If a foreign investor wants to close a company in China once and for all, a simplified de-registration, as described in the last video, may not be the option of choice.

In today’s third video on how to close a company in China, our expert Kai Kim will therefore discuss the path to an ultimate de-registration of a company in China, a de-registration following a liquidation.

In the majority of cases, the liquidation of a limited liability company in China, will be initiated by a resolution of the shareholder(s). Within 15 days after such resolution, a liquidation group will then have to be established. Throughout the liquidation process, this group will have to carry out the main liquidation work, that means, liquidating the company’s assets and property, paying taxes, settling creditor's rights and debts etc.

Following the establishment of the liquidation group, the company will then have to make several announcements, in particular regarding the information of the liquidation group and the circumstance that the company is now under liquidation. In most regions of China, these announcements can nowadays all be made online via the National Enterprise Credit Information Publicity System. No newspaper announcement will be necessary any longer.

The announcement on the company’s liquidation must be made for at least 45 days and the remaining assets or funds of the company may only be distributed to the shareholder(s) of the company, after the announcement period and only once all outstanding liquidation expenses, taxes, employees' wages etc. of the company have been paid or settled.

Once the main liquidation work is finished and the liquidation group has formulated its liquidation report, but before a de-registration of the company can be applied for with the Administration for Market Regulation (AMR), the company will first have to be de-registered with several other authorities, for example the tax authority, or the social security bureau.

Once these de-registrations have been completed, one may then apply for the ultimate de-registration of the company with the AMR. Along with the application form itself, there are several other documents that will have to be submitted to the AMR, for example the resolution of the Shareholder(s) regarding the liquidation of the company, the liquidation report, or the tax clearance certificate.

Now, how long will such a liquidation process take? Well, although the announcement period only takes 45 days – compared to for example, 1 year in Germany – the entire process of liquidating a limited liability company in China will likely take at least one year and it can easily become more time-consuming depending on, for example, the business activities of the company, or the requirements of the local authorities.