Regulation of Business Organizations in a Socialist Market Economy
Chapter 12: Corporate dissolution, liquidation, and bankruptcy
The life of a company can be brought to an end by dissolution (jiesan) or bankruptcy (pochan) under China's corporate law. Bankruptcy occurs when a company is insolvent, namely it no longer has the ability to pay its due debts. Dissolution is the legal termination of a company for other reasons. Dissolution of a company involves three legal steps: (1) a decision adopted by a competent organ to dissolve the company; (2) the liquidation process for winding up of affairs, realization of receivables, payment of debts, and distribution of assets among the shareholders; (3) deregistration of the company to completely end its legal existence. A company is deemed legally dissolved after it is deregistered by the relevant registration authority (AIC) and makes a public announcement of the termination of the company. The rules governing corporate dissolution are contained in Chapter 10 of the Company Law and the SPC's Company Law Interpretation (II). The procedure for ending a company through the bankruptcy discharge is provided in the PRC Enterprise Bankruptcy Law and will be examined in a later section. A company can be terminated by a voluntary dissolution, administrative dissolution, or judicial dissolution. Specifically, the dissolution could occur under any of the following circumstances: 1. Dissolution by expiration of stated duration of operation; 2. Dissolution by the resolution of shareholders; 3. Dissolution because of a corporate merger or division; 4. Administrative dissolution; 5. Judicial dissolution.
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