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China Company Termination: How to Exit Chinese Market?

Updated:2018-10-23 11:18:43    Source:www.tannet-group.comViews:258

China company termination is one way to exit Chinese market. Most of our articles have been written to inform newcomers to China. Over the years, there have been an increasing amount of foreign companies have a presence in China. However, due to the increased competition, end of tax incentives, increasing cost of labor, and/or other market conditions, can make some companies decide to stop their operations in China and exit the market.

Ending your companies’ operations in China is not considered an easy task, since liquidation procedures are difficult and generally time-consuming. Generally, there are two common choices: Liquidating your company or selling your company. Pending on your firm’s situation, one of these options would be most suitable when choosing to exit the Chinese market.

I. Company Termination in China
Dissolution and liquidation of foreign-invested enterprises should be in accordance with the company law and relevant provisions of the foreign investment laws and administrative regulations:
(1) Company Law;
(2) Implementing Rules for the Foreign-invested Enterprises Law;
(3) Implementing Rules for the Chinese-foreign Cooperative Enterprise Law;
(4) Implementation Regulations for Chinese-foreign Cooperative Enterprise Law.

Procedures for Company Deregistration
(1) Pass of the dissolution application by the approval authorities of China foreign-invested enterprises;
(2) The enterprise establishes the liquidation team and reports to the industry and commerce department;
(3) The liquidation team issues the liquidation report;
(4) The enterprise submits the liquidation report to the foreign-invested enterprises’ approval authorities to cancel the approval certificate;
(5) Cancel the certificate issued by the tax bureau and the customs department;
(6) Submit the deregistration application to industrial and commercial authorities;
(7) Submit the deregistration application to the bank, foreign exchange bureaus.

II. Company Transfer/Selling in China
Another option to leave the Chinese market by selling your company. This basically means the Chinese company remains to exist, but you as an investor are leaving the Chinese market. When selling your company in China, you should be aware of the following:

After receiving approval granted by Ministry of Commerce of PRC (MOFCOM) to sell your company (and other authorities pending on your business scope), the share transfer of the company need to be registered with the Administration for Industry and Commerce (AIC) during the 30 days period following the grant of approval from MOFCOM. Usually the required documents are similar to the approval documents that need to be used for MOFCOM. Within this procedure, an official valuation of the company may also be required before being able to sell the company. Furthermore, a Purchase and Sales Agreement should be signed between the seller and the buyer, on the details of the acquisition to conclude on the details of the sale of the company in China.

When you sell any company, this sale does not only include its assets, but also the equity and the liabilities of the company. Therefore, it is important to clear these as much as possible before the sale or have a good agreement with the buyer.

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