Ministry of Finance, Provisions Relevant to Finance-related Regulation of Foreign-invested Enterprises During Liquidation Period Circular

Issued: March 11 2003
Effective: as of date of issue

Main contents: When a foreign-invested enterprise has announced the termination of its operations, they should form a liquidation committee within 15 days (Item Two). The assets of a liquidating enterprise include all assets at the time liquidation is announced as well as assets obtained during the liquidation period. Any amounts remaining in employee benefit funds, incentive funds and employee housing funds shall not be included among assets to be liquidated (Item Four (1)). After debts, losses, undistributed profits, capital common reserve, all types of benefit funds and liquidation costs are subtracted from the assets, if the remaining portion exceeds the paid-in capital, the portion shall be regarded as profit and taxed as income. The remaining portion after tax shall be distributed to investors in accordance with the following principles: (1) according to the proportion of paid-in capital contribution in the case of Sino-foreign equity joint ventures; (2) in accordance with the contract or the articles of association in the case of Sino-foreign cooperative joint ventures; and (3) in accordance with the articles of association in the case of wholly foreign-owned enterprises (Article 7).