In recent years, due to the global economic downturn, many foreign investors have decided to close their operations in China for various reasons. Furthermore, many wholly foreign-owned enterprises (WFOEs) engaged illegal intermediaries to set up their companies in an effort to save on costs related to registration, accounting, taxation, and work permits. Consequently, these illegal intermediaries have come under police investigation; this explains why your agent may have suddenly disappeared and why your company has been placed on the “List of Enterprises with Abnormal Operations” by the State Administration for Market Regulation (SAMR). If this is your situation, closing the company is the best solution.
How do you close a company in China? Under relevant Chinese laws and regulations, failure to take the proper steps to wind down operations and settle all debts can lead to serious negative consequences; the company may face penalties or even be placed on a government blacklist.
Consequences of a company remaining inactive for an extended period without being deregistered
1. If a company fails to file reports with tax authorities and undergo the annual inspection, the tax bureau will impose annual fines that continue to accumulate.
2. The company’s legal representative and shareholders will be blacklisted by the State Administration for Market Regulation (SAMR) and will be barred from registering new companies.
3. The company’s legal representative will be placed on China’s credit blacklist, rendering them unable to purchase airline or high-speed train tickets within the country. Furthermore, if the legal representative is a foreign national, they may be permanently barred from obtaining a visa from a Chinese embassy.
This article provides detailed information regarding the deregistration of Chinese companies.
Steps for Deregistering a Company in China
How do you properly deregister a Chinese company? The following steps clearly outline the entire process.
1. Internal Corporate Resolution
The shareholders must issue a resolution to dissolve the company. Conduct a review of the company’s receivables and payables, employee wages, social security obligations, and assets. Any issues regarding frozen equity, branch offices, or outstanding administrative penalties must be resolved before proceeding further.
2. Tax deregistration and obtaining a tax clearance certificate
Complete the filing of all tax types and settle all outstanding taxes, late payment surcharges, and fines via the electronic tax bureau; return unused blank invoices and cancel the tax control U-Key. Upon successful verification by the tax authorities, obtain the “Tax Clearance Certificate.” Without this certificate, it is not possible to proceed with the subsequent industrial and commercial deregistration.
3. Complete the business deregistration process and obtain the deregistration notice
First, a public notice must be posted online for 45 days. Once the period expires without objection, submit a deregistration application via the “One-Stop Service” platform and upload required documents, such as the tax clearance certificate, the resolution, and the business license. Upon approval, obtain the “Notice of Approval for Deregistration,” marking the formal cancellation of the business entity’s registration.
4. Cancellation of Bank Accounts and Company Seals
Take the receipt of business deregistration to the bank where the account is held to close the corporate bank account;
Submit the official company seal, financial seal, and legal representative’s seal to the designated public security office for cancellation.
Time Required to Complete the Deregistration of a Chinese Company
Generally speaking, the standard company deregistration process takes two to four months; however, if the company faces other irregular circumstances, the process will take longer.
Ultimately, once all procedures are completed, the company is deemed to have ceased operations in accordance with the law. Among these steps, corporate liquidation is the most critical, while the deregistration procedure itself is the most complex.
Conclusion
KERUI provides one-stop services for the deregistration of Chinese enterprises. We can assist you with accurately completing application forms, establishing a liquidation committee, handling the deregistration certificate, and explaining your actual situation to tax authorities.
