Recently, many foreign investors decided to close their Chinese companies for a variety of reasons. For example, during the Novel Coronavirus Pandemic, many foreign investors withdrew from China to reduce costs, expecting the market to thrive again soon. Furthermore, a lot of WFOEs used illegal agencies to set up their company for the purpose to save money on company registration, accounting & Tax, Work permit, etc. The result is that all the illegal agency is under investigation of the Police, that’s why your agents disappeared suddenly and your company is put into the Abnormal list by the State Administration for Market Regulation (SAMR). If the truth is like that, the company closure is the best solution because your company is also under investigation by the police, followed by every action of the company need to stop now.
How to close down the company in China? According to the relevant laws and regulations of China, if a Foreign Invested Company didn’t take the right steps to close the business and clear all obligations, it might cause a lot of negative consequences and the mentioned company might attract penalties or even get blacklisted in China.
What is the consequence if the company does not use the right way to close down the company in China?
- If the companies are not declared to the tax authorities and annual inspection, they will be fined by the Tax bureau every year.
- The Legal Representative and the shareholders of the company will be blacklisted by State Administration for Market Regulation (SAMR) and they are unable to register a company again.
- The Legal Representative of the company will be blacklisted in China’s credit system and will not be able to buy an air ticket and High-speed rail ticket in China. Meanwhile, if the Legal Representative is a foreigner, she/he might never get a visa from the Chinese Embassy again.
In this article, we will explain everything you need to know about Company Deregistration in China.
The 5 Steps to close down the company
How does a Foreign-Invested Company close down a Chinese corporation correctly? The following 5 steps will state the whole process clearly.
Go to the Tax Bureau to apply for Company Cancellation
After the Company pays up all the salaries and social insurances to its employees, taxes to the authority, debts to other companies, or individuals, the owner must submit a liquidation report to the Tax Bureau with all necessary documents for the past 3 years. After the review and approval of authorities, they will issue the tax clearance certificate to the owner.
Cancellation of registration by the SAMR (State Administration for Market Regulation)
The company must form a liquidation committee. Generally, the liquidation committee is comprised of at least 3 members including a chairman, which usually includes the Legal Representative. The committee needs to publish an announcement in the newspaper for a minimum period of 45 days. Meantime, the owner should file a record at the State Administration for Market Regulation (SAMR).
Cancellation of social security account
After this certificate is obtained by the SAMR, the owner should also move on to the Social Insurance Bureau, Municipal Common Funds Center, Customs Bureau, and all relevant license agencies to finish the cancellation processes.
Cancellation of the Bank Account
The shareholders should proceed with the account closure of the capital account of the bank. All funds remaining in the bank account will be transferred to the shareholder’s bank account overseas.
Cancellation of the company seals
In the last step, of course, the company should destroy all the company seals or chops.
How long does it take to close down your business in China?
Generally, the cancellation process takes 3-4 months or even longer.
Finally, company dismissal, company liquidation, and company cancellation are three inevitable legal procedures of the legal entity, relating but also differentiating with each other. Once all the processes have been finished, the company will be deemed to be legally shut down in China. Among these, the company liquidation is most important, and the company cancellation process is most complicated.
GWBMA provides the one-stop service for company closure in China. We can help you with the proper completion of application forms, setting up the Liquidation Committee, deregistering of certificates, and answering & explaining to the tax authorities your actual situation, etc.