence via Customized Due Diligence Reports (covering legal, financial, and operational risks).
🔍 Example: Our Official Business Credit Report includes:
- Certified NECIPS capital data.
- Asset valuation certificates.
- Shareholder payment histories.
Verify your partner’s financial health today → ChinaBizInsight Company Verification Service
Disclaimer: This guide is educational. Consult legal counsel for jurisdiction-specific advice.