News

Introduction

Company exit mechanisms, including bankruptcy and restructuring, have been a hot topic even before the latest amendments to the Company Law. These changes have further heightened interest in this area. The new Company Law’s Chapter 12, which addresses company dissolution and liquidation, has made these processes clearer and more systematic. The amendments were officially released on December 29, 2023, and will come into effect on July 1, 2024.

Key Points of Zhang Li’s Speech

· Importance of Theory: Understanding the theoretical foundations is crucial for lawyers, especially commercial lawyers, to navigate legal provisions effectively.

· Company Exit Mechanism: This is detailed in Chapter 12 of the new Company Law, encompassing dissolution and liquidation. The new regulations provide a structured framework for companies exiting the market.

· Comparison and Impact: The new Company Law's provisions are compared to previous laws, highlighting the changes and their practical implications for businesses and investors.

Company Exit Overview

Company exit, also known as termination, is primarily regulated under Chapter 12 of the new Company Law (Articles 229-242). It provides a clearer framework for the process, including dissolution and liquidation. The State Administration for Market Regulation also issued updated guidelines on company deregistration.

The Civil Code and the Enterprise Bankruptcy Law further complement these regulations, detailing the dissolution, liquidation, and deregistration procedures. The Bankruptcy Law serves as a special law within the Company Law framework, addressing specific termination procedures such as bankruptcy liquidation and restructuring.

Dissolution and Liquidation

· Dissolution: Initiated either voluntarily (by company decision) or compulsorily (by administrative or judicial action). Judicial dissolution cases have surged, requiring specialized bankruptcy courts.

· Liquidation: This follows dissolution and involves settling company affairs. It can be voluntary (handled internally) or compulsory (court-supervised).

· Bankruptcy: A special procedure within the broader dissolution context, initiated by court application and involving detailed legal processes.

Final Steps

The final step is deregistration, which officially ends the company’s legal existence. This can be done through standard or simplified procedures, with the latter being widely adopted due to recent policy reforms.

Conclusion

Mr. Zhang emphasized the importance of studying the new Company Law, understanding its provisions, and applying them to practical scenarios. This approach helps provide better services to companies and investors. The session is part of an ongoing series by JAVY Law Firm to educate and discuss the new Company Law and its implications.