Regulation of Capital Withdrawal from the Perspective of the New Company Law

Abstract

Although the capital withdrawal rule plays an important role in maintaining the company’s capital, its substantive connotation and constituent elements are ambiguous when determining whether the company’s distribution behavior constitutes capital withdrawal. In particular, the standard of harm to rights and interests adopted in judicial practice. Damage to the rights and interests of a company is a relatively subjective concept that is difficult to make objective and quantitative assessments. At a time when the Company Law has been fully updated, it is not wise to abolish the rule prohibiting capital withdrawal, which is essentially the withdrawal of company property. The stage distinction rule is used to determine the withdrawal of capital contributions, that is, to compare whether the distribution behavior has damaged capital in advance, and to predict the solvency after the fact — whether it can pay off the debts that have reached the repayment deadline and should be repaid due according to the normal business process after the distribution. When applying this prohibitive rule, the legal responsibilities of relevant entities should be clarified, and a new framework should be built to effectively detect and maintain the actual solvency of the company.