Regulatory provision outlines the mandatory steps a liquidation committee must follow before distributing the remaining property of a dissolved corporation. This article serves as a legal safeguard to ensure that all creditors and public obligations are satisfied before the shareholders receive any assets. Under the framework of the prc company law article 186, the committee must prepare a liquidation plan and submit it for approval by the shareholders or the people’s court.
Its scope is restricted to the procedural requirements of the liquidation phase and does not cover the initial decision to dissolve the company. The provision remains in effect until the final distribution is complete and the company is deregistered.
Formalization of the liquidation plan is the first step toward the lawful closure of the business and the distribution of its assets. The prc company law article 186 dictates that the liquidation committee must conduct a thorough investigation of the company’s property and prepare a balance sheet and an inventory of assets. This plan must clearly state how the debts will be paid and how the remaining assets will be allocated.
Shareholders must approve this document at a general meeting, or if the company is in bankruptcy, the people’s court must provide the authorization. Without this approval, any distribution of assets is considered invalid and can be challenged in court. The committee is also responsible for notifying all known creditors and publishing a public notice to inform any unknown claimants.
This ensures that the process is transparent and that all parties have an opportunity to protect their interests.
Order of payment is strictly defined to prevent the unfair treatment of any group with a claim against the company. The prc company law article 186 requires the committee to pay the liquidation expenses first, followed by the unpaid wages and social insurance premiums of the employees. Statutory compensation and outstanding taxes must then be settled before any other debts are addressed.
Only after all these obligations are met can the committee pay the general creditors of the company. If the assets are insufficient to cover all the debts, the committee must apply to the court for a declaration of bankruptcy. Shareholders are only entitled to the assets that remain after every single creditor and government claim has been satisfied in full.
This sequence is designed to protect the most vulnerable parties and to ensure that the state receives its taxes. The committee must maintain detailed records of every payment made during this process.
Distribution of the surplus property marks the final benefit that the owners receive from their investment in the dissolved entity. The prc company law article 186 states that the remaining assets must be distributed to the shareholders in proportion to their respective shareholdings. In a limited liability company, this is based on the capital contribution of each member.
In a joint-stock company, the distribution is based on the number of shares held by each person or entity. The committee must ensure that all shareholders are treated fairly and according to the rules set out in the company’s articles of association. Once the distribution is finished, the committee must prepare a final report and seek the final approval of the shareholders or the court.
This report is then used to apply for the cancellation of the business license. The members of the liquidation committee can be held personally liable if they distribute assets in violation of these rules. This liability ensures that the committee acts with diligence and integrity throughout the closing process.
Cross-border liquidating dividend transfers require prior tax clearance under Bulletin 37 and SAFE Circular 13 bank verification before capital account execution.
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