(Source: https://pltfrm.com.cn)
Deregistering or closing a foreign business entity in China is a complex process that involves multiple steps and dealings with various government agencies. The process, known as liquidation, must be carried out in accordance with Chinese laws and regulations. Here’s a general outline of the steps involved:
- Decision to Deregister: The decision to close the business must be formally made, usually by the board of directors or shareholders. This decision should be documented as per the company’s Articles of Association.
- Notification to Authorities: Notify relevant authorities about the decision to dissolve the company. This may include the State Administration for Market Regulation (SAMR), tax bureaus, and other regulatory bodies.
- Set Up a Liquidation Committee: Establish a liquidation committee responsible for overseeing the deregistration process. This committee typically handles the settlement of debts, disposal of assets, and dealing with remaining contractual obligations.
- Announcement to Creditors: Publicly announce the company’s dissolution and notify creditors. There’s typically a statutory period during which creditors can declare their claims.
- Tax Clearance: Apply for tax de-registration and obtain a tax clearance certificate. This involves settling any outstanding taxes and undergoing a final audit by the tax authorities.
- Settlement of Claims and Debts: The liquidation committee should settle all claims, pay off all debts, and handle any remaining employee matters, including severance and final salary payments.
- Disposal of Remaining Assets: After settling debts, distribute any remaining assets according to the company’s Articles of Association and relevant laws.
- Final Report and Auditing: Prepare a liquidation report detailing the process and financial dealings during liquidation. This report usually needs to be audited by an external auditor.
- Deregistration with Business and Other Authorities: Submit the liquidation report and other required documents to SAMR and other government agencies to deregister the business. This typically includes deregistration from the commercial bureau, tax bureau, customs, foreign exchange, and social insurance agencies.
- Cancellation of Licenses and Permits: Cancel any business licenses, permits, and registrations held by the company.
- Bank Account Closure: Close the company’s bank accounts.
- Record Keeping: Maintain records of the liquidation process, as required by law. The duration for keeping these records varies.
Given the complexity and legal implications of this process, it’s highly advisable for foreign businesses to seek assistance from legal and accounting professionals who specialize in Chinese corporate law and have experience with the deregistration process. They can help navigate the various requirements and ensure compliance with all legal obligations, minimizing risks and potential liabilities. Additionally, the timeframe for completing the liquidation process can be lengthy, often taking several months or even years, depending on the complexity of the company’s affairs.
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