This document provides a practical overview of the legal and procedural steps required to wind up and deregister a Wholly Foreign-Owned Enterprise (WFOE) in the People’s Republic of China, based on the Company Law, Foreign Investment Law, and the 2025 Enterprise Deregistration Guidelines.
1. Overview of the Company Exit Process
In China, winding up a WFOE generally involves three main stages:
1) Resolution to dissolve the company;
2) Liquidation and asset distribution;
3) Deregistration with multiple government authorities.
A company is legally terminated only after deregistration is completed with the company registration authority (State Administration for Market Regulation or its local branches).
2. Legal Grounds for Dissolution
A WFOE may be dissolved under the following circumstances:
• Voluntary dissolution approved by shareholders;
• Expiration of the operating period specified in the articles of association;
• Dissolution due to merger or division;
• Administrative revocation of the business license;
• Court-ordered dissolution due to severe management deadlock;
• Bankruptcy declared by the People’s Court due to insolvency.
3. Liquidation Procedure (Mandatory Step)
Liquidation is a statutory requirement before deregistration. Its purpose is to protect creditors, employees, shareholders, and public interests.
3.1 Establishment of the Liquidation Committee
• Must be established within 15 days after the dissolution event.
• Directors or shareholders are liquidation obligors unless otherwise specified.
• If liquidation is not initiated, creditors or stakeholders may apply to the court to appoint a liquidation committee.
3.2 Public Announcement and Creditor Notification
• Within 10 days after formation, the liquidation committee must publish its information via the National Enterprise Credit Information Publicity System.
• Within 60 days, the committee must publish a creditor announcement with a public notice period of at least 45 days.
• Known creditors must be directly notified.
3.3 Liquidation Activities
The liquidation committee must:
• Prepare balance sheets and asset lists;
• Handle unfinished business and contracts;
• Pay employee wages, social insurance, and statutory compensation;
• Pay outstanding taxes, penalties, and late fees;
• Conduct corporate income tax liquidation;
• Cancel invoices and tax control equipment;
• Settle customs obligations (if applicable);
• Collect receivables and settle liabilities;
• Represent the company in litigation;
• Distribute remaining assets to shareholders.
3.4 Distribution of Remaining Assets
After all liquidation expenses, employee claims, taxes, and debts are paid, remaining assets are distributed to shareholders according to their capital contributions.
3.5 Liquidation Report
Upon completion of liquidation, a liquidation report must be prepared and approved by shareholders representing at least two-thirds of voting rights.
4. Deregistration Procedures (“One-Stop Deregistration System”)
China operates an integrated deregistration system that coordinates tax, company registration, social insurance, customs, banking, and public security authorities.
4.1 Tax Deregistration
• Tax authorities conduct a pre-check for unresolved tax matters.
• Companies with no tax risk may obtain immediate tax clearance.
• Companies with minor missing documents may obtain clearance under a commitment mechanism.
• Companies with unresolved tax issues must complete them before deregistration.
4.2 Company Registration Deregistration
After tax clearance, the company submits a deregistration application, dissolution resolution, liquidation report, and tax clearance information. The registration authority cancels the business license.
4.3 Social Insurance Deregistration
Within 30 days after company deregistration, the company must cancel social insurance registration after settling all contributions and penalties.
4.4 Customs Deregistration (If Applicable)
Companies engaged in import/export activities must complete customs deregistration before final company deregistration.
4.5 Bank Account Closure and Seal Cancellation
• Corporate bank accounts must be closed.
• Corporate seals and beneficial ownership records are cancelled via data-sharing systems with public security and the People’s Bank of China.
5. Simplified Deregistration Procedure
A WFOE may use simplified deregistration if it:
• Has no outstanding debts or liabilities;
• Has no unpaid taxes, wages, or social insurance;
• Has no unresolved penalties or disputes;
• Has no external investments or pledged assets;
• Issues a written commitment to the above.
A public notice must be published for 20 days. If no objections arise, deregistration may proceed without full liquidation.
6. Legal Liabilities of Shareholders and Directors
• Failure to initiate liquidation on time may result in liability for asset loss.
• Deregistration without proper liquidation may lead to shareholder and director liability for company debts.
• Fraudulent liquidation or asset transfer may trigger joint and several liability, administrative penalties, and criminal liability.
• Submitting false deregistration materials may result in revocation of deregistration, fines, blacklisting, and registration bans.
7. Practical Notes for Foreign Investors
• Tax clearance is the main bottleneck in company exit.
• Employee termination and social insurance settlement are highly scrutinized.
• SAFE (foreign exchange) filings may be required for repatriation of remaining funds.
• Banks often require tax clearance and liquidation documents before closing accounts and remitting funds abroad.
8. Conclusion
China has modernized its WFOE exit system with integrated deregistration platforms and strengthened enforcement mechanisms. Foreign investors should ensure proper liquidation, tax settlement, and compliance to avoid post-deregistration liabilities.
