Meaning
Formal legal process of dissolving a foreign-invested entity and removing its name from the records of the State Administration for Market Regulation. Successful foreign enterprise deregistration requires the completion of a formal liquidation process and the clearance of all tax and social security liabilities. Completion of this procedure signifies the end of the legal existence of the entity in China.
Procedural Sequence
Administrative steps begin with the formation of a liquidation committee and a formal public announcement in the National Enterprise Credit Information Publicity System. Following a forty five day notification period for creditors, the entity must obtain a tax clearance certificate from the State Taxation Administration. The foreign enterprise deregistration continues with the cancellation of the business license at the local branch of the market regulator.
Final steps involve closing all foreign exchange accounts through the bank and surrendering the company seals to the Public Security Bureau. This sequence ensures that no latent financial obligations remain with the parent company.
Regulatory Requirement
Article 188 of the PRC Company Law dictates the statutory obligations for closing a business. Authorities examine the liquidation report to verify that all assets have been distributed and all debts paid. The foreign enterprise deregistration is rejected if any labor disputes or pending litigation remain unresolved.
Exit Liability
Shareholders face potential liability if the process is handled incorrectly or assets are hidden during the wind down. Tax authorities may audit the last three years of operation before granting the necessary clearance. Professional liquidators often manage the interface with customs and social security bureaus to prevent delays.
Total time for a standard closure ranges from six months to over a year.
