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Chapter 10 Corporate Dissolution and Liquidation

Chapter 10 Corporate Dissolution and Liquidation. Terminology Dissolution is the formal extinguishment of the corporation’s legal life. Liquidation is the process of reducing the corporation’s assets to cash or liquid assets.

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Chapter 10 Corporate Dissolution and Liquidation

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  1. Chapter 10 Corporate Dissolution and Liquidation Terminology • Dissolution is the formal extinguishment of the corporation’s legal life. • Liquidation is the process of reducing the corporation’s assets to cash or liquid assets. • Winding up is the whole process of liquidating the assets, paying off creditors, and distributing what remains to shareholders.

  2. Two Fundamental Forms of Dissolution • Voluntary Dissolution • expiry of the term of operation • occurrence of an event triggering dissolution • resolution on dissolution made by shareholders’ meeting or shareholders’ general meeting • Involuntary Dissolution • dissolution required by a merger or division • business license revoked • company ordered to be closed down • dissolution ordered by a court

  3. Regulation in China • Article 182 the company may continue to exist by making an amendment to its articles of association. • Amendment to the articles of association of a limited liability company in accordance with the provisions of the preceding paragraph shall require a resolution passed by a two-third majority of votes cast by its shareholders; in the case of a company limited by shares, such a resolution shall be passed by a two-third majority of votes cast by its shareholders present at a shareholders’ general meeting.

  4. Involuntary Dissolution • dissolution required by a merger or division the acquired company dissolved • business license revoked by Administration of Industry and Commerce • company ordered to be closed down Securities Companies CSRC Insurance Companies CIRC Banks CBRC • Judicial Dissolution

  5. Judicial Dissolution • Article 183 Where a company experiences serious difficulties in its business and the shareholders will suffer serious damages if the company continues its operation, a shareholder or a group of shareholders holding 10% or more of the shares of the company may, in the absence of any other means, request for a mandatory dissolution of the company by a people’s court. Note: Distinguish common lawsuits and judicial dissolution

  6. Thank You !

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