Hello, Im Julien from the consulting team at RTF.  Today we are going to introduce the processof closing down a WFOE (Wholly Foreign Owned Entity) in China.  Companies in China may choose to shut downtheir operations for various reasons, due to changes in their business, failureto adapt in the market, or external pressures like the US-China trade war ormost recently, the coronavirus outbreak. 

As an investor, you have to follow proper closure procedures and clearall your obligations before shutting down your business, if not, the companywill attract penalties, damage its reputation or even get blacklisted inChina. 

Now let’s take a moment to talk about the process of closing down, whichis not an easy one because it can take 3-4 months or even longer in case ofirregularities.  The first step is toform at liquidation committee and prepare an internal plan.  After the liquidation committee is formed,the WFOE must file for deregistration at the AIC (Administration for Industryand Commerce), then submit an announcement in the newspaper for a minimumperiod of 45 days to notify creditors and also file a record at the COC(Commission of Commerce).  At the sametime, the company needs to terminate all its employees and liquidate all itsassets.   After all these are done, themost complicated part is the tax deregistration, which can take 2-3 months tobe completed.  During that process, youwill have to submit a liquidation report to the tax authorities with allnecessary documents from the previous 3 years for them to review.  If the review is successful, the taxclearance certificate will be issued. After this certificate is obtained, you can move on with thederegistration at the AIC, Social Insurance Bureau, Customs Bureau and allrelevant license agencies.   Also, youwill have to proceed with the account closure of the capital, general and RMBbasic account.  All funds remaining inthe capital account will be transferred back to the shareholder’s bank accountoverseas.  And the last step will be tocancel the company chops. 

Once all these are done, the company will be deemed to be legallyderegistered and will no longer exit as a legal entity. 

Hope this video has been helpful. And should you have any queries, do not hesitate to contact us or visitour website at www.rtfcpa.com.  Stay tune for our next video and I will seeyou! Bye Bye!