International Journal of Law and Management

Emerald Article: A comparative study on capital system across the Taiwan

straits
Ni Cailong, Ni Wenzhu

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Ni Cailong, Ni Wenzhu, (2009),"A comparative study on capital system across the Taiwan straits", International Journal of Law and
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IJLMA
51,4

A comparative study on capital

system across the Taiwan straits
Ni Cailong and Ni Wenzhu

234

Law School, Shanghai University, Shanghai, Peoples Republic of China

Abstract
Purpose The purpose of this paper is to compare the capital system and governance of Mainland
Chain with that of Taiwan.
Design/methodology/approach This a comparative study drawing upon the main principles of
the legal systems of China and Taiwan.
Findings Due to historical, institutional social factors, the capital system of the Mainland China
differs greatly from that of Taiwan. There is room for both sides across the Taiwan Straits to learn from
each other by taking into consideration the respective features and deficiencies of their regulations.
Originality/value The comparison and contrast study of the two capital systems helps them to
improve respectively and boost economic development as well as legal construction.
Keywords China, Taiwan, Company law, Capitalist systems
Paper type Research paper

The capital system and governance structure are two pillars in corporate law. The
legal term, corporate capital, specifically refers to the total capital received by a
corporation at the time of its establishment from shareholders as provided in the
corporation charter (Shaoxia, 1999). Different from the corporate capital, corporate
assets refer to the disposable value of corporate assets in the form of cash, mainly
including the contributions made by shareholders, bonds issued by the corporate,
loans from the bank, and so on. Although assets collected from through bonds and
loans are disposable, these sets are de facto liabilities of the corporation and shall be
recorded as liabilities in the balance sheet of the corporation. The contributions made
by shareholders are the real assets of a corporation. Therefore, corporate asset is a
term more extensive term than corporate capital, which is only a part of corporate
assets. Capital system has been a hot topic for academic discussion while it is an
institution urgently called to change by the practical legal world as well. The design of
capital system is related to whether the form of corporation can be more extensively
applicable, the threshold of market entrance, the development of market economy and
the stability of market order as a matter of course.
It is not hard to find that the capital systems across the Taiwan straits have
respective features and deficiencies as well as room for mutual improvement thanks to
historical, institutional and social factors. The comparison and contrast study of the
capital systems is theoretically and practically meaningful to for the perfection of
capital systems, economic development and economic legal construction.

International Journal of Law and

Management
Vol. 51 No. 4, 2009
pp. 234-244
# Emerald Group Publishing Limited
1754-243X
DOI 10.1108/17542430910974068

1. Minimum registered capital requirement

The registered capital is generally interpreted on the Mainland China as the amounts
that the corporation is entitled to as provided in the article of associations of a
corporation and as registered in the corporate governing authority (Ping and Liufang,
This paper is the periodic achievement of project Research on Finance Law and Cultivation of
Talents under the Background of Financial Reform and Innovation by Shanghai Municipal
Education Commission.

2001). Article 26, 59 and 81 of the Mainland China Company Law provide, respectively:
the minimum registered capital requirement for a limited liability company is 300,000
RMB, 100,000 RMB for a one person limited liability company, and five million RMB
for a joint stock limited company. If any law or administrative regulation prescribes a
relatively higher minimum amount of registered capital, such provision shall be
followed. The corporate law of Taiwan has no explicit provisions concerning the
minimum registered capital requirements either on Limited Liability Company or Joint
stock limited company. Instead, it provides that the governing authority may decide by
order according to the nature of the entity in case.
Regarding the minimum registered capital requirements, Taiwans corporate law
adopts the open provisions. The revised company law of the Mainland China has
lowered the requested amount of company registered capital. Comparing the current
capital systems and the development trends of Taiwan and other major countries of
rule of law in the world[1],the provisions concerning the minimum registered capital
requirements of the Mainland China Company law seems to be too high or even
unnecessary.
First, from the viewpoint based on the relationship between law and economy, the
law shall follow the rules of economic development. The proposition law rooted in
certain economic basis is the application of Marxism theory of dialectical relationship
between the economic basis and superstructure (1995) in jurisprudence. The law
guides, promotes and safeguards the economic basis, on which it survives and
develops. Market economy is the economy of rule of law. Many market phenomena
shall be regulated by law. However, law shall respect the objective economic
development, record and reflect economic relationship at any time. In the backdrop of
market economy transformation on the Mainland China, the best way to realize free
competition is to fully make use of the invisible hand for self control. The provisions
concerning the minimum registered capital requirements of the Mainland China
Company law have become artificial obstacles to free market entrance. As the
economist Coarse put it: in a world of zero transaction cost, no matter how the law is
selected, high efficiency will be the result only if the transaction is free. In conditions of
current transaction costs, the law that can minimize the transaction costs is the most
applicable law. The effects of transaction costs include the actual transaction costs and
the low efficient selection to avoid transaction costs (Posner, 1997).
Second, the provisions of the Mainland China Company law concerning the
registered capital have no sufficient objective basis, and may result in social dilemma
as well as increase social costs. The US legal economist pointed out in the analysis of
the minimum registered capital requirements: If the minimum registered capital is too
high, the new enterprises will be prevented from entering the industry, leading to
monopoly prices and interests of the existing enterprises. If it is too low, the minimum
registered capital requirements cannot prevent risks; . . . . . in either case, the return rate
of share investment will be undermined, which means a certain type of social cost
(Easterbrook and Fischel, 1991). To the high risk enterprises, the protection of the
minimum registered capital requirements is not sufficient. It will become an
unnecessary obstacle to low risk enterprises, and will cause waste of social resources to
a certain degree.
When revising the Mainland China Company law in 2005, there were a lot of
disputes concerning the minimum registered capital requirements from various
parties? The member of the revision committee stated when interviewed: there do
exist the conflicts and gaming of different viewpoints. The final outcome sometimes is

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the negotiated and compromised one of various viewpoints. For example, 300,000 RMB
(minimum registered capital for limited liability company), was originally 100,000
RMB, and later on changed to 500,000 RMB. And we have proposed for 10,000 RMB.
The Association of Legal Study proposed 10,000 RMB as too low. And then, the
compromised outcome comes (Xudong, 2005). It can be seen that the minimum
registered capital requirements provisions of the Mainland China Company law are the
compromised outcome of many different viewpoints without sufficient scientific and
practical proofs. The gaming process to create such compromise seems to be random
and unscientific.
Then, funds can become capital only in social transaction to create more wealth and
bring about more economic benefits. The provisions of the Mainland China Company
law concerning the minimum registered capital requirements make the corporate have
to raise a certain amount of capital at the early stage of its establishment. The high
registered capital and early stage capital limitation have been criticized in the past. The
revision of the Mainland China Company law has considerably reduced the minimum
registered capital. It is a big step forward that shareholders can effectively use capital
to avoid waste of social wealth on the basis of clear cut capital contribution obligations.
However, compared with the flexible provisions of the Taiwan company law, as far as
the commodity market is concerned, the later one is more compliant with the
requirements of free economy, and beneficial to encouraging investment, expanding
employment, and promoting sustainable development of the economy. As far as the
protection of interests of the creditors, the later one has supporting measures in place.
However, with the lack of supportive systems on the Mainland China, the provisions
concerning the minimum registered capital requirements cannot prevent fraudulent
practice to realize the legislation goals.
In a word, the minimum registered capital system of the Mainland China has weak
points as seen from aspects of legal prudence, legislation and practice. It is a matter of
course to gradually reduce and finally eliminate the minimum registered capital
system by following the status quo and trends of Taiwan and other major countries of
rule of law in the world.
2. Capital contribution system
In the global development history of capital contribution system, three types of capital
contribution systems, namely: the statutory capital system, the authorized capital
system and the compromised capital system. In different capital contribution system
modes, the capital ideals and legislation purposes are not necessarily the same.
Articles 26, 59 and 81 of the Mainland China Company Law provide that
shareholders may not contribute all the capital subscribed to them and may pay it off
in installments according to provisions of law and articles of association. The law
provides the minimum payment of the initial period as no less than the minimum legal
registered capital to be paid off within certain term. The shareholder of the one-person
limited liability company and shareholders of joint stock limited company is
established by stock floatation shall, in a lump sum, pay the capital contribution.
Therefore, the limited liability company and joint stock limited company is established
by stock floatation on the Mainland China adopt the compromised capital system. The
one-person limited liability company and the joint stock limited company is established
by stock floatation still adopt the statutory capital system.
When Taiwans Company Law was revised in 1966, the statutory capital system
was changed into the compromised capital system in accordance with the then

practical conditions. When revising Taiwans Company Law in 2005, the revised
Articles 156 and 278 confirmed the change from the compromised capital system to
authorized capital system. Namely, the capital amount shall only be confirmed in the
articles of association when a company is established. The shareholders may pay off a
part of the total capital as subscribed; even no capital shall be paid off at all to launch
the company. The subscribed unpaid capital will be paid off by issuance of shares or
loans determined by board of directors in accordance with business needs and market
conditions. The unpaid subscribed sum shall be included in the total capital as
recorded in the articles of association. The articles of association may not be changed
when issuing new shares.
When Taiwans Company Law was revision in 1966, it was a time of rapid social
economic development and dramatic change of social environment in Taiwan. In the
revision process, in addition to referring to the experience of company law revision of
post-WII Japan, Anglo-American legal system was preferred in adoption. The
statutory capital system of joint stock limited company s was changed into the
compromised capital system. Namely, when establishing a corporation, at least onefourth of the total capital as recorded in articles of association shall be paid off. The
rest three quarters shall be paid in installments subject to the actual needs as
determined by the authorized board of directors (Yongrong, 1985). The Taiwan
company law was significantly revised in 2001, almost resulting in a new company
law with compromised capital system being kept. It was not until the revisions in 2005;
the authorized capital system was confirmed. Scholars in Taiwan believe that
(Guoquan, 2005), under the pure authorized capital system, the capital as recorded in
articles of association and the paid off one may have very considerable difference,
resulting easily in mistake of transaction participants and undermining transaction
safety if no complete and effective information disclosure system is in place. And
Article 393 of the revised company law in 2001 has listed the paid off capital of a
company as an item that any person may apply to the regulating authority for reading
or copying (section 7, provision 2) as well as checking online (provision 3). It is the
perfection of company paid off capital information disclosure system that the capital
system was changed into pure authorized capital system.
As the Mainland China is at the economic transformation stage, the disadvantages
of the statutory capital system has gradually emerged with the continuous deepening
of reforms and opening-up and the fast development of economy: first, it increases the
difficulty in establishing a company for shareholders and results in loss of time gains of
the capital at the early stage; second, the complex procedural regulations will affect the
company in its pursuit of maximized business interests; third, the protection of
registered capital is too superficial to creditors. Hence, it is necessary for the Mainland
China to reform the statutory capital system which has been in place for 15 years. The
perfection of information disclosure system is another major issue the Mainland China
Company Law is faced with. With the premise of perfect information disclosure
system, it is extremely easy for shareholders to hurt the creditors. It is hard for
the latter to prove the errors of shareholders, resulting in insufficient guarantee of the
interests of creditors. The No. 1 goal of the reform of the Mainland China Company
Laws statutory capital system is to confirm and implement the authorized capital
system. Namely, the company is allowed to be established when certain percentage of
the registered capital or shares as recorded in articles of association has been
subscribed and paid off. The rest capital may be made up or paid off according to the
actual needs after the company is established ( Jichun et al., 2005). Thus, the loss of time

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gain of the capital when the company is established can be avoided and the interests of
creditors can be better protected.
The development history of Taiwan Company Law capital system is basically in
line with those of major countries of rule of law, indicating that the authorized capital
system has irreplaceable advantages. The authorized capital system will definitely
become the choice of capital contribution system for all the countries across the world.
At present, conditions for implementing the authorized capital system are not rife in
the Mainland China, the compromised capital system will be in place as the transitional
one with supporting provisions being developed gradually to prepare for the future.
3. Form of capital contribution
Articles 27 and 83 of the Mainland China Company Law provide: A shareholder may
make capital contributions in currency, in kind or intellectual property right, land use
right or other non-monetary properties that may be assessed on the basis of currency
and may be transferred according to law. The value of the non-monetary properties as
capital contributions shall be assessed and verified, which shall not be over-valued or
under-valued. The amount of the capital contributions in currency paid by all the
shareholders shall be not less than 30 percent of the registered capital of the limited
liability company. The form of capital contributions of initiators shall be subject to the
provisions in Article 27 of this Company Law.
Articles 43 and 44 of Taiwan Company Law provide: a shareholder may make
capital contribution in business goodwill, labor or other rights; a shareholder shall
make up the capital contribution made in creditor rights that are not paid off and
compensate for the company damages if any. Taiwan Company Law is one of the few
corporate laws that expressly confirm the capital contribution forms of creditor rights
and goodwill.
3.1 Capital contribution in labor
The legislators in the Mainland China generally believe that the limited liabilities of
company shareholders actually shift some risks to the society, especially the creditors.
Therefore, Company Law shall have the protection for the creditors. This compromised
protection mechanism in the capital contribution is embodied in Article 27 of the
Mainland China Company Law as only non-monetary properties that may be assessed
on the basis of currency and may be transferred according to law can be the capital
contributions, indicating the worry of the Mainland China legislators about the
capital contribution in labor: first, after the shareholders making the contributions, the
contributions become the assets of the company as the economic basis of its liabilities.
Therefore, the capital contribution shall be transferable and enforceable by law.
However, labor has no such characteristics, and thus cannot be the capital contribution
(Ping, 2002); Second, legislators expect to prohibit some non-monetary matters such as
power, knowledge and experience from being capital contributions to counter fraud
and embezzlement (Feng, 2003). Thanks to so many worries and concerns, the
Mainland China Company Law has forsaken the capital contribution form of labor.
In fact, based on the change of capital credit to asset credit as provided in the
Mainland China company law, it is not necessary to rigidly limit the scope of capital
contribution. Labor as a resource that can create huge economic value, as Marx pointed
out in Der Kapital, it is undeniable that labor creates value. The CPC 16th national
conference report has expressly stated that production factors including labor, capital,
technology and management should be considered in proportions of contribution in

distribution. In particular, at the age of knowledge economy, human capital has been
proved of better capability to create more values than traditional tangible capital
(Daxing, 2001). The role of labor in production has become more and more important.
The labor investment can bring great benefits to the company and even becomes the
key to the success of the enterprise. Following the economic development, the
integration of labor investment will be listed for legislation discussion. At present, two
methods may be employed to improve: first, establish the perfect labor assessment
mechanism and build up professional independent assessment team. It provides that
shareholders shall be held responsible for joint liability for damages arising from
fraudulent assessment. Even, the administrative departments that make such
fraudulent assessments shall be held responsible for joint liability. Second, before
having the mature assessment mechanism, labor investment shall be requested to have
full sum guarantee. In profit-making years, the profits shall be distributed according to
shareholding percentage with limit of the guaranteed amount. In case of losses, the
guarantee assets shall undertake the limited liabilities of the company.
It is hard to understand that provisions in Taiwan Company Law relates only to joint
stock limited companies. Generally, if the joint stock limited company is based on capital
combination can recognize labor investment, the limited company based on both labor
and capital can better accept the labor investment. In this respect, the Mainland China
shall learn from the experience when determining labor capital contribution system.
3.2 Goodwill
The Mainland China scholars generally believe that goodwill refers to the objective
evaluation of the general public about the production and management capacity,
business operation status, credit status, commodity and service quality of a specific
business operator ( Jin, 2000). Goodwill as a type of intellectual properties shall be
included as a way of capital contribution. From the viewpoint of transferability,
although goodwill cannot be the sole way of capital contribution, it can be a part of the
business entity to which it attaches for capital contribution. Its inability to be
transferred will not affect the transfer of the entire business entity, of which it is a part.
From the viewpoint of assessment, in the determination of well-known trademarks in
the Mainland China, some factors of goodwill have been included. The practice of the
well-known trademarks can provide experience for goodwill assessment. The
assessment related to intellectual properties is an estimation and assessment process
that is hard to quantify and be accurate. The purpose is to provide reference, and the
possibility of assessment shall not be affected by whether it is accurate or not.
Therefore, we can draw a conclusion: goodwill of the intellectual property type in the
capital contribution forms is in line with the conditions of being able to be assessed in
currency and transferred according to law, and shall be listed in the non-monetary
capital contributions of the Mainland China Company Law.
The flaw guarantee and the burden of risk after making capital contribution in the
form of goodwill shall be guarded against. The Mainland China, referring to the security
system of Taiwan, may set up a risk security supportive mechanism that is more
applicable the status quo in China. For example, divide explicitly the company total
capital into material capital and intellectual property capital to let the public know the
real information about the capital of the company. Establish the annual re-assessment
system of the contributions in the form of intellectual properties. Adjust the percentage of
capital contribution in the form of intellectual properties accordingly. Establish major
item assessment system for major change of intellectual property values and grant rights

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to other shareholders to re-assess and adjust the shareholding structure. Strengthen the
responsibilities of the shareholders making capital contribution in the form of goodwill;
establish compensation liabilities of the shareholders making capital contribution in the
form of goodwill. The shareholder making capital contribution in the form of goodwill
may share the company liabilities personally to the limit of received material benefits
(Fengqin, 2006). In this way, goodwill capital contribution will not threat the security of
the social wealth and realize the balanced interests of various investing parties.
3.3 Claimable assets
The claim financing in Taiwan Company Law is similar to the current debt-turned
share of the Mainland China as they are both limited to currency claimable assets
against the company only. However, the differences of the two are conspicuous as well:
first, in Taiwan, the creditor makes capital contributions in the form of claims against a
third person in establishing a company, however, in the Mainland China, the creditors
turn the claims against the company into shares of the company as known debt-turned
share after the establishment of the company. Second, it is an assignment of claims in
Taiwan as the creditor transfers the claim against a third person to the company as the
capital contribution to the company. However, it is a capital contribution made in the
form of the claim against the company in the Mainland China in a form of claim offset.
The offset has the shares granted to the creditor as the consideration. Third, it can be
applicable to most companies in Taiwan as it is a legal system. However, it can be
applied to specific scope in the Mainland China as it is a political measure. The measure
cannot change the relevant provisions of the Company Law and can only play a role in
specific scope designated by the policies. Fourth, the former is the direct conversion of
claims to shares, and the latter is a direct conversion. For example, the Business Bank
Law provides that the banks cannot invest directly in enterprises. Thus, the bank cannot
directly convert its claims against the enterprise into shares. Instead, the bank will
transfer the claimable assets to the asset management company funded totally by the
state to realize the transfer from the creditor to shareholder.
Claims is a dynamic wealth of the society with characteristics of value, certainty,
and transferability according to law and is in line with the conditions of the legal forms
of capital contribution. Thus, claims shall be allowed as a way of capital contribution.
The claim hereby defined is an extensive concept not limited in monetary debts. The
common claims include bonds (company bonds, national treasury bonds and foreign
governmental bones), notes (including bill of exchange, promissory notes and checks)
and contractual rights (the housing right, sales contract). It should be noted that some
specific personal debts or claims agreed by the involving parties such as personal
injury claim, pension, retirement pension, labor insurance and debts that must be
claimed by specific persons due to personal trust (such as debts arising from
employment and training)(Zhigang, 2007)
To guard against the credit crisis associated with financing by claimable assets, the
Mainland China Company Law may employ other provisions to regulate: first, limit the
application conditions, for example, the capital contribution by claimable assets shall be
subject to the consensus of other shareholders; second, establish the internal and external
auditing systems to review the shareholders and registration authorities in terms of the
truthfulness and certainty of the claims. The auditing personnel shall be held for joint
liability for any loss suffered due to lack of prudence in finding out fraudulent capital
contribution by claimable assets; third, provide capital contributor by claimable assets

enforceable breach of contract liabilities and statutory guarantee obligations to safeguard

the legitimate rights and interests of other shareholders and the transaction partner.
4. Capital contribution liabilities
Article 31 of the Mainland China Company Law provides the capital contribution
liabilities. It provides After the establishment of a limited liability company, if the
actual value of the capital contributions in non-monetary properties is found to be
apparently lower than that provided for in the articles of association of the company,
the balance shall be supplemented by the shareholder who has offered them, and the
other shareholders of the company who have established the company shall bear joint
liabilities. There is no such provision in Taiwan Company Law.
The protection of the interests of creditors has been a major issue of concern for the
Company Law. The performance of capital contribution liabilities as the link of
building up the original capital of the company is the general basis for protecting the
interests of the creditors. As the capital contributors and the creditors are not directly
connected in terms of rights and responsibilities, the creditors cannot urge the capital
contributors to fulfill their responsibilities for capital contribution. Thus, the guarantee
of capital contribution shall be rested on the shoulder of the capital contributors. At the
establishment of a company, shareholders or initiators shall bear supervision liabilities
toward each other regarding the capital contribution authenticity. In case of any capital
contribution value fraud attributable to capital contributors resulting in possible
damage to the creditors, the liable one shall bear the joint liabilities.
Article 94 of the Mainland China Company Law provides: After the establishment of a
joint stock limited company, if any of the initiators fails to make full payment for the
capital contributions as provided for in the articles of association, it shall make up the
arrears, and the other initiators shall bear joint liabilities. However, how such innocent
shareholders claim their rights? Article 28 of the Mainland China Company Law
provides: Where a shareholder fails to make his/its capital contribution as specified in
the preceding paragraph, it shall not only make full payment to the company but also
bear the liabilities for breach of the contract to the shareholders who have make full
payment of capital contributions on schedule. The shareholders make up the default
payment may be compensated in practice by relevant systems such as recovery. After
making the full payment of capital contributions, the shareholders may claim the default
payment from the breaching shareholder in addition to default penalty, bank interest and
compensations for losses due to fraudulent capital contribution. In case of company
registered capital no less than the minimum statutory requirement as a result of flawed
capital contribution, the shareholders shall share the liabilities as agreed. Where other
shareholders have to bear joint responsibilities due to flawed capital contributions of a
couple of shareholders, the default shareholders may share the liabilities in accordance
with their actual amount of capital and the due amount of capital, respectively.
In addition to value flaw and authenticity flaw, the capital contribution flaw may be
in the form of fraudulent flaw and capital contribution pullout and so on. Articles 200
and 201 provide severe punishment for unauthentic capita contribution and capital
contribution pullout of company initiators and shareholders. However, in legal practice,
the court believes that the shareholders of fraudulent capital contribution shall be held
responsible for unauthentic capital contribution only in case that the company is
incapable of satisfy the creditors. In this case, the shareholders will be added in the legal
process upon the application of the creditors to bear joint liabilities to the degree of
unauthentic capital payment. Although the shareholders are liable in practice, the

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confirmation of liability is not limited to the scope of unauthentic capital contribution. The
liability of the shareholders against the creditors is actually another way of undertaking
the capital contribution liabilities. Limiting the liability to the scope of the unauthentic
capital contribution to allow the shareholders to undertaking a responsibility of making
up the payment will obviously make shareholders tend to evade. Namely, when the
company is in good business status, the shareholders may use little amount of investment
to get the protection of limited liability to avoid risks. When the company is on the verge
of bankruptcy, the only thing the shareholders have to do is to make up the capital
contribution. Such practice will allow fraudulent shareholders never take corresponding
liabilities due to fraudulent capital contribution. It will allow them to have opportunities to
use the capital due for company registered capital to get other benefits. In this process, the
transaction partners have to shoulder extra risks. And even the shareholders are
intentional; they shall undertake the liability of paying off the capital contribution only. If
the company is on the verge of insolvency, the shareholder may greatly reduce
opportunity costs in transaction (costs of company establishment) by fraudulent capital
contribution. Hence, it is extremely unfair to the creditors to allow the shareholders of
fraudulent capital contribution to undertake responsibility only to the degree of
unauthentic capital contribution. In view of the fraud of the fraudulent capital contributor
and other helping shareholders, the corporate veil of limited liability shall be pierced and
the legal person status of the company shall be denied to order the shareholders to bear
the joint liabilities or even more serious administrative or criminal liabilities.
Upholding the ideals of protecting the creditors, the Mainland China Company Law
expressly provides that the capital contributors shall bear joint liabilities for fraudulent
capital contribution. The Taiwan Company Law shall be revised by referring to
relevant provisions of the Mainland China Company Law.
5. Improve the supporting systems
The elimination of the minimum registered capital requirements, the evolution of the
capital system, the diversification of capital contribution forms and capital
contribution liabilities request the establishment and perfection of supporting systems.
Relevant provisions of Taiwan Company Law as listed in the following aspects can
serve as reference to revision of the Mainland China Company Law.
5.1 The establishment and strengthening of capital information disclosure system
The perfection of company capital information disclosure system is the key to the
protection of stakeholders. Taiwan Company Law revised in 2001 has provided strict
information disclosure system for the implementation of the compromised capital system.
This was one of the major causes for the smooth transition to authorized capital system of
Taiwan Company Law in 2005. The success of Taiwan is worth learning for the Mainland
China. For example, under the authorized capital system, if there is no complete
information disclosure system to regulate when the company profits shall be assigned, the
provision will be of no practical significance. The Mainland China shall learn from the
experience and prepare solidly for the future further reduction of the minimum registered
capital requirements and the capital system reformation.
As far as the practical conditions of the Mainland China are concerned, the
information disclosure may focus on the strengthening of daily supervision of
the enterprises such as the due time record system of non-monetary investment and the
regular visit of the registration authority system as well as the disclosure of
information relating to company liability structure, prospect analysis, liability

guarantee and security, allowing stakeholders to make reasonable decision on the basis
of full understanding of company asset and capital status. If the stakeholders
understand that the company credit is poor or behaves improperly by relevant
information disclosure or other means, they shall make wise decisions on whether to
establish transaction relationship with such companies. In a word, we can see that the
company capital system is not a system of complete internal cycling and its
development and perfection are inextricably related to the coordinated development of
the information disclosure system.
5.2 Simplify registration system and strengthen supervision
The revision of Taiwan Company Law in 2001 has deleted provision concerning the
precondition of business license for the establishment of a company. It is worth
noticing for the Mainland China that the industrial and commercial registration
procedures shall be simplified, the corporate license and certifications shall be
eliminated, the corporate registration or approval are regulated by authorized orders
and the records of company name and business activities have been simplified.
Business license has certain effects of business notice; however, frauds relating to
business license are common. In addition, at present days of fast development in
information network, it is unnecessary to approve the license. It cannot only simplify
establishment procedure, reduce administrative costs and improve administrative
efficiency, but also eliminate the disadvantages arising from practice and satisfy the
requirements of modern management. And the simplification of company business
item registration, the regulation of similar company names by competition law or civil
law are also the major changes of company deregulation and legal system construction.
With the lowering threshold for the establishment, companies will be more and
more. When revising the Company Law in the Mainland China in the future, the
simplified registration system of Taiwan shall be learnt to reform the current company
establishment system. Except for special industries, the establishment system of rules
shall be applicable to all forms of companies. Online registration and management can
be considered if necessary to eliminate the issuance and approval of business license.
Simplify the establishment procedure; disclose the registration information with the
information disclosure system to make it convenient for people to browse online.
Along with the simplified registration system, the supervision of the company after
its establishment by the authority shall be strengthened accordingly. The more popular
the company becomes, the heavier tasks are to protect the transaction safety. To reduce
frauds through company establishment and illegal transaction through fraud
companies, the governing authorities shall take measures such as improved
supervision methods, increased review frequency and intensified punishment for
illegal behaviors to safeguard the interests of the transaction partners.
5.3 Strengthen the supervision and management of social intermediate organizations
of economic certification and assessment
It is internationally recognized and concerned to strengthen the management of capital
verifications and assessment organizations. Some foreign countries established specific
auditing organizations to review relevant matters including capital verification reports
and assessment reports to play a very good role of regulation. Taking reference to the
capital review system of Taiwan, the Mainland China Company Law shall further
perfect the company capital verification and assessment system, establish
corresponding auditing organizations to regulate capital verification and assessment

Capital system
across the
Taiwan straits
243

IJLMA
51,4

244

organizations. In case of any operation in violation of rules by any intermediate

organization, investigation must be carried out immediately and shall be handled
seriously according to law to make the intermediate organizations gradually set foot on
the path of normalization and standardization.
Note
1. France and Japan terminated the minimum registered capital institution in 2003 and
2005, respectively. The British company law provides that the minimum registered
capital of a public company is 50,000 pounds (Article 11, section 1, Article 18) without
any regulation relating to non-public companies. The corporate laws of states across the
USA basically have no provision concerning the minimum capital requirements.
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Corresponding author
Ni Cailong can be contacted at: nilong@163.com

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