Is There Fourth Type of Capital System? Rethinking the Classification of Corporate Capital Systems

In 2013, China modified its Company Law, and this modification created a new capital system, which is not exactly the same as legal capital system in the Germany or the authorized capital system in the Anglo-American countries. Jurists in China debate on the classification of the new capital in the traditional category among the three capital systems, which are legal, authorized and compromise capital systems. Some argue that the Chinese new capital is still legal capital, and some claim it is to be a compromise capital. However, that endeavor is useless and they take a wrong logic approach. They always change the traditional definition of each capital system in order to make the new capital of China fit for the one they argued. The new capital in China Company Law is a new one, and it does not belong to any type of existed capital system all over the world. Because the category of the capital system is inductive consequence, which is just a description of the typical modern developed countries legislation and is not a deductive one based on a closed logical loop. There is no logical reason why we must classify the new Chinese capital into one of them. A more important academic dilemma is that such controversy has no theoretical and practical meaning. The category of the capital system is on the end branch of the corporate theory, and no theory or institution is bases on it. It is only a theoretical analyzing conclusion, without any reasoning or inference following. Furthermore, this controversy has no contribution to the legal practice. The running, registering of a company, even resolving a company dispute has never and will never consider the category of a capital system offered by the Company Law. Recognition of the legislation innovation is pragmatic and struggling on the theoretical problem is helpless.

Chinese Company Law, new capital system, controversy, legal capital, authorized capital, compromise capital, formal logic, induction, deduction, theoretical function of category

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