Labor Issues for Foreign Investors Divesting from China

September 17, 2023 | BY

Susan Mok

Liu Yuxiang and Wu Qiong, labor law specialists at Haiwen & Partners examine the important and sometimes difficult labor law issues which can arise for foreign investors seeking to exit China

Summary

  • An exit from China will have a number of legal implications, including under labor law
  • When dissolving a PRC legal entity, investors must consider whether and how employment contracts may be terminated, and allow for required payments to be made
  • During dissolution, certain employees may have protected status
  • Issues can also arise when making an equity acquisition as a means of exit, and investors must consider points such as establishing cause for termination and dealing with length of service

 

As a result of recent international developments, some foreign enterprises are considering shutting down their businesses, dissolving local entities in China, or selling their business to third parties. This process will lead to labor law issues that need special attention, in particular relating to the termination or transfer of employees.

 

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