Even though my global business has been doing everything it can to recover from the financial crisis, it doesn't seem like it will be enough. Unfortunately we're not able to pay our debts as they fall due. We will declare bankruptcy and shut down the factories and sales outlets we have in China. I'm not familiar with the PRC insolvency process and want to know what the least painful way is to proceed.

How do I wind up my business in China?

The domestic perspective

The decision on which route to take when winding up a business involves fundamental decisions of how involved the company management wants to be involved in the process and whether a company wants to retain goodwill, possibility out of a consideration of re-entering the China market someday.

If the group company values goodwill in China and overseas above the cost of winding down the business, the company likely should choose voluntary liquidation. Under this procedure, the company can lead the liquidation procedure and make separate partial settlements with each creditor. Still, the company must organise a local liquidation team to handle all liquidation-related issues, which can become quite complex. The company must retain auditors and appraisers to issue independent auditing and appraisal reports to satisfy government requirements. At the same time, creditors still have the right to sue the company and ask a court to freeze and seize assets of the company within China.