The reason and conditions for the termination of an enterprise

According to relevant regulations, foreign-funded enterprises may terminate their operation if the following conditions occur:

1. Expiry of the operation term;

2. The enterprise suffers great loss and fails to continue its operation;

3. One of the involved parties of a cooperative business fails to implement its obligations as stipulated in the agreement, contract or articles of association and thus deprives the enterprise of the ability to continue its operation;

4. The enterprise suffers severely from force majeure, such as war and natural disaster, and fails to continue its operation

5. The enterprise fails to achieve the expected results and is unlikely to develop in the future;

6. Other conditions for termination as stipulated in the contract of a cooperative business or the articles of association of a solely foreign-owned enterprise;

7. Other conditions in which termination can bring greatest interest to the enterprises.

Procedures

1. If the above-mentioned situation occurs in a foreign-funded enterprise, the Board (or the investors of an enterprise without a board) shall submit to the relevant approval-giving authorities the application to disincorporate, proposed procedure and guidelines for liquidation, and the names of the group in charge of liquidation. Within 15 days after obtaining the approval by approval-giving authorities, the liquidation group shall start the liquidation by assessing the assets of the enterprise, and decide how to liquidate. When the liquidation group starts working, they shall within 10 days notify in written forms the informed creditors to claim their rights and shall within 60 days make public announcement at least twice to notify the uninformed creditors to claim their rights. The enterprise shall report their liquidation results to the Foreign Investment Bureau within 180 days, cancel their registration with the Taxation Bureau, the Customs Office and the Industry and Commerce Administration and make a timely public announcement of its termination.

2. If a cooperative business fails to continue its operation due to the violation of one party of the contract, the other party has the right to require the termination of business according to the contract or relevant regulations. The requirements and procedure are:

A. There are obvious facts that the delinquent party has violated the contract and fails to return to the contract before the deadline stipulated in the contract;

B. The obedient party should inform the delinquent party in written forms such as telex, fax and require the delinquent party to implement all the obligation stipulated in the contract (such as the conditions of investment or cooperation) within a deadline, indicating that if the delinquent party does not do so it will terminate the contract unilaterally;

C. If the delinquent party fails to return to the contract within the fixed deadline, the obedient party may report the facts and its proposed actions to the relevant approval-giving authorities. After obtaining the approval, the obedient party may inform the delinquent party of its decision to terminate in written forms;

D. Within ten days after the delinquent party is informed of the termination of the contract, the obedient party shall submit the notice and report on the termination to the original approval-giving authorities for approval. Within 30 days after obtaining the approval it shall handle the termination procedure and cancel its registration with the Industry and Commerce Administration and make a public announcement.