1Presentation of the Problem

Article 54 [i] of the new Company Law stipulates that "if a company is unable to repay its due debts, the company or the creditors of the due debts have the right to demand that shareholders who have subscribed for capital but have not yet reached the capital contribution deadline pay their capital contributions in advance." This is referred to as the "accelerated capital contribution period" of shareholders in academia. Some scholars believe that this provision of the new Company Law is a legalization of the content of Article 6 of the "Minutes of the National Court Civil and Commercial Trial Work Conference" (hereinafter referred to as the "Nine Civil Society Minutes") released in 2019. Some scholars believe that this is a matter of choosing the capital system, which reflects the legislator's compromise between the statutory capital system and the authorized capital system. However, regardless of any theoretical controversies, further clarification is needed on how to apply it in practice. The current regulations are not clear except for the applicable subject, which poses a great challenge to how this clause will be applied in the future, as the applicable conditions and performance methods are not clear. The author believes that in the future, the relevant judicial departments will definitely provide clear explanations on the relevant issues. However, before the issue is clarified, the author attempts to analyze and explore it in order to apply it more comprehensively and correctly.

 2、 The source of accelerated maturity of shareholder contributions

As is well known, the provision in China's legislation for accelerating the maturity of shareholder contributions in limited companies comes from Article 6 of the "Minutes of the Ninth People's Congress" released in 2019. This provision states: "Under the registered capital subscription system, shareholders enjoy term benefits in accordance with the law. If creditors request shareholders who have not yet reached the deadline for capital contribution to bear supplementary compensation liability for the company's debts that cannot be repaid within the scope of their capital contribution, the people's court shall not support it. However, except for the following situations: (1) in cases where the company is the debtor and the people's court has exhausted all enforcement measures but has no property available for execution, and there are already reasons for bankruptcy, but does not apply for bankruptcy; (2) after the company's debts arise, the shareholders' meeting (general meeting) of the company decides or extends the shareholder's capital contribution period in other ways." The reason for the promulgation of this rule in the "Nine People's Meeting Minutes" is that in practice, the shareholder's capital contribution period has not expired, and the company has not applied for bankruptcy. How to protect the interests of company creditors when they are unable to repay their due debts. In the past, when the Company Law of our country stipulated the implementation of the paid up capital system for company capital, this problem did not exist. However, after the amendment of the Company Law in 2013, the shareholder contribution of limited companies was changed from the installment payment capital system to the fully subscribed capital system, this problem became increasingly prominent. A large number of companies, especially private companies, have stipulated a capital contribution period of 50 or 70 years from the establishment of the company for shareholder contributions. This is clearly a huge gap from the reality that the average lifespan of private enterprises in China is only 3.7 years, and the average lifespan of small and medium-sized enterprises is only 2.5 years [ii], resulting in the fact that most enterprises have not yet paid their registered capital when they pass away. On the other hand, based on the "low threshold" of shareholder contributions, the number of companies in China has increased from 13.03 million in 2014 to 48.39 million by the end of November 2023, of which 99% belong to small and micro enterprises. High priced registered capital can be seen everywhere, and the fully subscribed capital system has become a speculative tool for some businessmen, resulting in the loss of the value of the subscribed capital system stipulated in legislation and damaging the legitimate rights and interests of creditors. It is precisely to solve this practical problem that the new Company Law has introduced provisions for accelerating the maturity of shareholder contributions.

The origin of the company capital system lies in the fact that the establishment of a company must have a certain amount of funds, which determines the size of the company and whether it has the ability to engage in certain industries. For example, the financial industry cannot allow companies with a registered capital of only 1 million yuan to appear. This is a reflection of the capital value in the company's statutory capital system. It can be said that the reason why the statutory capital system is stipulated in legislation is not because of theoretical perfection, but because practical needs have promoted the formation of the statutory capital system. The authorized capital system did not arise due to the needs of small companies, but rather due to the emergence of professional investors who did not participate in business operations when the enterprise developed to a certain scale. The form of the company changed from a limited liability company to a joint-stock company, and the governance structure changed from shareholder oriented to board oriented. The shareholders' meeting must give the board of directors certain powers to ensure that it does not lose its status as a professional investor and avoids the expansion of board power that harms shareholder interests. This reflects the transformation of modern corporate capital system from capital value to asset value. Therefore, whether it is the statutory capital system or the authorized capital system, they are both inevitable products of market development, not the result of theoretical shaping. The various effects of different capital systems in practice in different countries depend on differences in commercial practices, financial system levels, trading habits, and even thinking patterns, rather than the advantages and disadvantages of the capital system itself.

The repetitiveness of the selection of capital system in China's Company Law precisely reflects the result of the need for continuous revision of the law in response to market development. Since the implementation of the subscribed capital system for registered capital in Article 26, Paragraph 1 of the revised Company Law in 2013, a total of 13891 civil judgments have been issued on the China Judgments Online in the ten years since the promulgation of the new Company Law in 2023, with "disputes over shareholder liability for damaging the interests of company creditors" as the cause of action. This number has increased from 12 in 2013 to 1352 in 2023 (this number is limited by the number of cases disclosed by various courts and may not match the actual situation, but it is only a small number), an increase of more than 110 times. The disputes over the liability of shareholders for damaging the interests of the company's creditors mainly focus on issues such as personality confusion, untrue capital contributions, withdrawal of capital contributions, and accelerated maturity of shareholders. For cases of accelerated maturity by shareholders, a large part of the reason is that the registered capital of the company is artificially high after the subscription system. On the one hand, shareholders take advantage of the relaxed requirements of the subscription system for the payment deadline of registered capital, and on the other hand, use large amounts of registered capital to attract the attention of investors and consumers, using large amounts of registered capital to act as the "strength" of the company. In addition, China has not established a fully open corporate tax inquiry system and a mandatory annual audit system for companies, resulting in a large number of cases of corporate fundraising fraud and contract fraud in the short term. Taking the number of cases from 2013 to 2023 as a sample, there were a total of 36523 criminal judgments on the China Judgments Online based on the crime of "illegal absorption of public deposits", an increase of more than 23 times from 322 in 2013 to a peak of 7530 in 2020. By 2023, it will decrease to 383, almost at the same level as in 2013. In November 2019, the Supreme People's Court issued the "Minutes of the Ninth People's Congress", which clarified the issue of accelerated maturity of shareholder contributions in limited companies. In November 2020, the chief lawyer of the China Banking and Insurance Regulatory Commission stated that the number of P2P lending institutions operating nationwide gradually decreased from around 5000 during the peak period to completely zero by mid November this year. At this point, P2P, disguised as a legitimate company, has come to an end. Of course, we cannot say that the reason why P2P has caused a large amount of property losses to the general public is due to the company subscription system, but obviously the company subscription system is an important link in this industry chain. On December 20, 2021, the accelerated maturity clause for shareholder contributions was first included in the "Explanation on the Revised Draft of the Company Law of the People's Republic of China" issued by the Standing Committee of the National People's Congress. On September 1, 2023, the Standing Committee of the National People's Congress proposed for the first time in the "Draft of the Company Law (Third Deliberation Draft) for Soliciting Opinions" that the amount of capital subscribed by shareholders of a limited company should be fully paid within five years from the date of establishment of the company. Thus, in terms of legislation, China's capital system has returned to a restricted subscribed capital system.

 3、 Scope of entities requiring shareholders to make advance capital contributions

Compared with the "Minutes of the Ninth People's Congress", Article 54 of the new "Company Law" expands the subject of requiring shareholders to make early capital contributions from "creditors" to "the company and creditors", and clarifies creditors as "creditors of matured debts". The inclusion of the company as a subject originates from the first paragraph of Article 51 of the new Company Law: "After the establishment of a limited liability company, the board of directors shall verify the capital contribution of shareholders. If it is found that a shareholder has not paid the capital contribution stipulated in the company's articles of association on time and in full, the company shall issue a written call for payment to the shareholder, urging the shareholder to make the capital contribution." From the content of this paragraph, it can be seen that shareholders have a capital contribution obligation to the company, and the company has a duty to urge the shareholder to make the capital contribution. Therefore, when shareholders should contribute but fail to contribute, the company can naturally become the subject demanding shareholder contributions, which has consistency in the system. Restricting creditors to "creditors with matured debts" is to limit the accelerated maturity of shareholder contributions as an exception within a certain range, in order to maintain the stability of shareholder contribution obligations as much as possible.

 4、 Determination of inability to repay matured debts

The core issue in the accelerated maturity rules for shareholder contributions in limited companies is the determination of 'inability to repay maturing debts'. According to Article 6 of the Minutes of the Ninth People's Congress, there are two situations in which a company cannot repay its due debts: (1) in cases where the company is the debtor and the people's court has exhausted all enforcement measures but has no assets available for enforcement, and there are already reasons for bankruptcy, but it does not apply for bankruptcy; (2) After the company's debt is incurred, the shareholders' (general) meeting of the company resolves or extends the shareholder contribution period in other ways. ”It is questionable whether the provisions of the "Nine People's Congress Minutes" will continue to be used after the promulgation of the new Company Law. The author believes that from the wording of the new Company Law, it can be seen that the criteria for determining the inability to repay due debts are broader than those stipulated in the Nine People's Congress Minutes. However, before detailed rules are introduced, theoretical discussions can only be conducted on this issue in order to obtain a correct solution. The switch to activate the accelerated maturity rule for shareholder contributions in a limited company is "the company cannot repay its due debts", which involves two issues: one is the determination of due debts, and the other is the determination of the company's inability to repay its debts.

（1） Recognition of matured debts

There are two ways to determine the maturity of debt, one is through litigation and the other is through non litigation. 

The litigation channel, as the name suggests, refers to the confirmation by arbitration institutions or judicial authorities that the debt is established and has matured, and the company should repay the debt. In such cases, companies often receive documents issued by arbitration institutions or judicial authorities, including awards, judgments, rulings, etc. The matured debt confirmed through litigation is clearly clear and does not require further elaboration.

Non litigation channels refer to debts that have not been confirmed by arbitration institutions or judicial authorities, but have been recognized by the company as due and payable. The confirmation of matured debts through non litigation channels is quite complex, involving issues such as the method and institution of confirmation. The author believes that the confirmation methods can include statements confirmed by the company, inquiry letters and replies issued to intermediary agencies, other agreements and letters confirming the maturity of debts, and factual content that has been verified by arbitration or judicial authorities in other litigation cases. The institutions for confirmation should be differentiated according to the different objects of debt. When the creditor is a shareholder of the company or a subsidiary of the company, or an object outside of the affiliated relationship, it can be directly confirmed by the company. The confirmation method can be the company seal or the signature of the legal representative, both of which are available. When the creditor is a shareholder or affiliated person of the company or a subsidiary of the company, the institution that can make the determination shall be determined according to the company's articles of association. If the company's articles of association stipulate that confirmation by a resolution of the shareholders' meeting or board of directors other than the affiliated person is required, the provisions of the articles of association shall be followed.

（2） The determination that the company cannot repay its debts

Based on the different entities that can require shareholders to make early capital contributions under the Company Law, the recognition of non repayable debts should also vary.

For a company, its understanding of the company's operating and financial situation can determine that it is unable to repay its debts when the following situations occur: (1) the company has received internal audit reports and asset evaluation reports indicating that the company's assets are insufficient to cover its debts; (2) In other litigation cases of the company, audit reports and asset evaluation reports made by intermediary agencies commissioned by arbitration institutions or judicial authorities show that the company's assets are insufficient to cover its debts; (3) The company has already filed for liquidation or bankruptcy; (4) The company has received notice of entering into liquidation or bankruptcy proceedings; (5) After the company's debt is incurred, the shareholders' meeting of the company resolves or extends the shareholder contribution period in other ways.

For creditors whose debts have already expired, it can be determined that the company is unable to repay its debts when the following situations occur: (1) the company enters bankruptcy or liquidation proceedings; (2) The execution of this case has been terminated due to the inability to settle debts; (3) Those who have been listed as dishonest persons subject to enforcement or restricted from consumption through public information display; (4) Displaying through public information that the assets are already insufficient to cover the debts; (5) After the company's debt is incurred, the shareholders' meeting of the company resolves or extends the shareholder contribution period in other ways.     

5、 Accelerated expiration of performance methods

After the recognition of matured debts is met, Article 54 of the new Company Law only stipulates that the company and creditors of matured debts have the right to demand shareholders to make advance payments and contributions, but there is no provision on how or at which stage to demand such payments. The issue arising here is: 1. In the case of requiring shareholders to contribute capital in advance, should the company refer to Article 51 of the new Company Law to make written reminders; 2. What methods should creditors with matured debts use to make their claims; 3. What procedures should be followed if written reminders can be made; 4. Can shareholders be directly added as executed persons in the execution program; 5. How to remedy shareholders who still fail to fulfill their debt collection obligations after fulfilling them.

For the first question, the author believes that after the company has confirmed that the shareholder has met the conditions for accelerating the maturity of the capital contribution, the company can refer to Article 51 of the new Company Law and issue a written call to the shareholder. The purpose of a written call is to prepare shareholders for capital contributions, but issuing a written call is not a prerequisite for filing a lawsuit. Based on the relationship between shareholders and the company, the company can issue a notice of early capital contribution to shareholders or directly file a lawsuit with the court. If shareholders can actively cooperate, the burden of litigation will be eliminated and judicial resources will be saved; If the company wants to improve efficiency, it can directly demand shareholders to contribute capital through litigation to solve the company's debt burden and protect the interests of the company and creditors.

For the second question, it is actually whether creditors with matured debts can make demands through written reminders like companies before the case enters the compulsory enforcement procedure. That is to say, if the case has not entered the execution procedure, is it necessary to go through the litigation procedure to demand early payment of capital contributions from shareholders. The author believes that it is not necessary for creditors who have already matured their debts to exercise their rights through written reminders. They should have the right to directly file a lawsuit against shareholders who have not yet reached the deadline for capital contribution. The reason is that the status of creditors with matured debts is different from that of the company. Creditors with matured debts are the direct subjects whose legitimate rights and interests have been damaged, and they have the right to directly demand that shareholders who meet the accelerated maturity requirements make timely contributions; And the company itself has a time limit for shareholders to contribute capital as stipulated in the articles of association. If there is no situation where creditors directly claim rights, there is no direct harm to the company's interests. Therefore, creditors with matured debts should be directly granted the right to sue without the need for written debt collection. Of course, this does not mean that if the creditor of the matured debt requests the shareholder who should contribute to fulfill the contribution obligation on their own, and the shareholder fulfills the contribution obligation, it is invalid. For shareholders who meet the requirements of accelerated capital maturity and make direct capital contributions at the request of matured creditors, it does not violate mandatory provisions of laws and regulations and is of course valid.

For the third question, as mentioned earlier, as the subject that can request shareholders to contribute capital to accelerate the maturity, the company can exercise its rights through written reminders. So what should be the method of written reminders? In this regard, the author believes that reference can be made to Article 52 of the new Company Law: "If a shareholder fails to make capital contributions on the date specified in the company's articles of association, and the company issues a written call for capital contributions in accordance with the provisions of the first paragraph of the preceding article, the grace period for making capital contributions may be specified. The grace period shall not be less than 60 days from the date of issuance of the call for capital contributions by the company. If a shareholder fails to fulfill their capital contribution obligations at the end of the grace period, the company may, by resolution of the board of directors, issue a notice of loss of rights to the shareholder, which shall be issued in writing. From the date of issuance of the notice, the shareholder shall lose their unpaid equity. The equity lost in accordance with the provisions of the preceding paragraph shall be transferred in accordance with the law, or the; If the transfer or cancellation is not made within six months, other shareholders of the company shall pay the corresponding capital in full according to their respective contribution ratios. Shareholders who have objections to the loss of rights shall file a lawsuit with the people's court within 30 days from the date of receiving the notice of loss of rights. ”The reason is that once a shareholder's contribution is deemed to be due for accelerated maturity, it should be subject to the same rules of payment and loss of rights as the shareholder who is required to contribute as stipulated in the articles of association.

For the fourth question, some opinions suggest that the accelerated maturity of shareholder contributions can be subject to the provisions of Article 17 of the Supreme People's Court's "Provisions on Several Issues Concerning Changes and Additions of Parties in Civil Enforcement" (2020 Amendment), which directly adds the shareholder who should contribute as the debtor. I believe that this does not comply with legal principles. The object specified in Article 17 is "shareholders or contributors who have not paid or fully paid their contributions, or initiators who bear joint and several liability for such contributions in accordance with the Company Law". The term "shareholders or contributors who have not paid or fully paid their contributions" referred to here refers to shareholders or contributors who have not paid or fully paid their contributions at the expiration of the payment deadline agreed upon in the company's articles of association at the time of establishment; And the shareholders who accelerate the maturity are required to contribute according to the deadline stipulated in the articles of association. For shareholders who have not participated in the operation of the company, what they are concerned about is the deadline for capital contribution. They are not obliged to know whether the company has reached a point where it cannot repay its due debts during the operation process. The accelerated maturity of shareholder contributions is not the fault of the shareholders themselves, but rather an exceptional obligation imposed by the law to protect the interests of the company and creditors. Shareholders have a capital contribution obligation to the company, not to creditors. The capital contribution obligation of shareholders belongs to the company rather than creditors, and shareholders are directly added as executed persons, confusing the legal relationship between shareholder capital contribution and creditor debtor legal relationship. Directly placing two parties with different legal relationships in one execution case without trial is a typical case of using execution as a substitute for trial. Combining Article 53 of the new Company Law can better prove the aforementioned reasons. Article 53 of the new Company Law stipulates: "After the establishment of a company, shareholders shall not withdraw their capital contributions. If the provisions of the preceding paragraph are violated, shareholders shall return the withdrawn capital contributions; if losses are caused to the company, the responsible directors, supervisors, and senior management personnel shall bear joint compensation liability with the shareholder." In the case of shareholder withdrawal of capital contributions, shareholders shall return the withdrawn capital contributions to the company. Similarly, the contributions made by shareholders are also paid to the company, and there is no issue of direct payment to creditors. Although the company can be the subject of Article 54, there is no legal relationship between the company itself and its shareholders, and there is no possibility of applying Article 17 of the "Provisions on Several Issues Concerning the Change or Addition of Parties in Civil Enforcement".

For the fifth question, how to remedy the situation where the shareholder who should have contributed has not yet contributed after the company has completed the call notification procedure. The author believes that at this time, a separate lawsuit should be adopted for relief. The cause of the company's lawsuit is the dispute over liability for damaging the company's interests, which is consistent with current practice. Thus, a closed loop has been formed, from self remedy to external remedy, for the accelerated maturity rule of shareholders.

 VI. Conclusion

In summary, the author believes that the accelerated maturity rule for shareholders' capital contributions in limited companies is not a dispute between the statutory capital system and the authorized capital system, but a balanced result of considering the value of capital and assets to protect the rights and interests of the company and creditors. As an exception to shareholder contributions, the applicable conditions and performance methods for accelerating the maturity of shareholder contributions in limited liability companies should be differentiated based on whether the requester is a company or a creditor of matured debt. We hope that after the detailed rules of this rule are introduced, it can truly promote the selection of more suitable managers by shareholders, operate the company more effectively, protect the legitimate rights and interests of the company and creditors, and promote the rapid development of the market economy.