Meaning
Designated bank accounts facilitate the inflow of foreign currency for equity investments and the subsequent conversion of those funds into local currency. A capital account bank account is opened following registration with the State Administration of Foreign Exchange at the location of the business license. It handles the initial capital contribution from foreign investors and any subsequent increases in registered capital.
Statutory Supervision
Supervision involves the verification of capital by a certified public accountant before the funds are released for general use. The capital account bank account operates under strict oversight to prevent the illicit movement of money across borders. Authorities require the submission of a capital contribution report to confirm the arrival of the investment.
Operational Constraint
Funds deposited into the account are restricted to specific categories of expenditure including the purchase of fixed assets or the payment of operational costs. The use of the capital account bank account for purchasing domestic real estate not for self use or for investing in the securities market is generally prohibited. Banks act as the primary gatekeepers by checking the supporting invoices for every outgoing payment.
Account Termination
Account closure occurs once the registered capital is fully paid. If a company undergoes liquidation, the capital account bank account is utilized to return the remaining capital to the offshore investors. This final remittance requires tax clearance.
