As a corporate risk management consultant, today Shouzheng would like to talk to everyone about a topic that is close to their heart—how to fill in a company’s registered capital so as not to “trap” your own people.
Let me tell you a real case first (obfuscated to protect privacy): A friend was very enthusiastic when he started a business. He felt that "the higher the registered capital, the stronger the strength", so he filled in 10 million with a wave of his hand. As a result, the company later encountered difficulties and owed a large amount of foreign debt. Since he was a sole proprietor, the creditors filed a complaint and took him to court personally. After the trial, the court found that the company's assets were simply not enough to repay the debt, and the friend's original registered capital was obviously far beyond his actual capital contribution, and was eventually found to be "untrue". The court ultimately ruled that he should bear supplementary compensation liability for the company's debts within the scope of the uncontributed principal and interest. What's even more troublesome is that because his family property is highly mixed with his personal property, even his wife's account has been frozen, and now the couple has parted ways because of this financial account. Start a business well and "create" your whole family.
The above cases are not alarmist. Our country's laws and regulations, such as the Company Law of the People's Republic of China and the Provisions of the Supreme People's Court on Certain Issues Concerning Changes and Addition of Parties in Civil Enforcement, have clear and strict regulations on shareholders' capital contribution obligations and responsibilities. Registered capital is not about "face", but how much real money you are willing to use to bear the "cover" responsibility for the company's debts. As an enterprise risk management consultant, Shouzheng would like to give the following suggestions to all entrepreneurs:
1. Why is it not recommended to blindly “paint the pie”?
1. “Subscribing” does not mean “not paying”, and legal liability cannot be evaded
Registering a company now uses a subscription system, and you can freely agree on the amount and time of investment. But please note that this only gives you a buffer in terms of investment time and by no means relieves you of your investment obligations. Once a company encounters a debt dispute or becomes bankrupt and liquidated, the court can require shareholders to pay subscribed capital in advance to repay debts. The number you write is the "ceiling" of your responsibility.
2. Be careful of "limited liability company" becoming "unlimited joint and several liability"
This is the most critical point! If the court finds that you have abused the independent status of a company as a legal person (for example, the registered capital is obviously false, personal property and company property are completely mixed), it may "lift the veil of the company" and order you to bear joint and several liability for the company's debts. At that time, your house, car, and savings may all be used to repay the company's debts. This will really be like "a fire at the city gate, affecting the fish in the pond", and your family will also be affected and suffer.
2. The capital verification of bridge funds is “laying mines” for yourself!
In order to make the actual payment quickly, some bosses will ask an intermediary to borrow a "bridging fund" to verify the capital, and transfer it immediately after the capital verification. This operation seems smart, but in fact it is extremely risky.
• Legally constituting "false capital contribution" or "evading capital contribution": This is a clear illegal act. The company, the directly responsible person in charge and other directly responsible personnel may face administrative penalties. In serious cases, it may even constitute a crime.
• Laying huge hidden dangers for the future: Once an equity dispute or debt dispute occurs in the future, other shareholders or creditors can rely on bank statements to claim that you "withdraw capital" and require you to return the capital contribution and bear corresponding liability for compensation. This is tantamount to setting a "ticking time bomb" for yourself.
3. Is the proportion of intellectual property investment too high? Beware of “indigestion”
Using intellectual property rights such as patents and software copyrights to invest is a good thing that is allowed and encouraged by law. But things must be reversed at the extremes. If the proportion is too high (for example, more than 70%), it will cause two major troubles:
1. High risk of value fluctuation: The value assessment of intellectual property rights itself is relatively flexible. If the company does not perform well in the future, creditors may claim that your initial intellectual property valuation was "inflated" and that it was an "inauthentic investment," and require you to make up the difference in cash.
2. The company's "cash flow" hunger: What a company needs most in its early stages is cash to pay wages, rent, and purchase raw materials. A company's assets are all "paper patents" and there is no "living money". It is like a person who has a brain full of ideas but no food, and can easily starve to death.
As a veteran who has been working in the enterprise risk management consulting industry for more than 10 years, Shouzheng would like to give some tips to all bosses:
1. Act within your capabilities, seek truth from facts, and don’t pretend to be B: Your registered capital should match your project scale, actual needs, and risk resistance capabilities, rather than pretending to be B. Small companies with RMB 100,000 or RMB 500,000 can still do good business. Face is not valuable, security and stability are valuable.
2. Cash is king, make steady payments: Give priority to using your own funds, and gradually complete the payments based on your own profitability. This is the healthiest and least troublesome way.
3. Keep clear distinctions between family business assets: Clear financial account books must be established, and company money and personal money should be kept and used separately. This is the most important "firewall" to protect your personal and family property.
4. Don’t be too stingy, and establish a sense of paying for knowledge consulting: the money you should spend must be spent first. As the saying goes, a small amount of money can do a big thing. When registering a company, you might as well pay a small consulting fee and consult a legal consultant or a financial and tax consultant, instead of looking for a professional only after you have a problem. In fact, professional advice in advance can save you a lot of trouble later.
Starting a business is difficult, and everyone is a warrior who wants to do a good job. As your friends and consultants who have been involved in the field of enterprise risk management consulting for many years, our biggest wish is not to wait for your company to have trouble to help you with lawsuits, claims settlements, and tax repayments. Instead, we hope to help you mark out all the "pitfalls" in advance, so that everyone can wear legal "bulletproof vests" and fight in the business world safer and more down-to-earth.
