Shenzhen Liquidation Service
Hotline: 86-755-82143348, Email: amyhuang@citilinkia.com
Winding down your China-based subsidiary requires thorough preparation for, and execution of, a very particular sequence, with significant involvement from various third party actors. This CS Alert outlines key steps to liquidate your China wholly foreign owned subsidiary.
Why Liquidate?
Liquidation is the process by which investors terminate a company, use the company’s assets to discharge any remaining liabilities, then repatriate any remaining assets to investor(s). Liquidation should not be confused with bankruptcy: Liquidation is applicable to a solvent company, while bankruptcy occurs when a company’s liabilities exceeds its assets.
Chinese law mandates that liquidation must occur when the company’s term of operation expires, the company’s board of directors (the “Board”) requires liquidation due to financial difficulties, the authorities require termination (e.g. for committing illegal acts), the company is subject to a merger, or for other reasons set out in the company’s articles of association. Liquidation may also be elected per resolution by the Board.
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If liquidation is mandated but the company fails to do so (e.g., the investors abandon the company), the company’s tax liabilities and existing debts may go unpaid, resulting in the accrual of fines and other penalties, as well as civil judgments against the company and the investors. The company’s legal representative, who is often held legally accountable for the actions of the company, may have his personal assets in China frozen or seized, be unable to obtain or renew his visa or work permit, be prohibited from exiting China’s borders, and may even be blacklisted (along with the shareholders) from holding similar positions in China.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82143348, or emailing to amyhuang@citilinkia.com.