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How to Deregister a Foreign Invested Company in China?

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How to Deregister a Foreign Invested Company in China?

Due to the impact of global economic difficulty and uncertainty, foreign investors may consider to cease the operation of their foreign invested companies in China. How to deregister a foreign invested company in a legally compliant manner in China?

There are two types of company deregistration procedures provided in the Company Law of the PRC. The first one is the simplified deregistration process, and the second one is the ordinary deregistration process. If all shareholders commit that the company has not incurred any debts during its existence or has already paid off all debts, they may choose to proceed the company deregistration through a simplified deregistration process. Under this circumstance, the company can be deregistered without liquidation. However, if the company is deregistered through a simplified process, all shareholders shall bear joint and several liability for the debts incurred before the company deregistration, and their scope of liability shall not be limited to the shareholders' capital contributions. Therefore, the shareholders should carefully choose whether to adopt a simplified deregistration process.

If the shareholders of the company decide to adopt an ordinary deregistration process, then a series of procedures should be followed and completed. The general steps involved are as follows:

Pre-deregistration Preparations

Before the commencement of the deregistration process, the company should:

（1）	Dismiss employees lawfully. It is recommended to negotiate and sign an employment termination agreement with all the employees of the company with an agreed severance package in accordance with the PRC laws and regulations. Deregistration of the company is not allowed if there is any labour arbitration or lawsuits against the company.
（2）	Terminate office lease and contracts with vendors and customers, etc.
（3）	Cease business operations.

Formal Deregistration Process

（1）	Adoption of a resolution for company dissolution. The shareholders of the company shall adopt a resolution for company dissolution in accordance with laws and regulations. Under the Company Law of the PRC, a resolution to dissolve a company may be adopted by shareholders representing at least two-thirds of the voting rights. But in practice, unanimous consents of shareholders may be required by local registration authorities to avoid dispute of shareholders.
（2）	Formation of a liquidation group. A liquidation group shall be formed within 15 days upon execution of the shareholder resolution for dissolution.
（3）	Notification of creditors and public announcement. The liquidation group shall notify the creditors of the company to submit their claims and make public announcements on newspapers or the designated government website. The period for public announcement is 45 days.
（4）	Liquidation and settlement of debts. The liquidation group shall liquidate the assets of the company and pay off the debts in order of priority as required by laws and regulations.
（5）	Application for tax clearance and deregistration with the competent tax authority.
（6）	Cancellation of the foreign exchange registration for FDI. A liquidation audit report is required for the forgoing cancellation.
（7）	Closing all bank accounts of the company, including general settlement account, capital account and RMB basic account.
（8）	Application for company deregistration with the registration authority.
（9）	Closing the company social insurance account.
（10）	Closing the company housing provident account.
（11）	Application for the deregistration with other government authorities if applicable. It depends on the company’s business scope and license obtained.
（12）	Cancellation of the company seals.

Post-deregistration Compliance

Upon completion of company deregistration, the important company documents such as financial books, accounting vouchers, and liquidation materials should be properly kept by the shareholder for at least ten years in accordance with relevant laws and regulations of the PRC.

The shareholders of the company and the members of the liquidation group which shall be composed of the directors of the company will be liable for any losses caused to the company or creditors by their failure to strictly comply with the company liquidation requirements. Furthermore, without proper liquidation and deregistration, the shareholders of the company might be forbidden to invest in or establish new companies in China. Therefore, it is important to ensure that your foreign invested company in China has been deregistered lawfully.

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.

See also:
Deregistration for Shenzhen Branch- Procedures and Fees
Deregistration of WFOE’s Branch in Beijing - Procedures and Fees

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All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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How to Deregister a Foreign Invested Company in China?

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