Closing Your Company in China: What Do You Need to Prepare?
Closing a company in China is not an easy process. There is a need to be clear on the process of closing down the company in the right way.
2020 was not easy for anyone and even the year is halfway through and the situation with the COVID19 is slowly getting under control most of the industries still face different struggles that force big players to completely rethink the strategy and have big budget cuts. What about SMEs and smaller companies?
Unfortunately, not everyone is able to survive the crisis due to different reasons: restriction of the activities (events and travel companies), not being fast enough to go online, lack of knowledge or resources to pivot the business strategy, cashflow issues, and many others. Even if the company can survive an additional few months it does not guarantee that it will be able to continue to grow and generate profit again.
Closing a company is not an easy process. First of all, it is a psychological aspect of it: the feeling of uncertainty, fear, and lack of clarity of what to do next. The second important aspect is to figure out the whole process of closing down the company in the right way, that it is done the clean way to make sure no penalties apply. Once you combine the two aspects it is easy to see why most of the companies or individuals have a tendency to avoid this process.
But even when losing something very important for you, you still need to process internally your loss. It is quite the same for a company, but in addition, you have to process it externally. What does it mean?
You will need to go through several stages from the preparation of documents needed by the authorities to the de-registration process.
The beginning of the de-registration process will include the following:
Later on, de-registration to the customs, commercial bureau, and closing of bank accounts.
Preparation and anticipation are important not to lose time in the process because while postponing the process the costs will keep adding up. For example, during the process, you still need to keep your lease on until taxes validate that you are authorized to let it go.
In terms of preparation, you should also take care of how the company is structured (who is the investor) and the impact of this process: who owns your trademark, prepare your chops, etc.
It is not a simple time for anyone and to be in a situation, where a company needs to be closed can be devastating. If there is no other way, try to make it the easiest possible for yourself and for the team.
Feel free to contact us regarding the processes and needed documents for the de-registration of the company in China.
