Company law and the liquidation process The procedures for closing a wholly foreign-owned enterprise (WFOE) – its dissolution and liquidation – are no easier or shorter than the process of setting up such a company, and normally take between 12 to 14 months to complete.According to PRC law, a WFOE must be dissolved if any of the following circumstances apply: For circumstances (2), (3), (6) and (7), dissolution will need the approval of the relevant authority.
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8 – Many foreign businesses in China do very well and are profitable.
However, there will always be some that do not succeed commercially, or that may have to close because of external circumstances affecting their parent company overseas.
There are of course regulations under Chinese law for how these liquidation processes should properly be carried out to ensure that the company’s final bills are settled, tax is paid, and all the company’s remaining liabilities and statutory responsibilities are correctly discharged.
In this article, we explain the procedures you would need to go through to close a foreign invested enterprise in China, and highlight the many related issues that you will need to address.
The financial performance and transactions of the company for the last three years before the date of declaring liquidation. The completeness and truth of information on assets, such as: After payments have been made in accordance with provisions above and upon completion of the liquidation procedures, the remaining revenue shall be converted into U. dollars, or any other foreign currency acceptable to the investor through a designated foreign exchange bank or any other method permitted by PRC Law, and can be freely remitted or transported abroad.
Upon completion of the liquidation procedures, the liquidation committee shall submit the Liquidation Report, approved by the Board, to the original approval authority.
The committee should return its business license and cancel its registration with the relevant government authorities including the Ministry of Commerce, the State Administration of Industry and Commerce, the customs administration, the tax authorities and the State Administration of Foreign Exchange.
All of the company’s bank accounts should be closed.
The investor shall have the right to preserve the originals of all accounting records and business documents of the company.