If you’ve registered a company in China, then you also need to know how to close a business in China. The first thing you need to know is that the process takes time, and must be executed in accordance with specific regulations.
PTL Group specializes in company registration in China. We make sure that China company registration is done right, because doing so will help us focus on the real goal: long-term WFOE management. To help our clients, we provide extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.
We hope you find the following information useful.
The Beginning of the End
If you thought that company registration in China is difficult, then you should know that the WFOE deregistration process is gradual, complex and time-consuming as well. It requires businesses not only to reconcile with the situation and deal with regulatory mechanisms, procedures and requirements, but also to continue with normal operations until the final shut down. In addition, the new Foreign Investments Law, which came into effect on January 1st 2020, is expected to affect foreign companies’ prospects in China in general – and will specifically influence shutdown procedures.
The WFOE deregistration decision
When a decision is made to deregister a Chinese WFOE, it is against the law to simply “clear out”. An abrupt abandonment (leaving behind unfilled reports and unpaid taxes) would lead to a revocation of the WFOE business license. The company would also be blacklisted and publicly humiliated on the State Administration of Industry and Commerce website.
Sudden and quick abandonment of a business is also not recommended for practical reasons. WFOE deregistration is a gradual process in which all business aspects are handled and terminated. During this process, the company still operates, albeit limited, until it is completely shut down. But as long as the company functions, it has to be handled legally.
The WFOE deregistration process takes at least 6 months, which are required for closing tax files (provincial and national). This is the longest and most cumbersome phase of the process, and may last longer if unpaid fines or other irregularities have accrued. At the end of this period, approval for closing will be obtained from the State Administration of Industry and Commerce.
The duration of the deregistration process varies and depends on other factors such as the number of employees hired at the time of the shutdown, location (province, city), etc.
Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.