2021-09-13 14:36:28
According to China Company Law, foreign-invested enterprises may be dissolved due to the expiration of the operation term stipulated in the articles of association or the resolution of the shareholders' meeting. In addition, in case a foreign-invested enterprise is confronted with corporate deadlock, and its continued existence will cause major losses to shareholders, which cannot be resolved through other means, shareholders holding more than 10% total shareholders’ voting rights of the company may apply to the court for dissolution.
The liquidation process of foreign-invested enterprises
(1) apply for dissolution and liquidation to the bureau of commerce;
(2) establish a liquidation team;
(3) apply to company registry (Market supervision and Administration Bureau in China) for the record of the liquidation team;
(4) notify all known creditors and publish an announcement, register and confirm the creditor's rights;
(5) terminate employment contracts;
(6) check company’s property and conduct audits;
(7) pay up taxes and go through the cancellation procedures of taxation and customs registration;
(8) prepare liquidation report;
(9) cancel of company registration;
(10) the investor distributes the remaining property and cancel the bank account;
(11) cancel fiscal registration, organization code, statistical registration, foreign exchange registration, and social security registration.
Some matters needing attention
(1) the composition of the liquidation team
According to China Company Law, the liquidation team of a limited liability company is composed of shareholders, and the liquidation team of a foreign-invested enterprise could be composed of three or more persons approved by the company’s authority. The three or more members are not limited to the company's directors, supervisors or general manager and other senior management personnel, and can also be any personnel appointed by the company's authority, such as lawyers and ordinary company employees.
(2) About employee placement
The foreign-invested enterprise that intends to dissolve should try to negotiate with the employees to terminate the labor contract and reach a written agreement before submitting an application for dissolution. This method can reduce the legal risk of the subsequent liquidation process.
(3) About taxation
The taxation matters in liquidation are very complex. Therefore, the liquidation team should communicate with the tax authorities immediately after its establishment to confirm the specific materials to be submitted.
By Linchang “Charles” Shen, Senior Partner of Shanghai Promise Law Firm
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