The Liquidation Process

Last updated: Feb 2021
Regulations Guide to WFOE Establishment, Registration & Liquidation

Want to know how to close a business in China? The liquidation process is structured, but it can also be quite complicated. In this article, we break down the process and delve into the details.

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 Liquidation Process

Liquidation sale

The Chinese government requires every company planning to close down, both foreign and domestic, to go through a formal and sometimes lengthy and complex multi-stage process. However, there has been a recent improvement in the WFOE closing process, though only for WFOEs that have been managed properly and have met all requirements prior to their closing.

The most important aspect of closing a WFOE is the company’s official liquidation, which consists of 5 main steps:

  • Notifying relevant authorities within 7 days from the start of the liquidation process
  • Forming a liquidation committee (to be explained below)
  • Announcing the shutdown publicly through the media within 60 days from the committee’s establishment, including removal of online references concerning the company’s business activities
  • Submitting documents to relevant authorities: liquidation report, company dissolution form and business license
  • Closing bank accounts and tax files

The liquidation committee

Chinese business shutdown procedures require the establishment of a special committee, consisting of the company’s shareholders, within 15 days from the start of the closing process.

The committee’s main responsibilities and obligations are as follows:

  • Appointing one of the committee’s members as a legal representative
  • Formulating a detailed and organized list of all corporate assets, including intellectual property
  • Formulating criteria for property computation and asset evaluation
  • Consolidating and implementing a liquidation plan
  • Paying debts, taxes, remaining financial claims, and depositing official seals (chops)
  • Legal representation of the company in civil lawsuits
  • Delivering written notice of closure to the creditors
  • Preparing a WFOE dissolution report, with the shareholders’ approval

Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.