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Company Dissolution and Liquidation in China

Updated:2019-10-17 11:15:58    Source:www.tannet-group.comViews:298

Under which condition the company shall be dissolved?
According to China’s new company law, a company may have to be dissolved when one of the following conditions is met:
a)The business operation term as agreed in the company’s Articles of Association becomes expired or other condition for dissolution as agreed in the Articles of Association for dissolution occurs;
b) Resolution of dissolution is made by the meeting of shareholders;
c) The company is merged or separated and the company will not exist any more;
d) The business license is revoked by government, or the company is ordered to be closed or cancelled;
e) There is serious difficulty in company’s operation and management and the shareholder’s interest may suffer great loss if the company continues to operate. Shareholders who holding ten percent or above voting right may file to the court for dissolution if negotiation among shareholders fails.

What shall happen after the company is dissolved?
Except above c), after the company is dissolved, a liquidation committee shall be formed by the company within 15 days and the company shall go to the liquidation procedure. For limited liability company, the liquidation committee shall consist of the shareholders. 
If the company fails to form the liquidation committee, the company’s creditor can apply the court to form such committee and the member of such committee shall be designated by the court.

What is the job for the liquidation committee?
a) Having a liquidation of the company property and issuing balance of sheet and property list;
b) Informing company’s all creditors;
c) Dealing with any pending transaction/business with the company;
d) Settling all outstanding tax fees;
e) Dealing with any remaining company property;
f) Handling company litigation on behalf of the company.
Within 10 days after the liquidation committee is formed, the committee shall inform company’s creditors and further shall make public announce on the newspaper within 60 days. The creditors shall report their claims to the committee within 30 days upon receipt of the notification or within 45 after the newspaper announcement.

How to deal with the company property?
The committee shall be responsible for liquidation of the company property and make the liquidation plan and report to the meeting of shareholders or the court (if the committee is designated by the court) for confirmation.
The company property shall be distributed as follows:
a) To pay liquidation expense;
b) To pay employee’s salary, social security fee and severance fee;
c) To pay outstanding tax;
d) To pay company debt;
e) To distribute among shareholders if there is any property left.

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