How to liquidate a Chinese company can be referred to as China company deregistration, China company liquidation, or China company dissolution, etc. Liquidating a business in China can be a challenge, since the whole process is time-consuming and involves multiple applications, deregistrations and negotiations. Below is a brief guidance in this regard for your reference.
General Liquidation Procedures
Once the company has decided and declared its decision to dissolve, the liquidation process begins. The liquidation process can be quite long, usually taking up to 12 months, but may differ depending on the reaction time of the company, the authorities and other unforeseeable circumstances. The liquidation process can be roughly divided into three phases.
1. The First Phase
The first phase of dissolving a company usually takes up to four months and comprises seven steps which have to be taken according to Chapter 10 of the Chinese Company Law passed in 2014. Once the decision has been made and the necessary permission obtained, the company is then required to form a liquidation committee within 15 days. The liquidation committee will take responsibility for and manage the liquidation process.
2. The Second Phase
The second phase includes the termination of employment contracts, the liquidation of company assets, the collection of outstanding debt, and the distribution of proceeds. Once the company enters liquidation, the company should try to collect all outstanding debt with its clients and other entities.
3. The Third Phase
The third phase, finally, consists of the post-liquidation audit, the deregistration, the final distribution of funds, and the closing down of bank accounts. After the settlement of assets and the distribution of proceeds, a second audit report will need to be done. Once the post-liquidation audit report is completed, the deregistration processes can then begin.
.jpg "China Company Deregistration")
Risks of Inaccurate Liquidation
According to business registration regulations in China, if a foreign invested company is being wound up, the foreign investor is required to deregister the company before they may take back any remaining assets of the company. In other words, you must tell the authorities. Deregistration can only take place after the company has gone through a liquidation procedure, including a liquidation audit, and the payment of any liabilities to the tax authorities, customs, employees, and creditors.
If a foreign investor fails to meet this obligation, and instead “walks away” without going through a proper liquidation, the registration authorities are entitled to impose a fine on the company and to revoke its business license. In addition, the legal representative of the FIE whose business license is revoked, and who is personally liable for such revocation, shall be banned from being appointed to director, supervisor, or other senior management positions for three years in any other business entity in China as from the date of revocation of the business license. The names of the relevant investors are blacklisted in the official archives of the registration authorities and they may be barred from the China market in the future.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
Previous：China Company Accounting Service
Next：Company Deregistration in China