Closed company establishment process and must-see key SOPs
In order to build my country into an environment suitable for global investment, promote my country's business environment to be more conducive to new industries, attract more domestic and foreign entrepreneurs to set up companies in my country, and respond to the needs of new technological start-ups, and give enterprises greater autonomy. Diversified financing tools and more flexible equity arrangements. The Ministry of Economic Affairs began to study company law in February 2015, adhering to the relaxation of legal restrictions on fundraising for new startups, providing more flexible equity planning space for new startups, and respecting entrepreneurship Based on the concept of entrepreneurial philosophy and value, the closed company system of Britain, the United States and other countries was introduced, and the system of "closed company limited by shares" was added.
Closed company establishment process
The establishment procedure of a closed joint stock limited company is the same as that of a general joint stock limited company, mainly including the following procedures:
serial number | Closed company establishment process |
1 | Apply to the Department of Commerce of the Ministry of Economic Affairs for a preliminary inspection of the name of the new company and the business it operates |
2 | Planning and design of limited matters in the articles of association of a closed joint stock limited company (Note) |
3 | Convene sponsor meeting and board meeting |
4 | Open a company preparatory account and incorporate capital |
5 | Contact an accountant (national college entrance examination) to handle capital verification and issue a capital verification report |
6 | Choose a legal company registration address |
7 | Apply to the company registration authority for company establishment registration |
8 | Apply to the State Taxation Bureau where the company is located to register as a business entity |
9 | Apply to the Bureau of International Trade for English name pre-check and apply for import and export manufacturer qualification registration |
Note: For planning and design of limited items in the articles of association of a closed joint stock limited company (such as: equity transfer, non-cash capital contribution, multiple voting rights special shares, etc.), a closed joint stock limited company should fill in the number of shareholders, and a non-cash investment should fill in List the approved number of shares and offset amount specified in the Articles of Association, including labor service contributions. |
The preparation materials are as follows:
serial number | Documents required for company establishment |
1 | Pre-check name 1~5 |
2 | Business item selection |
3 | ID card copy of the person in charge |
4 | Photocopies of ID cards of other shareholders |
5 | A copy of the company name lease contract or 2 copies of the owner's agreement (with examples) |
6 | A copy of the latest housing tax bill or a copy of the ownership certificate of the building within 3 months |
7 | Accountant capital visa should provide documents |
8 | Registration size stamp and invoice stamp (Jingxun can engrave it on behalf of you) |
time required | 7-14 days |
Closed company compared with general joint stock limited company
project | Closed Co., Ltd. | Company limited by shares (non-lock-up) |
Number of shareholders | No more than 50 people | 2 or more shareholders or 1 government and legal person shareholder |
Type of investment | Cash, other assets, technology, credit, and labor services (but credit and labor services shall not exceed a certain percentage of the total number of issuances) | cash, other assets, technology |
Equity transfer | The articles of association may specify restrictions on the transfer of shareholders' shares | Free transfer of shares (but not within 1 year after establishment) |
shareholders meeting | "Attend in person" or "attend by proxy" can be adopted; if the company's articles of association stipulate that shareholders can participate in the meeting via video conference, the video conference participants are deemed to be "attend in person" | "Attend in person" or "attend by proxy" can be adopted; if the company's articles of association stipulate that shareholders can participate in the meeting via video conference, the video conference participants are deemed to be "attend in person" |
gold stocks | Gold shares can be issued | No golden shares may be issued |
shareholder voting rights | One voting right per share, but multiple voting rights and special voting rights for specific matters may be issued | One vote per share, but special shares may be restricted to no voting rights |
Surplus distribution | Allocated every semi-fiscal year | Distributed once a year |
IPO | no | Can |
change organization | More than two-thirds of the shareholders agree to change to a non-locked joint stock company | All shareholders agree to change to a closed-type limited company |
Q: Can a joint stock company or a limited company be converted into a closed joint stock company?
A: Yes. There is a two-way conversion between a non-public offering joint stock company and a closed joint stock limited company. A non-public offering joint stock company can be changed into a closed joint stock limited company with the consent of all shareholders. A closed joint stock limited company may also be converted into a general (non-closed joint stock) joint stock limited company with the consent of more than half of the voting rights of the shareholders present at a shareholders' meeting representing more than two-thirds of the total number of issued shares.
Related explanations
The Ministry of Finance released the taxation regulations for individuals to acquire the equity of closed joint-stock companies (non-public offering companies) with labor services or credit capital contributions.
The law adds a special section on "closed joint stock limited companies". The capital contribution of its promoters, in addition to cash, property, and technology, may also be offset by labor services or credits required by the company's business. The Ministry will review and release the taxation regulations on the acquisition of shares in closed joint-stock companies by individuals using labor services or credit capital contributions in the near future, so as to facilitate compliance by both taxpayers and taxpayers.
The Ministry of Finance explained that the acquisition of shares in a closed joint stock limited company by means of labor services or credit capital contributions by individuals is similar to the in-kind income stipulated in Item 2, Article 14 of the Income Tax Law. For the development of the company, the Ministry refers to the current income tax law and related interpretation orders, and releases the taxation regulations for individuals to obtain equity in a closed joint-stock company through labor services or credit capital contributions as follows:
1. Equity equity acquired by shareholders with labor services or credit offsetting capital contributions shall be classified as other income specified in Category 10, Item 1, Article 14 of the Income Tax Law; The current price of each share on the day following the expiry of the period shall be used to calculate the shareholder's income, and income tax shall be levied in accordance with the law. However, if the company's articles of association do not restrict transferability for a certain period of time, the date of equity acquisition shall be regarded as the date of disposition, and the amount stated in the company's articles of association shall be used to calculate the shareholders' income, and income tax shall be levied according to law.
2. The term "current price" refers to the net value per share of the latest financial report audited and certified by an accountant within one year before the date of disposition; if there is no financial report audited and certified by an accountant within one year before the date, it shall be based on that date. The net value per share calculated from the company's net asset value.
3. The company is exempt from withholding when the shareholder obtains the equity by means of labor service or credit offset capital contribution, but shall list and report to the Ministry of Finance, the competent taxation authority, in accordance with the provisions of Article 89, Item 3 of the Income Tax Law, before the end of January of the year following the disposal date According to the statement, based on the main characteristic of a closed joint-stock company limited by equity transfer, shareholders use labor services or credits to offset capital contributions to obtain equity. If the equity has restrictions on disposal (for example, it cannot be disposed of within 2 years), the reasons or conditions for restricting disposal can be eliminated. The market price of each share on the day afterward can be disposed of, calculate the income of shareholders and levy income tax, so as to achieve the effect of deferred taxation of shareholders' income and taking into account the effect of enterprise retention.
Contact person for press release: Section Chief Wu Juntai
Tax issues if shareholders use credit or labor services to offset capital contributions
Because members of the start-up team usually lack funds, when establishing a closed joint stock limited company, shareholders are allowed to contribute capital in different ways. In addition to the current cash and technology, Under a certain ratio, shareholders are allowed to contribute capital in the form of labor services or credit. In addition to reducing the financial pressure on the members of the start-up team, it also gives the start-up team more room to recruit outstanding talents. Regarding the taxation method for shareholders to obtain company equity by offsetting capital contributions with credit or labor services, according to the order No. Other income stipulated in category 10, Item 1, Article 14; if the equity cannot be transferred within a certain period of time according to the company's articles of association, the current price per share on the day after the expiration of the certain period of time (one year before the date of disposability) If there is no financial report audited and certified by an accountant within one year before the date, the net value per share calculated based on the company’s net asset value on that day) shall be used to calculate the shareholders’ income according to the law. Levy income tax. However, if the company's articles of association do not restrict transferability for a certain period of time, the date of equity acquisition shall be regarded as the date of disposition, and the amount stated in the company's articles of association shall be used to calculate the shareholders' income, and income tax shall be levied according to law. The company is exempt from withholding when the shareholder acquires equity by means of labor services or credit offset capital contributions, but shall file a list and report to the competent taxation agency in accordance with Article 89, Item 3 of the Income Tax Law before the end of January of the year following the disposable date.
For the various procedures and fees for the establishment of a closed company, please contact Jingxun United Accountants, which serves nationwide.
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