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Q&A Regarding New Company Law of China (39)

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Q: What are the consequences of a company failing to reduce its registered capital in accordance with the Company Law?
A: If the company reduces the registered capital in violation of the provisions of the Company Law, the shareholders shall return the funds they have received, and the shareholders' contribution shall be restored to the original state; If any loss is caused to the company, the shareholders and the directors, supervisors and senior managers in charge shall be liable for compensation.

Q: When a limited liability company increases its registered capital, can the shareholders have the priority to subscribe to the capital contribution?
A: When a limited liability company increases its registered capital, the shareholders have the right to subscribe to the capital contribution in accordance with the paid-up proportion of the capital contribution under the same conditions. However, except for cases where all shareholders agree not to subscribe for capital in proportion to their respective contributions.

Q: When a joint stock limited company issues new shares to increase its registered capital, can the shareholders have priority to subscribe?
A: When a joint stock limited company issues new shares to increase its registered capital, the shareholders shall not enjoy the priority right to subscribe, except as otherwise provided in the articles of association of the company or as determined by a resolution of the board of  shareholders.

Q: What are the reasons for the dissolution of a company?
A: The dissolution of a company includes the following reasons:
  1. The term of operation stipulated in the articles of association expires or any other cause for dissolution stipulated in the articles of association occurs;
  2. Resolution of the board of  shareholders to dissolve;
  3. Dissolution is required due to company merger or division;
  4. The business license is revoked, ordered to close down or cancelled according to law;
  5. Where there are serious difficulties in the operation and management of the company, and the continued existence of the company will cause significant losses to the interests of the shareholders, which cannot be resolved through other means, the shareholders holding more than 10 percent of the voting rights of the company may request the people's court to dissolve the company.
Q: Does the dissolution of a company require liquidation?
A: Except for cases where the company needs to be dissolved due to merger or division, if the company is dissolved due to the other four reasons, it should be liquidated.

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