Shanghai Hotline: 021- 58763186 , +86 18101649652
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Company cancellation in Shanghai should be compliant with relevant Chinese laws and regulations. Shanghai is one of the four direct-controlled municipalities of China and the most populous city in the world. Due to government support and various preferential policies in free trade zone area, there are plenty of foreigners doing business here. Here, we will talk about the dissolution of WFOE (Wholly foreign invested enterprise).
Reasons for deregistering a company
For whatever reason, investors in China may be faced with the decision to cease their company’s operations. Economic circumstances change rapidly, and the business assumptions that underlie the investment may have proven flawed. Common reasons for closing a business are as follows:
1. Inability to carry its own business in Shanghai;
2. Progressive losses due to intense competion;
3. Insolvency;
4. Fall out between shareholders bringing the company to a stand still;
5. Failing to meet the required legal requirements, which includes mismanagement of the company.
How does dissolving a WFOE work?
Although dissolution of a Chinese WFOE is a technically demanding process, it can be broken-down into eight major steps (not including the preparatory steps).
Establish a Liquidation Committee;
Publication of the intention to dissolve the WFOE;
Preparation and submission of "liquidation reports" to the Chinese government;
Dissolution registration with Chinese tax authorities and payment of all outstanding taxes;
Dissolution registration with Chinese Customs;
Dissolution registration with the Chinese Industrial and Commercial Administration Bureau;
Cancellation of WFOE bank accounts in China;
Statutory dissolution notification to other Chinese government offices.
In order to properly dissolve a WFOE, each step must be done properly, on time and according to the relevant Chinese laws. Given the complexity of the process, it is generally suggested that WFOEs seek and obtain proper legal advice before starting any aspect of the dissolution in order to avoid costly errors.
What if not deregistering a company legally
A WFOE, like any company, needs to be deregistered properly and according to the law. Failure to follow the correct procedures can lead to negative outcomes for both the WFOE and its legal representatives and shareholders. These unfavorable outcomes can include blacklisting by the Chinese authorities, unfavorable credit reports, bars from future participation in Chinese investment and significant monetary fines. Thankfully, all this unpleasantness can be totally avoided by following the proper procedures.
Contact Us
Shanghai Hotline: 021- 58763186
Tel (Wechat): +86 18101649652
E-mail: 3001945826@qq.com
Address: Block F, 15th Floor, No.855 South Pudong Road, Pudong New Area, Shanghai
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