After the people’s court has accepted the bankruptcy application, if the debtor’s investor has not fully performed his obligation of fund contribution, the administrator should request the investor to pay in the subscribed contribution despite of the contribution deadline. Forced liquidation cases where the shareholders have not fully paid in their investment should be handled accordingly

[Basic facts]

On August 5, 2020, Company A, suffering losses in business operation, convened a shareholders’ meeting, which decided to dissolve the company and set up a liquidation committee. As Company A’s shareholders disagreed with the members of the liquidation committee over the liquidation plan, the liquidation committee, since its setup, has not started the liquidation process. On March 24, 2021, the people’s court, at the application of Company A’s shareholders, decided to accept Company A’s case of forced liquidation, and then appointed by law a liquidation committee. During the forced liquidation, no creditors declared any claims, but the two shareholders, however, could not reach an agreement over the liability of losses. The investigation of the liquidation committee shows that neither of Company A’s two shareholders has fully paid in his contribution. So, the liquidation committee brought the case to the people’s court and requested the two shareholders to pay in the balances of their contributions.

[Rationale of the people’s court]

While the contribution period for the two shareholders of Company A has not expired, Company A, however, has already entered the procedures of forced liquidation, which is a statutory circumstance to expediate the maturity of the shareholders’ contribution deadline, and therefore, the two shareholders should pay in the balances of their contributions according to the law. Since no creditors have ever declared any claims in Company A’s forced liquidation, and the liquidation committee has not found in its investigation any external debts that Company A owes, the balances of the two shareholders’ contributions, once paid in, should be redistributed as Company A’s assets to the two shareholders according to the percentages of their respective contributions. To resolve from the root the dispute between the shareholders, the collegiate panel handling the cases of Company A’s forced liquidation and the derivative litigation organized several mediation sessions, during which the two shareholders reached agreement on the sums of their contributions and their liabilities in the company’s losses. Their duties are performed, the two cases successfully concluded, and the two shareholders made peace by shaking hands.

[Tips on legal risks]

Under the registered capital subscription system, shareholders enjoy by law a fund contribution deadline. However, after the people’s court has decided to accept the application for bankruptcy and forced liquidation, the fund contribution deadline for the company’s shareholders should mature before the due time. Therefore, investors should view the capital subscription system in a rational manner, and, when founding a company, should reasonably set up the registered capital and the subscription period according to the company’s business scope, development planning and the shareholders’ financial status and risk endurance.