Regardless of the type of business or activity sector, a company in China may find itself in financial difficulty and the company owners will want to consider liquidating the Chinese company. The process might be inevitable for some businesses, but this does not mean that the investor should stop doing business in China.
Our attorneys in China can help you throughout this stage and guide you through the necessary legal steps that are required by law to liquidate a company in China. We will help you make all the necessary arrangements, finish the economic activities and obtain the necessary documents that attest the liquidation and, finally, the dissolution of the company.
Grounds for company liquidation in China
A company in China can be liquidated for a number of reasons and there are two types of liquidation - voluntarily and compulsory. The first type of liquidation occurs when the company has fulfilled its business operation term, as described in the articles of association, or if any other conditions described in this document are met by the company.
The resolution for liquidation is made by the company’s shareholders during a special meeting. Another reason why a company can cease to exist in China is the merger with another company and the complete assimilation.
Compulsory company liquidation can be ordered by court or a higher regulatory body in China that decides the company must be closed or revokes its business permits. The business can be forced to stop its activities, for example, if its business license is revoked by the Chinese Government.
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.
The liquidation procedure
Every license or permit the company has obtained during its active time will need to be deregistered. The certificate of approval, the business licence or licenses, the tax registration certificate or any financial certificates and other documents will be cancelled as the company will no longer be a registered legal entity in China.
If the liquidation is voluntarily, the company, specifically its shareholders, can be the ones to oversee the liquidation procedure and the distribution of the assets. However, it is best to seek the services or a professional and accredited liquidator in China. In case of a compulsory liquidation, the process will be supervised by an administrator appointed by court.
Our lawyers in China can help you with tax advice and planning for any outstanding taxes that may arise after the liquidation process is commenced. We can also help you with bankruptcy in China and other company management issues.