Procedures
for Liquidation of Foreign-Funded Enterprises
(Approved by the State Council on June 15,1996
and promulgated by Decree No.2 of The Ministry
of Foreign Trade and Economic Cooperation on
July 9.1996) |
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Chapter 1 General
Provisions
Article 1 This set of procedures are formulated
in accordance with relevant laws to ensure the smooth
progress of the process of liquidation of the foreign-funded
enterprises(FFEs),protect the rights and interests
of the creditors and investors and safeguard the
social and economic order related to the liquidation.
Article 2 This set of procedures apply to the liquidation
of the sino-foreign equity and contractual joint
ventures and wholly foreign-owned enterprises(hereinafter
referred to as FFEs) set up within the People's
Republic of China. The liquidation of FFEs which
have been declared bankrupt according to law shall
be handled in line with relevant laws and administrative
regulations on liquidation due to bankruptcy.
Article 3 FFEs that are competent to organize by
themselves liquidation committees for their own
liquidation may proceed their liquidation in accordance
with the stipulations on the general liquidation
of this set of procedures. But for FFEs that are
incompetent to do so or which that have met with
difficulties in general liquidation processes their
power organs such as the board of directors or joint
management committee(hereinafter referred to as
power organ),investors or creditors may apply to
departments in charge of examining and approving
the FFEs for a special liquidation. If approved,
the liquidation of a FFE concerned liquidation in
accordance with stipulations on special liquidation
in this set of procedures. The liquidation of a
FFE which has been closed according to law should
be proceeded in accordance with the stipulations
on special liquidation in this set of regulations.
Article 4 Liquidations of FFEs should be proceeded
in accordance with relevant State laws and administrative
regulations, on the basis of the FFEs ' approved
contracts and articles of association under the
principles of being fair, reasonable and protecting
the rights and interests of the enterprise, investors
and creditors.
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Chapter 2 General
Liquidation
Section
1 Duration of Liquidation
Article 5 Liquidation of a FFE should be begun at
the date of expiration of the operation term of
the FFE, the date of the closure of the FFE as permitted
by the examining and approving department, or the
date of the termination of the contract of the FFE
judged by the people's court or arbitrated by the
arbitration agency.
Article 6 The duration of a liquidation cannot exceed
180 days beginning from the starting day of the
liquidation ending with the submission of the liquidation
report by the FFE to the examining and approving
department of the FFE. When there is the need to
extend the duration of the liquidation due to special
reasons, the liquidation committee should apply
to the examining and approving department of the
FFE 15 days before the end of the duration, and
the extension cannot exceed 90 days.
Article 7 FFEs should not engage in any new business
activities during the duration of the liquidation.
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Section 2 Liquidation
Organization
Article 8 The power organ of a FFE should organize
a liquidation committee for the liquidation of the
enterprise and the committee should be set up within
15 days beginning from the date of beginning of
the liquidation.
Article 9 A liquidation committee should be made
up of at least three people selected by the power
organ or among members of the organ or employed
from related professionals.
The liquidation committee should have a head member
appointed by the power organ of the FFE. With the
approval of the power organ the liquidation committee
may employ staff to do the routine work of liquidation.
Article 10 Members of the liquidation committee
should be changed in one of the following cases
during the liquidation period:((1)The member violates
laws;(2)Creditors ask to change under just reasons;
and((3)The member dies or loses ability to act.
Article 11 The liquidation committee exercises the
following terms of power during the liquidation
period:(1)clearing enterprise's property, making
of the balance sheet an detailed list of property
and formulation of liquidation plan;(2) announcement
to unknown creditors and notifications to known
creditors in written form;(3)handling and clearance
of the unfinished business of the enterprise;(4)working
out of principles of evaluation and of computation
of property;(5)clearing and payment of overdue taxes;(6)clearing
of credits and debts;(7)handling of the property
surplus after clearing and payment of the debt of
the enterprise; and (8)participation in civil lawsuits
on behalf of the enterprise.
Article 12 The balance sheet, detailed list of property,
the basic principles for property evaluation and
computation and the liquidation plan, proposed by
the liquidation committee, shall be reported to
examining and approving department of the FFE for
record after appraisals by the enterprise's power
organ.
Article 13 After the liquidation committee is set
up, staff of the enterprise concerned should hand
in accounting statements, financial books, list
of property, name list of creditors and debtors,
and other written materials related to the liquidation
committee within a set deadline.
Article 14 The liquidation committee should perform
its duty of liquidation according to law and handle
related affairs under consulting principles.
Members of the liquidation committee perform according
to their duties and should not take bribes by abusing
their power, seek illegal income, or defalcate the
property of the FFE.
Article 15 During the liquidation, the examining
and approving department of the FFE and other competent
departments may send people to attend the meetings
about the liquidation of the enterprise and supervise
upon the work concerned.
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Section 3 Notice
and Announcement of Liquidation
Article 16 Within 7 days beginning from the date
of the start of the liquidation the FFE should notify
the examining and approving department of the FFE,
the department in charge of the enterprise, the
customs, the foreign exchange administrative department,
the enterprise registration department, taxation
department and the bank where the FFE opens its
account, of the name and address of the enterprise
to be liquidated ,the reason and the beginning date
of the liquidation; FFEs with State-owned assets
should also notify the competent State assets administrative
department, the enterprise registration department,
taxation department and the bank where the FFE opens
its account, of the name and address of the enterprise
to be liquidated, the reason and the beginning date
of the liquidation; FFEs with State！owned assets
should also notify the competent State assets administrative
department.
Article 17 The liquidation committee should notify
the known creditors with their credit amount in
written form within 10 days beginning from the date
of the setting up of the committee, and publish
the announcement at least twice in a national newspaper,
a local provincial or city newspaper within 60 days
beginning from the date of its setting up. The first
announcement should be published within 10 days
beginning from the date of its setting up.
The liquidation announcement should specify the
name and address of the enterprise, the reason and
beginning date of the liquidation, the mail address
of the liquidation committee and names of its members
and person for liaision.
Article 18 The creditors should report their credits
to the liquidation committee within 30 days beginning
from the date of receiving the notice and those
who receive no notice, within 90 days beginning
from the date of the first announcement published.
Article 19 The creditors should report their credits
with the amount and relevant certificate of the
credit within the set term.
Failures of reports by creditors within the set
terms shall be settled as followings: (1) Credit
claims of the known creditors should be listed to
be handled in the liquidation; and (2) Credit of
unknown creditors may be claimed and paid before
the end of the distribution of the enterprise¨s
surprise¨s surplus property; but after the end of
the distribution of the enterprise¨s surplus property,
the claims are regarded as abandoned.
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Section 4 Credits,
Debts and Repayment
Article 20 The liquidation committees should register
the credit claims reported by creditors and notify
the creditors in written form of the results of
the checkups of the claims.
Article 21 If the creditors have objections to the
results of the checkups provided by the liquidation
committees, they may ask the committees to make
re-checks to the credit claims within 15 days beginning
from the date of receiving the written notices.
If the creditors still have objections to the re-checked
results, they may bring a lawsuit before the local
people¨s court within 15 days beginning from the
date of receiving the written notices about the
result of the re-checks; if the creditors and the
FFEs concerned have agreed to settle the matters
through an arbitration the matters shall be submitted
to arbitration. During the judicial proceedings
or arbitration, the liquidation committee must not
distribute the disputed properties.
Article 22 For any property gains and losses discovered
in stocking property, sales, unpayable debts, or
unreceivable credits as well as any incomes and
losses during the liquidation period, the liquidation
committees should provide written explanations and
certificates of evidence to power organs of the
FFEs and put the related amounts into gains or losses
of the liquidation.
Article 23 The following liquidation expenses should
enjoy priority in payments form the liquidated property:
(1) expenses incurred through management, sales
and distribution of the enterprise property during
the liquidation; (2) expenses incurred through announcements,
lawsuits and arbitration; and (3) other expenses
incurred during the liquidation period.
Article 24 Creditors with claims for property guaranteed
credits before the starting date of the liquidation
enjoy priority of repayment from the guaranteed
properties. The part of the claims in exceed of
guaranteed property may be paid in the order set
in the Article 25 of this set of this set of regulations.
Article 25 fter payments for the expenses of the
liquidations are made repayments should be in order
of: (1) employees wages and labour insurance fees;
(2) State taxes; and (3) other debts.
Article 26 FFEs properties must not be distributed
before payments of liquidation expenses and debts
surplus properties of the FFEs after payments of
liquidation expenses and debts should be distributed
according to the actual investment percentages of
the investors except the cases as stipulated by
laws, administrative regulations or enterprise contracts
and articles of association.
Article 27 Should FFEs properties not be able to
make up for payments for debts, the liquidation
committees should apply to the people¨s court for
announcing the bankruptcy of the enterprises; enterprises
being announced bankruptcy according to law shall
be handled in accordance with relevant laws and
administrative regulations on the liquidation of
the bankrupt enterprises.
Article 28 Following actions of the FFEs are invalid
within 180 days beginning from the date of starting
liquidation:
(1) free transfers of enterprise property; (2) sales
of enterprise property at abnormally low prices;
(3) provision of property guarantee for debts which
originally have no property guarantees; (4) repayment
of undue debts in advance; and (5) abandonments
of credits of FFEs concerned.
None of the Chinese or overseas investors has the
power to handle the enterprise property beginning
from the starting date till the end of the liquidation.
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Section 5 Appraisal,
Pricing and Handling of the Liquidated Property
Article 29 Appraisals and pricings of the liquidated
property should be made in accordance with: (1)
the stipulations of contracts and articles of associations
of the enterprises if there are any; (2) decisions
of the Chinese and overseas investors through consulations
with approvals by examining and approving department
of FFEs if without any stipulations defined in (1)
; (3) decisions made by the liquidation committee
in accordance with relevant State regulations and
also opinions of the asset appraisal agency with
approvals by examining and approving department
of FFEs if without any stipulations defined in (1)
and decisions defined in (2) ; and (4) decisions
of the court or the arbitration commission if terminations
of the contract of the enterprise are upon judgements
of the contract of the enterprise are upon judgements
of the court or rulings of the arbitration commission.
Article 30 When the liquidated properties are put
on sale, investors of the FFEs should enjoy priority
for the purchase with the actual purchase to be
made by the part who gives the higher offer.
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Section 6 Termination
of Liquidation
Article 31 A liquidation committee shall prepare
a liquidation report after completing all the work
set in the liquidation plan. The report concerned
shall includeL 1) the reason, time and procedures
of the liquidation; (2) results of the handling
of the credits and debts by the committee; and (3)
results of the handling of the liquidated property.
Article 32 A liquidation report shall be reported
to examining and approving department of the FFE
concerned for record after its confirmation by the
power organ of the enterprise.
Article 33 The liquidation committee shall cancel
the registration of the enterprise with the taxation
and customs administrations within 10 days beginning
from the date of handing in the liquidation report
to the examing and approving department of FFEs.
Within 10 days, beginning from the date of the cancellation
of registration as stipulated in the preceding clause,
the liquidation committee shall send the liquidation
report together with the certificates to ce4rtify
the cancellation of registration issued by the taxation
and customs administrations to the registration
office of FFEs cancel the registration of the enterprise,
had over the business licence and announce the termination
of the enterprise in a national newspaper and a
local provincial or city newspaper.
Article 34 Upon the termination of a liquidation,
the various accounting vouchers, books and statements
kept by the liquidation committee should be handed
over to: (1) The Chinese partner in cases of Sina-overseas
joint equity and contractual ventures and if there
are two or more Chinese partners, to the one that
is appointed by the department in charge of FFEs
for keeping of documents; and (2) the accounting
evidences, books and report forms shall be kept
by a unit appointed by the examining and approving
department before the process of cancellation of
registration of FFEs in cases of wholly overseas
owned enterprises.
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Chapter III
Special Liquidation
Article 35 Special liquidation of an enterprise
should be started on the day when the examining
and approving department of FFEs approves the special
liquidation of the enterprise or when the enterprise
is ordered to be shut down by law.
Article 36 For the special liquidation of an enterprise,
a liquidation committee shall be set up by the approving
department of FFEs or another department authorized
by it with the participation of Chinese and overseas
investors of the enterprise, representatives of
relevant departments and professionals concerned.
Article 37 The liquidation committee should have
a head appointed by the examining and approving
department of FFEs or a department entrusted by
it. During the special liquidation, the head of
the committee shall exercise the functions and powers
of legal representative of the enterprise and the
liquidation committee shall exercise the functions
and powers of the enterprise¨s power organ.
A liquidation committee should handle affairs related
to liquidation and report its work to the examining
and approving department.
Article 38 A liquidation committee may call meetings
of the enterprise¨s power organs for the creditors
to discuss the details about the liquidation.
Article 39 All creditors should be in title of participation
and voting in the meeting of the creditors except
those who have the property guarantee and have not
given up their priority of receiving the repayment.
Chairman of a creditors meeting should be appointed
from among the creditors who have the right to vote
by the examining and approving department of FFEs
or the department entrusted by it.
Article 40 A liquidation committee is responsible
for calling up the creditors meetings when doing
so, the clearing committee should notify the creditors
in written form in 15 days before the meeting is
held. Those creditors who cannot attend the meeting
should entrust their agents in a written form to
attend.
Article 41 A creditors meeting exercises the following
functions and powers: (1) check the evidences of
claims, amount of credits, and guarantee about the
credits; and (2) check the fact of debt repayment
and according to which propose to the liquidation
committee scheme for the liquidation on behalf of
the creditors.
Article 42 The liquidation scheme and report worked
out by the liquidation committee shall be confirmed
by the examining and approving department of FFEs.
Article 43 The stipulations in Chapter II of this
set of this set of regulations should apply to the
special liquidations in cases without any special
stipulations as set in this chapter.
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Chapter IV
Legal Liabilities
Article 44 Engagement in new business operations
by a FFE concerned during the liquidation period
shall be ordered a correction and may also be imposed
a fine between RMB10,000 yuan and RMB100,000 yuan
by the department concerned in charge of registration
of FFEs.
Article 45 An enterprise concerned failing to notify
or make announcement on the liquidation to creditors
in violation of the stipulations in Article 17 of
this set of regulations shall be ordered to correct
and may be imposed a fine between RMB10,000 by the
enterprise registration department.
Article 46 Chinese and overseas investors disposing
the enterprise property during a liquidation period
in violation of the stipulation in the second clause
of Article 28 of this set of regulations shall be
ordered to restore to the original state or repatriate
the disposed properties and compensate to losses
if any by the examining and approving department
of FFEs.
Article 47 A liquidation committee in violation
of stipulations in articles 32 and 33 of this set
of regulations of failing to send the liquidation
report to the examining and approving department
of FFEs and registration department for record,
or having department important facts held up or
omitted in the report, shall be ordered to correct
by the examining and approving and registration
departments of FFEs.
A liquidation committee failing to go through the
formalities of writing off the enterprise in violation
of the stipulations in Article 33 of this set of
regulations shall be revoked its business licence
by the registration department accompanied with
an announcement.
Article 48 An enterprise which hides property during
a liquidation, give fales records or balance sheets
or property lists or distributes its property before
paying the liquidation expenses and repaying its
debts should be ordered to correct by the examining
and approving and registration departments of FFE
and imposed a fine between 1% and 5% of the value
of the hidden property or the property distributed
by the enterprise before repaying all its debts
and a fine between RMB10,000 yuan and RMB100,000
yuan shall be imposed on persons who have direct
responsibility and other responsible persons.
Article 49 Liquidation committee members who abuse
their power to seek illegal incomes or intrude the
enterprise properties shall be ordered to return
intruded properties by the examining and approving
and registration departments of FFEs and be confiscated
the income they obtain by violating laws and regulations,
and may be imposed a fine between 2 and 6 times
their illegal incomes by the enterprise registration
department.
Article 50Those who violate the stipulations of
this set of regulations and commit crimes shall
be investigated and affixed their responsibilities
for the crimes.
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Chapter V Supplementary
Provisions
Article 51 This set of regulations goes into effect
as of the dated of its promulgation.
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