China company liquidation is one of Tannet’s basic business services. Liquidation (or "winding up") is a process by which a company's existence is brought to an end. The law classifies liquidations into two types: voluntary (which is by a shareholders' resolution) or compulsory (by a court order). Liquidations are also classified according to whether the company is solvent or insolvent.
Conditions for China Company Liquidation
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.
Procedures for China Company Liquidation
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. According to PRC law, a WFOE must be dissolved if any of the following circumstances apply:
1. Its term of operation expires;
2. It experiences financial difficulties and the board deems it necessary to dissolve the company;
3. It is unable to carry out its business due to major losses caused by force majeure;
4. It is bankrupt;
5. It is terminated by the government; for example because it commits illegal acts damaging the public interest;
6. Dissolution of the company is necessary due to any merger or de-merger to which the company is a party to;
7. Other reasons for dissolution stipulated in the original Articles of Association have occurred.
For circumstances (2), (3), (6) and (7), dissolution will need the approval of the relevant authority. Upon the declaration of dissolution, the company is required to start the liquidation procedures.
Consequences of Company Liquidation
The main consequences of the company being liquidated are as follows:
1. The company no longer has the power to dispose of its property.
2. The company may carry on business only for the limited purpose of completing the liquidation process.
3. The powers of the company directors come to an end when a liquidator is appointed.
4. A liquidation order operates as a notice of dismissal to all of the company's employees. Note, however, that if an employee is on a fixed-term contract and is required under this contract to be given a period of notice, then a liquidation order will breach this and the employee will be entitled to damages.
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.
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