Page 17 - Doing Business in China

BUSINESS ENTITIES

LIQUIDATION & DE-REGISTRATION

Chinese authority accepts 2 ways of de-registration application�

General de-registration Procedure Simplified de-registration Procedure
(applies to all companies) (applies to companies meet certain conditions)
• Set up a liquidation group • Liquidation group is not required
• Make an announcement • Make an announcement
• Announcement period is at least 45 days • Announcement period must be at least 20 days
• Tax clearance • Tax clearance
• Carry out the liquidation and prepare a liquidation report� • A liquidation report is not required
• The liquidation report must be signed by all members of • A commitment letter is required, signed by all investors�
the liquidation group, and by all investors�

THE ENTERPRISE BANKRUPTCY LAW
The Enterprise Bankruptcy Law (the “EBL”) was updated effective 1 June 2007, to provide a clearer legal basis for
formal bankruptcy proceedings�

The EBL applies to enterprises (whether state- or privately-owned) that are insolvent or at risk of becoming
insolvent� It also extends to the debtors’ overseas assets�

The EBL defines priority of claims on bankruptcy assets as follows:

(1) Secured claims
(2) Costs and expenses of the bankruptcy administration

(3) Salaries, compensation, superannuation, etc� of employees
(4) Social insurance and taxes

(5) Other unsecured claims

If the bankrupt has no assets to be realised for
distribution, the administrator shall apply to the Court
to conclude the bankruptcy administration�

The introduction of EBL demonstrates China’s intention
to align its insolvency framework with international
practices� It also provides foreign investors with a
defined mechanism for dealing with their investments
in distressed situations�

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