EXIT CHINA

Close your China business properly — and move on with confidence.

Not every business succeeds. Markets change, strategies change, shareholders change direction.

Closing a company is a normal part of doing business.

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What matters is whether the company closes properly and compliantly.

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If taxes and filings are up to date, employee obligations are resolved, debts are settled, assets are properly dealt with and the required deregistration procedures are completed, China has an established legal process for closing a business. The current national deregistration framework expressly provides for voluntary dissolution, liquidation and deregistration.

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How company closure works in China

Under the Company Law and current enterprise deregistration rules, a company generally exits the market through three stages:

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Decision to dissolve
The shareholders or other authorized body formally decide to close the company.

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Liquidation
The company deals with its remaining assets and liabilities, including taxes, employee wages and social insurance, creditor claims and other outstanding obligations.

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Deregistration
Once the liquidation is completed, the company proceeds through tax clearance and deregistration with the relevant authorities.

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For companies with no outstanding claims or liabilities — or where everything has already been fully settled — a simplified deregistration procedure may sometimes be available. Foreign-invested enterprises can qualify, subject to specific conditions.

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Closing a company does not mean something went wrong legally

This is an important message for foreign investors.

A business may close because it did not perform as expected, because the parent company changed strategy, because the founders retired, or simply because China is no longer part of the group’s plans.

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There is no requirement that every business must succeed.

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The important question is whether the company has properly dealt with its legal obligations before it disappears.

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Before closure, we therefore look carefully at:

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• Outstanding tax filings and tax liabilities

• Employee salaries, social insurance and statutory compensation

• Outstanding suppliers and other creditors

• Loans and shareholder balances

• Company assets and investments

• Customs matters

• Litigation, arbitration or enforcement proceedings

• Contracts that need to be terminated

• Remaining cash and its eventual distribution or remittance overseas

 

The current simplified deregistration rules specifically require that matters such as employee wages, social insurance, compensation, taxes and outstanding claims and debts have been settled before the simplified procedure can be used.

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Worried about personal liability or leaving China?

Foreign directors, legal representatives and shareholders sometimes become anxious when a company needs to close.

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The right approach is not to abandon the company. It is to identify unresolved obligations early and deal with them systematically.

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The risks generally arise from unresolved tax liabilities, unpaid debts, employee disputes, court proceedings, enforcement measures or other compliance problems — not simply because shareholders have decided to close a business.

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OPING can conduct a preliminary review before the formal liquidation begins so that potential issues are identified while there is still time to resolve them.

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We can help with

• Pre-closure legal, tax and accounting review

• Corporate dissolution resolutions

• Liquidation planning and coordination

• Employee termination and settlement

• Creditor and debt review

• Tax clearance

• Asset disposal and shareholder balances

• Customs and import/export deregistration

• Social insurance and employment deregistration

• Bank account closure

• Business licence deregistration

• Foreign-exchange deregistration and remaining fund transfers

• Coordination with lawyers, accountants and government authorities

• Simplified deregistration assessment where available

• Dormant, irregular or historically non-compliant companies requiring clean-up before closure

 

Foreign-invested enterprises may also need to complete foreign-exchange deregistration as part of the exit process, with supporting liquidation and tax documents depending on the circumstances.

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What if the company has not been maintained properly?

Not every company comes to us in perfect condition.

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Sometimes annual filings have been missed. Sometimes a business has stopped trading but was never formally closed. Sometimes an employee, tax or accounting issue was left unresolved years earlier.

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That does not necessarily mean the company cannot be closed.

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The first step is to understand exactly what remains outstanding.

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We can review the company’s status, identify the problems and determine what needs to be corrected before deregistration can proceed.

Shanghai has also continued to streamline enterprise exit procedures, including pre-check mechanisms for simplified deregistration so that tax and employment issues can be identified before the formal application is made.

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Why OPING

Since 2002, OPING has helped foreign investors establish and operate businesses in China.

That experience is equally valuable when the time comes to leave.

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We understand the corporate history, tax system, accounting requirements, employment issues and regulatory procedures that need to come together for an orderly closure.

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If we can help you enter China properly, we can help you leave China properly.

Our objective is simple: identify the risks, resolve what can be resolved, complete the required procedures, and allow the shareholders to move on with confidence.

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