Registered Capital against Paid up Reality in a Chinese Venture
PRC Company Law reforms mandate full paid-in capital settlement within five years, exposing unpaid registered equity to creditor acceleration and forfeiture.
Equity Forfeiture Article 52
Meaning
Corporate governance tools enforce shareholder capital commitments by revoking equity ownership from investors who default on subscription calls. The equity forfeiture article 52 mechanism permits a company board to issue a written demand giving a defaulting shareholder a grace period of at least sixty days to pay outstanding funds. Failure to pay within the specified period results in the loss of unpaid shares and associated investor rights.
The statutory provision restores corporate solvency by enabling equity reallocation.
Demand Notice
Formal written demands set the grace period and explicit payment terms required before equity cancellation occurs. Under equity forfeiture article 52, corporate management delivers explicit notice stating the outstanding capital sum and strict payment deadlines. The statutory notice must grant at least sixty calendar days for the shareholder to remedy the capital default.
Failure to pay within this period triggers automatic loss of equity claims.
Resolution Protocol
Board resolutions formalize the loss of rights once grace periods expire without full capital settlement. The targeted shareholder loses voting powers and dividend rights associated with the unpaid equity immediately upon issuance of the forfeiture notice.
Share Disposal
Forfeited shares must be transferred or retired within six months following issuance of the forfeiture notice. The remaining shareholders must adjust registered capital figures or purchase the forfeited equity to keep company capital intact. Inaction within six months requires the company to complete formal capital reduction procedures.
The company bears administrative duty to register changes with corporate authorities.