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In Shanghai, the procedures for closing a wholly foreign-owned enterprise (WFOE) – its dissolution and liquidation – are no easier or shorter than the process of setting up such a company, and normally take between 12 to 14 months to complete. This article compiled several key points?questions regarding the Shanghai WFOE deregistration for your reference.
To conduct liquidation of the WFOE is conditional upon the dissolution of the WFOE. In accordance with the Company Law of PRC, a company is dissolved due to the following reasons:
1.The term of operation specified in the articles of association of the company expires, or a dissolution event stipulated in the articles of association of the company occurs;
2.The resolution of dissolving the company have been made by The General Meeting of Shareholders;
3.Dissolution is required due to merger or split-up of the company;
4.The company’s business licence is revoked, the company has been ordered to be closed down or is revoked according to the law;
5.The people’s court orders the company to be dissolved in accordance with Article 182 of the Company Law (where shareholder(s) on its own or jointly holding 10% or more of the voting rights launch a company dissolution lawsuit with the court).
Are there alternative options to Shanghai WFOE deregistration?
Yes.
For a company looking to end operations in China, other than deregistering the company or simply “walking away”, a company may choose to explore the option of selling the company.
However, if a company may want to continue operations at a later point, the company should consider reducing operations while continuing to meet statutory company requirements, such as maintenance of an office lease and corporate bank account, tax filings, and annual reporting and inspections at a reduced level.
The core maintenance issues investors should consider during the Shanghai WFOE deregistration process
-Tax filing and business license compliance requirements are of the utmost importance.
Even after the official deregistration date of the company, a company will still need to continue to file taxes until the official tax deregistration process has been completed with both the local and state tax bureaus.
Additionally, until the official deregistration certificate has been issued by the AIC, a company will be required to maintain a valid business license and office lease during the Shanghai WFOE deregistration process.
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