In China, all capital contributions from shareholders shall be examined and verified by a legally established capital verification institution.
Capital contributions verification and certification is mandatory for the company establishment. And cannot be skipped or inaccurately verified, otherwise the establishment company will face legal liabilities. We provide the aspects to consider when conducting the capital contribution verification.
Select Qualified Institutions to Verify Capital Contributions.
Generally, legally incorporated accounting firms, law firms and asset appraisal institutions etc. are eligible capital verification institutions and are entitled to engage in capital verification.
Perform Due Diligence
Choose reputable institutions to verify capital contributions. Institutions appraising, verifying assets, or verifying certificates will face legal liabilities under the following:
- Providing false materials
- Omitting any important matter from reports submitted
Violations conducted by the appraising institution shall directly impact the established company. Namely, any unlawfully gained profits from such violations shall be confiscated by the competent administrative department and fined between one and five times the value of any unlawfully gained profits. And the competent administrative department may suspend business operations and cancel the qualification.
Equally, any inaccurate appraisal result or proof of asset verification or certificate verification that subsequently causes loss to creditors of the company shall compensate the creditors for the difference between the appraised or verified amount and the accurate value.
Check the Certificate Details.
Once the verification is complete, a certificate will be issued. For monetary contributions, it will state the currency type, amount of monetary contribution. Transferred capital from an overseas bank shall identify the name of the overseas bank and account number of the transferred capital. In the event of a share sale, the capital of the share will be transferred to the bank account on the capital verification certificate.
For non-monetary property, the certificate shall certify the value equivalent to the prevailing market value.
In case of capital contribution made in installments, the capital verification for each installment shall be attached.
Ensure Bank Details are Valid.
Before the sale of the share, the capital verification certificate is required as evidence. If the capital contribution is monetary, the funds will be transferred to the bank account on the certificate. If the bank account is closed, the shareholder shall amend the bank detail accordingly to regulations, which may delay the transfer of funds. Therefore, the original bank account on the certificate should be retained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.