Market exit procedures for enterprises are expected to get simplified following a recent State Council executive meeting, which urged accelerating the restructure and deregistration of “zombie enterprises” to secure industrial growth and improve corporate efficiency.
This year, the State Administration for Industry and Commerce (SAIC) has put simple deregistration procedures in trial for companies that have stopped operations or have no credit and debt records in Pudong new district of Shanghai, Yancheng of Jiangsu province, Ningbo of Zhejiang province and Shenzhen of Guangdong province. Now the government is expanding the scope of the trial nationwide.
For example, in Shanghai, a company that wants to deregister should first provide the required information on a public platform, then hand in related materials to the registration authority, which will be further examined by the market supervision department. It generally takes 20 days to finish all procedures instead of two months.
A healthy market should guarantee both a smooth entry and exit. A failing enterprise will suffer from additional administrative burden if it cannot deregister in a timely manner. Furthermore, the existence of numerous “zombie enterprises” in the market might cloud the judgment of policy-makers as the government relies on data such as business volume, corporate structure and management.
Simplifying commercial registration and deregistration can provide more convenience to enterprises and stimulate a new wave of entrepreneurial passion, an SAIC official said.
Particularly, the simplified procedures apply to companies that have stopped operations or have no credit and debt records, to protect the legal rights of related employees, creditors and stakeholders.
During the simple deregistration process, if a third party raises objections, the authority will immediately suspend the examination to prevent enterprises from escaping debt obligations or infringing upon the rights of others.
Since Oct 1, China has launched the integration of business licenses, organization code certificates, and certificates of taxation registration into one document. Against that backdrop, SAIC is working with other government departments such as taxation and customs to research a further simplified policy on corporate exits.