Paid-In Capital, on the other hand, is the amount of capital actually contributed to the company by shareholders.
Under Chinese corporate law, companies use a subscription system for each shareholder’s capital contribution. It is legal for shareholders to pay the committed capital long after the company’s formation, sometimes even decades after incorporation, as long as it is allowed under the company’s Articles.
As a result, it is possible for a shell company without any assets to have USD $5 million in registered capital but $0 in paid-in capital.
This should be a red flag to North American companies, as it indicates that the company may not be able to meet its financial obligations, pay for its order of products, or deliver on its supply contracts.
What does this mean for North American companies doing business in China?
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Doing Business in China?
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