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Solvent Liquidation/Deregistration


In China, there are often sound business reasons why a joint venture or Wholly Foreign Owned Enterprise should be wound up. The business may have run its course or be at risk of bankruptcy, or perhaps joint venture partners can no longer agree on how the business should be run. Sometimes, companies need to undergo voluntary liquidation simply because they are not needed post-merger or acquisition.

Whatever the reason, many Chinese Foreign Invested Enterprises (FIE) that are wound up are liquidated on a solvent basis with positive or nil net assets. This is largely due to foreign institutions which have made investments in China wanting to preserve their positive reputation and local relationships.

Voluntary liquidation of a company in China usually involves a more complex and protracted government approval process than the incorporation of the company. Our experience tells us that a smooth solvent liquidation and recovery not only requires a thorough understanding of laws and regulations, but also benefits from experience with local best practice and the ability to carry out complex on-the-ground work.

We can help shareholders design actionable close-down plans and identify potential problems that may be encountered during the liquidation process in China. We can also define corresponding solutions, deploy a team to assist the client in execution, and successfully implement the liquidation procedure, to lower the risk of losses and maximise the recovery. But perhaps most importantly, by taking care of asset protection, we help to free up time and resources so that management can focus on those operations with greater ongoing potential.


Potential issues

  • Management or investors would like to obtain professional advice on the relevant procedures, key issues and preparation prior to their decision on whether to terminate the company.
  • Close-down of operations due to a change in the company's strategy.
  • Joint venture partners cannot agree on how the business should be run and both partners would like to wind-up the joint venture.
  • Voluntary liquidation of a joint venture upon expiry of the cooperation period.
  • The useful lifetime of the entity has come to an end. For instance, it is no longer needed post-merger or acquisition.
  • Shareholders have been unable to recover their original investment from a loss-making enterprise and do not intend to continue their investment.
  • The company is insolvent, leading shareholders to trigger a winding up to avoid bankruptcy.
  • The company has been unable to obtain required licenses or operating qualifications since China incorporation.

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Pre-liquidation analysis

  • Review company information and documents and assess its financial position, in order to comment on issues which need to be completed or settled before liquidation.
  • Advise on the employee severance plan, asset protection and asset disposal plans and strategy, debt recovery plans, taxation, foreign exchange, close-down liquidation costs and other regulatory requirements.
  • Analyse the potential compensation payable and timing for early termination of contracts.

Liquidation or deregistration

  • By advising the liquidation committee or acting as a member of the liquidation committee, we can assist with the following voluntary liquidation work:
  • drafting the necessary documents for liquidation applications to be submitted to China Government authorities (including but not limited to tax bureaus, customs, State Administration of Foreign Exchange, Administration of Industry and Commerce (AIC) and Ministry of Commerce (MOFCOM)
  • assisting on employee severance work during the wind-up
  • realising fixed and movable assets of the company, including valuation, auction or seeking potential buyers, and attending to the negotiation and transaction of assets
  • commencing litigation against delinquent debtors, to maximise the recovery
  • preparing liquidation reports
  • arranging the liquidation audit, including the selection of auditors
  • providing advice on communication with regulators, creditors, shareholders/partners and debtors, to maximise asset protection
  • distributing/repatriating the remaining funds to shareholders.

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Our experience

An electronic product manufacturing WOFE in Suzhou, China

  • Attended to the voluntary liquidation of the company, disposed of assets worth around US$27 million, dismissed and transferred over 600 employees.
  • Advised the liquidation committee throughout the liquidation process.


A marine equipment manufacturing WOFE in Shanghai, China

  • Attended to the voluntary liquidation of the company, including dismissal of 30 employees.
  • Dealt with the arbitration and lawsuits initiated by certain employees on behalf of the company.
  • Advised the liquidation committee throughout the close-down process.

An agricultural machinery manufacturing JV in Shanghai, China

  • Attended to the voluntary liquidation of the company, including valuation of the remaining assets.
  • Advised the liquidation committee throughout the wind-up process.
  • Assisted the liquidation committee on reviewing the capital injection from both shareholders, calculating the liquidation costs to be borne by each of the shareholders according to the relevant board resolutions and reviewing the company’s budget in respect of future close-down costs.

A JV involved in aviation services in Beijing, China

  • Conducted pre-liquidation compliance review and then attended to the voluntary liquidation of the company.
  • Repatriated shareholders’ remaining property of approximately RMB18 million.
  • Advised the liquidation committee throughout the liquidation and recovery process.

An electronics product manufacturer

  • Attended to the voluntary liquidation of the company.
  • Disposed of its PRC JV and Hong Kong listed company.
  • Realised US$100 million.


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Contact us

Victor Jong

Victor Jong

Mainland China and Hong Kong Restructuring & Insolvency Leader, PwC Hong Kong

Tel: +[852] 2289 5010

Tim Guo

Tim Guo

Partner, PwC China

Tel: +[86] (21) 2323 2610

Christopher So

Christopher So

Partner, PwC China

Tel: +[852] 2289 2577

Chen Lau

Chen Lau

Partner, PwC China

Tel: +[86] (10) 6533 2208

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