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Closure of foreign-invested enterprise is necessary to be registered in case of the registration of RO or WFOE. The normal procedure of closure shall be that the competent authority makes the closure registration firstly, such as abrogating the approval certificate of foreign-invested enterprise, then the customs and taxation authority issue tax clearance certificate and finally the industrial and commercial authority makes the closure registration of business license. It is deemed that the enterprise in China terminates thoroughly in the event that the whole procedure of closure completes. Some foreign investors think that foreign-invested enterprise will terminate automatically upon closure or expiration of their business license, which is illegal in China.

Closure of a RO

Due to the limited activities available to a representative office, foreign investors may want to make a more considerable investment and commitment after spending some time acquainting themselves with Chinese market. As a consequence they may want to close their representative office and set up a limited company in the form of a WFOE/FICE/JV.

It is relatively simple to close a RO. After closure of tax registration certificate, foreign exchange registration certificate and organization code certificate, the closure of the business license may be applied. The tax clearance certificate shall be issued by National Taxation Bureau and Local Taxation Bureau. Then the staff of National Taxation Bureau and Local Taxation Bureau will review the accounts respectively. The above mentioned closure procedure of the tax registration certificate will take the most time, which may hold 3/4 time spent in the whole procedure of closure of RO. Generally speaking, the whole procedure of closure will take about three to six months.

Closure of WFOE

According to PRC laws, in the event that a company experiences financial difficulties and the board deems it necessary to dissolve the company, or the company is unable to carry out its business in a manner acceptable to the board of directors, the board of directors, upon a unanimous board resolution, can apply for approval from the competent approval authority for such termination. Once an approval is obtained, the company can commence liquidation procedures. The procedures to close a WFOE are no easier or shorter than they are to set up such a company, and normally take about six to nine months. After completing the liquidation, in the following procedure of closure, tax review made by tax authority will take much time. In the event that the WFOE needs to remit the profits to its homeland, it is necessary to accept the review from the foreign exchange management authority.

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