China question: What are the liabilities for a failed WFOE?
June 01, 2012 | BY
clpstaff &clp articlesThe economic slowdown has caused many WFOEs to shut down leaving bad debt. Under Chinese law, what are the liabilities for managers, directors and the shareholders?
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The domestic perspective
Under PRC law, if a wholly foreign-owned enterprise (WFOE) is unable to repay its debts, and the WFOE's assets are insufficient to settle all its debts, bankruptcy proceedings may be initiated. The WFOE may file for bankruptcy by itself, or a creditor of the WFOE may file for bankruptcy. The directors, senior managers and shareholders may assume liabilities.