Meaning
Statutory breach occurring when a shareholder fails to remit committed equity funds into a company account within the timeframe specified by the articles of association under the Company Law of the People’s Republic of China. A capital contribution default triggers statutory liability that exposes the non-paying shareholder to corporate sanction and loss of operational equity rights. The legal obligation ends once the defaulted amount, including interest and statutory penalties, is fully remitted or the delinquent shares are formally forfeited or transferred.
Corporate Enforcement
Company directors carry an explicit duty to issue written demand notices to delinquent equity holders upon discovering unpaid registered capital commitments. If the shareholder does not cure the capital contribution default within the designated grace period of not less than sixty days, the board may issue a forfeiture notice. The affected equity is then sold, reduced through capital reduction procedures, or absorbed by other founding shareholders.
Joint Liability
Shareholders who established the enterprise alongside the defaulting party remain jointly liable for the unpaid portion of registered capital. When a capital contribution default occurs during company formation, creditors can demand immediate performance from any original promoter. Statutory amendments enforce strict accountability among equity partners, preventing founders from insulating personal wealth behind empty equity commitments.
Creditor Remedy
Corporate creditors hold the legal right to request court enforcement against shareholders who fail to complete capital funding commitments. When the corporate entity lacks sufficient assets to satisfy outstanding debt, a creditor targets the capital contribution default to compel immediate cash injection up to the unfulfilled subscription limit. Liquidators also invoke this statutory claim during bankruptcy proceedings to pay off operational liabilities.
