Meaning
Statutory provision within the PRC Labor Contract Law that defines the conditions under which an employment relationship ends due to the cessation of a business entity. Article 44 dissolution termination occurs when a company business license is revoked or shareholders decide on an early dissolution.
Dissolution Trigger
Administrative actions that result in the permanent cessation of commercial activity trigger these filings. The formal revocation of a business license necessitates article 44 dissolution termination.
Financial Liability
Compensation owed to employees under these specific circumstances follows the calculation of one month of salary for each year of service. Because article 44 dissolution termination is an automatic expiration rather than a unilateral termination, the employer avoids the double indemnity penalties associated with unlawful dismissals. Payments are calculated based on the average monthly wage of the employee during the year preceding the dissolution, which includes bonuses, allowances, performance payments, and commissions.
The total amount is subject to the local cap of three times the regional average monthly wage. Settlement must be completed before the final liquidation of assets can be authorized by the liquidation committee.
Procedural Step
Management must coordinate with the local labor bureau to ensure all social insurance and wage arrears are settled. The effective date of an article 44 dissolution termination coincides with the date the business license is officially cancelled or the date specified in the shareholder resolution. Failure to provide written notice or settle outstanding dues can lead to assets being frozen during the liquidation process.
