How to Close a Business in China
Published: December 2019Companies in China may want to end their operations for various reasons. Irrespective of what factors might trigger this decision to shut down the business, investors cannot simply walk away without following proper closure procedures. Not properly closing the company will not only attract stringent penalties from the government’s tax and regulatory bodies, but also do lasting damage to the reputation of the company. Moreover, the legal representative and the financial associates of the entity will face difficulty in various occasions. In this issue of China Briefing magazine, we walk foreign investors through the process of closing down their company in China.
In this Issue:
- Common Questions Asked When Closing Chinese Businesses
- How to Close a WFOE: Step-by-Step Process
- How to Close an RO: Step-by-Step Process
- The Simplified Deregistration Procedure
Companies in China may want to end their operations for various reasons, due to changes in their business scope, failure to adapt in the market, or external pressures like the US-China trade war. Irrespective of what factors might trigger this decision to shut down the business, investors cannot simply walk away without following proper closure procedures.
For one, not properly closing the company will attract stringent penalties from the government’s tax and regulatory bodies. It could also do lasting damage to the reputation of the company – both in the eyes of the law and among consumers – as the business will be blacklisted.
Moreover, in case of improper closure, the legal representatives and financial associates of the entity will face difficulty in moving out of the country, starting another business, or even conducting ordinary banking and financial transactions if they are based in China.
In this issue of China Briefing magazine, we walk foreign investors through the process of closing down their company in China. First, we look at why entities might choose to end their business operations in the country. Next, we provide clear guidance on the legal steps to close two types of company office structures, namely a wholly foreign-owned enterprise and a representative office. Finally, we guide investors on how to use the simplified deregistration procedure introduced by the government.