Closing a company in China requires careful navigation of the country’s regulatory framework. Businesses can choose between two main approaches: general deregistration and simplified deregistration. Each process has distinct eligibility criteria, timelines, and documentation requirements. This guide provides a detailed overview of both methods, helping you determine the best approach for your company.
General Deregistration Process
The general deregistration process applies to most businesses, particularly those with complex operational histories, outstanding liabilities, or unresolved regulatory obligations. While thorough, this process is more time-consuming and document-heavy than its simplified counterpart.
Step-by-Step Process
Formation of a Liquidation Committee
Purpose: A liquidation committee oversees the company’s dissolution, ensuring compliance with legal and financial obligations.
Requirements: Composed of shareholders or directors, the committee is responsible for asset management, debt settlement, and regulatory compliance during the liquidation phase.
Creditor Notification
Notice Period: Publish a notice to creditors in a publicly accessible platform (such as a local newspaper) for a minimum of 45 days. Sole proprietorships may require a 60-day notice period.
Creditor Rights: Creditors can lodge claims during this period, and the company must address these claims before proceeding with deregistration.
Liquidation Report
Purpose: Prepare and submit a report detailing the liquidation process, including asset disposal and debt settlement.
Approval: Shareholders or the board of directors must approve the report before submission to the registration authority.
Tax Clearance
Requirement: Settle all outstanding tax obligations with the local tax bureau. Obtain a tax clearance certificate to proceed.
Deregistration Application
Submission: Apply to the registration authority, such as the State Administration for Market Regulation (SAMR), with all required documents.
Required Documents:
Liquidation report
Tax clearance certificate
Business license (original and copies)
Final audit report
Simplified Deregistration Process
The simplified deregistration process is designed for companies with no liabilities or unresolved regulatory issues. It is faster and involves fewer steps, making it ideal for companies that have never commenced operations or have ceased operations without complications.
Eligibility Criteria
A company is eligible for simplified deregistration if it meets the following conditions:
No business operations have commenced after obtaining the business license, or operations have ceased with no pending liabilities.
All debts, taxes, and employee-related obligations have been settled.
No administrative penalties or ongoing investigations are pending.
Step-by-Step Process
Publish a Simplified Deregistration Announcement
Notice Period: Publish the announcement on the National Enterprise Credit Information Publicity System for a reduced period of 20 days.
Stakeholder Notification: Inform all relevant stakeholders, including creditors and regulatory authorities, of the company’s intention to deregister.
Submission of Key Documents
Required Documents:
Application for Company Deregistration
Letter of Commitment signed by all investors, affirming the company has no outstanding debts or obligations.
Electronic Submission: Many regions now allow online submissions, further streamlining the process.
Tax Clearance and Business License Cancellation
Settle any residual tax obligations, if applicable, and submit a cancellation request for the company’s business license.
Key Differences Between General and Simplified Deregistration
Aspect | General Deregistration | Simplified Deregistration |
Eligibility | All companies | Companies meeting specific criteria (e.g., no operations or liabilities) |
Notice Period | 45-60 days | 20 days |
Documentation | Extensive | Minimal |
Processing Time | Longer | Shorter |
Complexity | High | Low |
Challenges and Considerations
Tax Obligations
Ensure all taxes, including corporate income tax, VAT, and local surcharges, are settled before applying for deregistration. Failure to do so can result in penalties and delays.
Compliance with Employment Laws
Address any outstanding employee compensation or benefits to avoid legal disputes.
Financial Audits
Prepare comprehensive financial statements to support the liquidation or deregistration process. Engage a professional auditor if needed.
Data and Intellectual Property
Manage the proper transfer or disposal of data, trademarks, and patents.
Whether pursuing general or simplified deregistration, it is essential to assess your company’s specific situation and consult with legal or tax professionals to ensure compliance with Chinese regulations. By understanding the requirements and processes, you can close your business efficiently while minimising risks and delays.
At Woodburn Global, we provide expert guidance and end-to-end support to navigate the complexities of company deregistration in China, ensuring a seamless process tailored to your business needs.
Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.
Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.