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Verification for Free: Which Status of a Chinese Company Is Legit? - CTD 101 Series

Tue, 28 Dec 2021
Contributors: Meng Yu 余萌
Editor: C. J. Observer

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Chinese company registration status is divided into the following types: existence, revocation, deregistration, moving in, moving out, suspension, and liquidation. Terms for company registration status vary slightly from place to place, but they are generally the same.

Except for existence, all others are abnormal operating status.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection.

You should try to avoid doing business with companies in abnormal operating status.

For how to verify a Chinese Company’s status, please read our post “How Do I Know if a Chinese Company Is Legitimate and Verify It?“. We can provide you with a FREE service to check the operating status of a Chinese company.

Specifically, the meaning of each status is as follows.

1. Existence

It means that the enterprise exists legally and continues to operate normally. It is also called open (开业, kaiye), in business (在业,zaiye), normal (正常, zhengchang), registered (登记, dengji), recorded (在册, zaice), in operation (在营, zaiying), and valid (有效, youxiao).

2. Revocation

This refers to the revocation of the enterprise’s business license, which is an administrative penalty imposed by the administration for market regulation on enterprise violations.

After this, the company should be liquidated and deregistered in accordance with the law.

3. Suspension

This refers to the status of a company’s suspension of operation.

For some reason, the shareholders of the company decide to register the company as suspension of production and business. During this period the company is not engaged in any business, and may resume operation after the conditions have changed.

4. Moving out and moving in

This refers to the process of changing a company’s registered address.

Since the old and new addresses are subject to different company registration authorities, the company is moving out or moving into a certain registration authority.

5. Liquidation

This means that the company is liquidating its assets, creditor’s rights, and debts for cancellation.

Liquidation is the last part before a company’s deregistration.

Therefore, you’d better not do business with a company in such status. If it owes you money, you should collect the debt from it as soon as possible.

6. Deregistration

This means the company has legally ceased to exist.

After the deregistration, the company disappears in the legal sense. The company loses its legal person capacity, similar to the death of a natural person.

In China, a company may be deregistered in three circumstances.

  • The company’s shareholders decide to deregister the company and then it is deregistered after liquidation.
  • The company is imposed the most serious administrative penalty, i.e. revocation of the business license, for its violations, and then is liquidated and deregistered by the shareholders.
  • The company is liquidated and deregistered due to its bankruptcy.

It should be noted that bankruptcy will not appear in the registration status when a company has just commenced its bankruptcy proceedings. The company can be seen liquidated only when it opens the liquidation part of the bankruptcy. Therefore, if you want to know whether a Chinese company is in bankruptcy, you should check the status from other sources.

7. Annulment

This means that the registration of a company is annulled by the company registration authority due to the illegal process of its establishment.

This usually results from illegal usage of others’ information to incorporate a company.

If you want to know more about the due diligence of Chinese companies, please read our post “How to Do I Due Diligence on Chinese Companies to Avoid Scams?“.

 

 

The Cross-border Trade Dispute 101 Series (‘CTD 101 Series’) provides an introduction to China-related cross-border trade dispute, and covers the knowledge essential to cross-border trade dispute resolution and debt collection.

 

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(1) Trade Dispute Resolution
(2) Debt Collection
(3) Judgments and Awards Collection
(4) Anti-Counterfeiting & IP Protection
(5) Company Verification and Due Diligence
(6) Trade Contract Drafting and Review

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Photo by Yusong He on Unsplash

Contributors: Meng Yu 余萌

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