{"id":4518,"date":"2015-08-06T04:23:37","date_gmt":"2015-08-06T03:23:37","guid":{"rendered":"http:\/\/www.ecovis.com\/focus-china\/?p=4518"},"modified":"2025-09-23T13:26:32","modified_gmt":"2025-09-23T11:26:32","slug":"4-steps-liquidate-wholly-foreign-owned-enterprise","status":"publish","type":"post","link":"https:\/\/www.ecovis.com\/focus-china\/4-steps-liquidate-wholly-foreign-owned-enterprise\/","title":{"rendered":"4 Steps to liquidate a wholly foreign owned enterprise"},"content":{"rendered":"<p class=\"p1\"><span class=\"s1\">Going through liquidation is a complex and often long lasting process. Failure to comply with existing regulations might result in severe legal consequences for shareholders. These are the most important steps to consider when closing a wholly foreign owned enterprise.<\/span><\/p>\n<p class=\"p1\"><!--more--><\/p>\n<p class=\"p2\"><span class=\"s1\"><b>Reasons for liquidating a WFOE include:<\/b><\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li2\"><span class=\"s1\">Terms of operations expire.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">The WFOE has to be dissolved due to financial difficulties.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">The company is unable to continue business operations because of external forces such as natural disaster and war.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">The WFOE is terminated by the government. Examples include illegal acts or acts damaging the public interest.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">The WFOE is closed due to a merger.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">Any other reasons specified in the Articles of Association of the WFOE occur.<\/span><\/li>\n<\/ul>\n<p class=\"p2\"><span class=\"s1\">The following are the most important procedures when liquidating a WFOE:<\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u00a0<\/span><\/p>\n<p class=\"p4\"><strong><span class=\"s1\">STEP 1: NOTIFY THE RELEVANT AUTHORITIES<\/span><\/strong><\/p>\n<ul class=\"ul1\">\n<li class=\"li2\"><span class=\"s1\">The shareholders as well as the board of directors, or executive director if only one is appointed, need to decide together to close the WFOE and inform relevant authorities once the liquidation process has started.<\/span><\/li>\n<\/ul>\n<p class=\"p3\"><strong>STEP 2: ORGANIZE A LIQUIDATION GROUP<\/strong><\/p>\n<ul class=\"ul1\">\n<li class=\"li2\"><span class=\"s1\">The registration authority must be provided with details of the liquidation group members after the group is set up.<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">Shareholders or a representative thereof need to be part of the liquidation group<\/span><\/li>\n<li class=\"li2\"><span class=\"s1\">Known creditors have to be notified and have to report their\u00a0claims within the following 30 days after receipt of the notice.<\/span><\/li>\n<\/ul>\n<p class=\"p5\"><span class=\"s1\">Responsibilities of liquidation group include:<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li5\"><span class=\"s1\">The liquidation group will be the legal representative of the WFOE<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Preparing a balance sheet and detailed list of all assets<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Formulating principles for properties evaluation and computation<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Formulating and implementing a liquidation plan<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Paying debts, overdue taxes, outstanding wages and\u00a0settling unfinished claims<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Legally representing the company in civil lawsuits<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li5\"><span class=\"s1\">Notifying known creditors in written form<\/span><\/li>\n<li class=\"li5\"><span class=\"s1\">Preparing a liquidation report, subject to approval by\u00a0the shareholder board<\/span><\/li>\n<\/ul>\n<p class=\"p4\"><strong><span class=\"s1\">STEP 3: SUBMIT THE LIQUIDATION REPORT<\/span><\/strong><\/p>\n<ul class=\"ul1\">\n<li class=\"li5\"><span class=\"s1\">Once all liquidation procedures have been completed by the committee, a liquidation report, including the WOFE dissolution application form and the business license have to be submitted to relevant authorities.<\/span><\/li>\n<\/ul>\n<p class=\"p3\"><strong><span class=\"s1\">\u00a0<\/span>STEP 4: DEREGISTER WITH RELEVANT AUTHORITIES AND CLOSE THE BANK ACCOUNT<\/strong><\/p>\n<ul class=\"ul1\">\n<li class=\"li5\"><span class=\"s4\">Tax authorities:<\/span><span class=\"s1\"> The deregistration with the local Taxation Bureau and State Administration of Taxation Bureau is required. For this step, a final tax audit needs to take place, in order to guarantee that all taxes are lawfully settled.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Customs Office:<\/span><span class=\"s1\"> Business license, dissolution application and customs registration certificates must be submitted to the local Customs Office.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">State Administration of Foreign Exchange (SAFE):<\/span><span class=\"s1\"> Deregister with SAFE or let the deregistration be handled by an authorized bank.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Industrial and Commercial Administration Bureau:<\/span><span class=\"s1\">\u00a0 Dissolution permissions and liquidation reports must be submitted to this authority.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Other agencies:<\/span><span class=\"s1\"> There might be other agencies where a deregistration is necessary, for example agencies, which are specific to the registered business scope of the WFOE, such as the Administration of Quality Supervision and Quarantine (AQSIQ) for food importing enterprises.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Bank account:<\/span><span class=\"s1\"> To close the bank account, the dissolution application, the dissolution permission from the Administration of Industry and Commerce (AIC) and other relevant documents have to be submitted.<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Company stamps:<\/span><span class=\"s1\"> The official destruction of all remaining company stamps by the relevant authorities<\/span><\/li>\n<li class=\"li5\"><span class=\"s4\">Audit &amp; report:<\/span><span class=\"s1\"> A liquidation audit as well as a liquidation report are needed for deregistering with most agencies<\/span><\/li>\n<\/ul>\n<p class=\"p4\"><strong><span class=\"s1\">DID YOU KNOW?<\/span><\/strong><\/p>\n<p class=\"p6\"><span class=\"s1\">During a liquidation process a company might still be able to engage in sales and purchases.<\/span><\/p>\n<p class=\"p3\"><strong>EXAMPLE:<\/strong><\/p>\n<p class=\"p6\"><span class=\"s1\">ECOVIS provided legal assistance to a German SME software firm. During the liquidation process, a large corporation wanted to purchase software licenses from our client. Not abiding by liquidation related laws can result in severe legal consequences. Therefore ECOVIS was consulted for further help on the issue. According to regulations a firm can engage in sales and purchases as long as the tax certificate is not de registered. In this case, the client was able to continue selling software licenses for a few more months until the final deregistration at the tax bureau.\u00a0<\/span><\/p>\n<p class=\"p6\"><span class=\"s1\">Please note that this article only contains the most basic information about the process of WOFE liquidation. For further, more comprehensive information and assistance please contact <a href=\"mailto:richard.hoffmann@ecovis.com\"><span class=\"s5\"><i>richard.hoffmann@ecovis.com<\/i><\/span><\/a><\/span><\/p>\n<p class=\"p5\"><span class=\"s1\"><b>\u00a0<\/b><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Going through liquidation is a complex and often long lasting process. Failure to comply with existing regulations might result in severe legal consequences for shareholders. These are the most important steps to consider when closing a wholly foreign owned enterprise.<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[798,100,37,800],"tags":[686,155,101],"class_list":["post-4518","post","type-post","status-publish","format-standard","hentry","category-blog","category-legal","category-miscellaneous","category-redirect","tag-deregistering","tag-liquidation","tag-wfoe"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>4 Steps to liquidate a wholly foreign owned enterprise - Ecovis Focus China<\/title>\n<meta name=\"description\" content=\"Going through liquidation is a complex and often long lasting process. 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