Social Sciences in China, 2025

Vol. 46, No. 3, 2025

The Authorized Capital System Operating Mechanism in China

(Abstract)

Fu Qiong

China’s shift from a subscribed capital system to an authorized capital system signifies a profound theoretical advancement in reform of the corporate capital regime, signaling a new era in legal governance for joint stock limited company financing. Central to this system is balancing corporate financing autonomy with shareholder interests—both incumbent and prospective. By empowering the board of directors to issue shares through articles of association or shareholder resolution, this framework not only streamlines company establishment but also redefines governance structures within corporate financing, underscoring board decision-making prerogatives. Integrating authorized capital with class shares and adopting a paid-in approach caters to diverse investor preferences, fostering novel capital transaction channels between corporations and shareholders while mitigating concerns over registered capital dilution. To balance and protect the interests of both new and existing shareholders under the model where shareholders have preemptive rights, it is essential to strengthen the fiduciary duties of directors. This should be supported by a judicial remedies of the primary purposes of new share issuances and legal remedies for any issuance defects.

Keywords: authorized capital system, joint stock limited company, board decision, class shares