Recently, I received an inquiry from one of our clients whose China company has just entered the early stages of official dissolution and liquidation procedures. The company has already filed the registration of the official Liquidation Committee Members’ at the local AIC as required by law. Only after this filing has the shareholder decided to remove and replace of the Liquidation Committee members.
In general, once the official list of the members of the Liquidation Committee is registered with the AIC, the liquidation procedure starts and is cannot normally be reversed. However, in some circumstances such as death, it may be required to remove and replace a registered Liquidation Committee member.
While, the grounds for removing members from the liquidation committee are well established where a company is in bankruptcy or is under court supervised liquidation, relevant laws and regulations are silent as regards how the situation is to be handled when the company liquidation process is started by action of the shareholder. IN a bankruptcy or in a court supervised liquidation, Liquidation Committee members who are in violation of laws, harm the liquidating company’s interests, or who lose civil capacity may be eliminated from the name list of the Liquidation Committee by the authority managing the liquidating company via passing and filing a new resolution with the company registration authority.
While these provisions only technically apply where a company is in bankruptcy or is under court supervised liquidation, we can deduce from the meaning and intent of the law that similar procedures will apply during a shareholder initiated liquidation. Unfortunately, because of the nature of the law, authorities in different localities are free to impose their own documentary and procedural restrictions.