Dissolving a company in China may occur due to various reasons. Sometimes it is necessary to dissolve a business. For example, some businesses must be dissolved because of a buyout or merger, some come to an end because the business owners choose to retire or move on to other endeavors, and, in some cases, business owners find that they cannot agree on business decisions and no longer wish to work together.
Before you begin the dissolution process, be sure to ask a lawyer or professional consultant to ensure that you comply with the relevant laws and regulations, and have adhered to all the necessary formalities.
Conditions for company dissolution in China
According to China’s new company law, a company may have to be dissolved when one of the following conditions is met:
a) The business operation term as agreed in the company’s Articles of Association becomes expired or other condition for dissolution as agreed in the Articles of Association for dissolution occurs;
b) Resolution of dissolution is made by the meeting of shareholders;
c) The company is merged or separated and the company will not exist any more;
d) The business license is revoked by government, or the company is ordered to be closed or canceled;
e) There is serious difficulty in company’s operation and management and the shareholder’s interest may suffer great loss if the company continues to operate. Shareholders who holding ten percent or above voting right may file to the court for dissolution if negotiation among shareholders fails.
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Shareholders have an important role in the decision to dissolve a company. They can decide to do so if the company suffers from great loss and any further continuation of its operations would bring the shareholders even greater losses. Individuals who own ten percent or more in the shares of a company can file for court dissolution if the special shareholder meeting fails to come to terms on this matter.
Importance of a formal dissolution process
If you have gone out of business, you need to officially dissolve your company with the state. It's critical that you formally dissolve your company, because letting it lapse or allowing the state to dissolve it involuntarily could create a number of problems, including but not limited to:
(1) Personal liability for judgments against the business;
(2) Expensive state-assessed penalties and fees.
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