Opinions on Comprehensively Deepening the Reform of Facilitating the Exit of Business Entities

Document number: No. 1 [2024] of Shanghai's regulation

Issued by: Shanghai Municipal Administration for Market Regulation, Shanghai Municipal Tax Service of the State Taxation Administration, Shanghai Municipal Human Resources and Social Security Bureau, Shanghai Municipal Healthcare Security Administration, and Shanghai Provident Fund Management Center

Date of Issuance:　January 18, 2024

　　Status: Full Text Valid

To district-level administrations for market regulation, administration for market regulation of Lingang New Area, the airport branch of Shanghai Municipal Administration for Market Regulation, district-level tax service bureaux, the third tax bureau, district-level human resources and social security bureaus, district-level healthcare security administrations, and district-level provident fund management departments,

　　To further optimize the business climate, smooth the exit channels for business entities, and facilitate the legal and orderly exit of business entities, the following opinions were put forward on comprehensively deepening the reform of facilitating the exit of business entities.

　　I. Deepening the reform of simplified deregistration and optimizing registration procedures

　　Further efforts are to be made to push forward with simplified deregistration, enhance the business entities' sense of gain in handling simplified cancellation registration, and continue to optimize the registration procedures.

　　(1) Determining the application scope for simplified cancellation registration. The simplified deregistration applies to a wide range of companies and specialized farmers' cooperatives except listed joint stock limited companies. Self-employed businesses that handle the simplified deregistration procedures do not need to be made public, and the registration authority will transfer applications to the tax department.

　　(2) Launching simplified deregistration objection precheck service. Relying on the online service platform called Shanghai Online Business Registration, business entities can file precheck applications online prior to the simplified deregistration or the announcement period, the tax, human resources and social security departments can perform information interaction with business entities in advance, so as to facilitate business entities to obtain the precheck results online and take the corresponding measures in advance. In the event of any objection, the relevant matters can be handled before the announcement.

　　(3) Establishing a simplified deregistration fault-tolerant mechanism. If the deregistration is rejected under the circumstances like equity (investment interests) freezing, pledge or chattel mortgage due to the inclusion of entities in the directory of companies with "abnormal business operations", or because of objections raised by the tax, human resources and social security departments, applications can be filed for a second time for simplified deregistration after the disappearance of the above circumstances. If the letter of commitment submitted by business entities is not up to standard in terms of the word and form, the registration authority will accept their applications for simplified deregistration after they make a rectification. There is no need to re-announce the deregistration notice.

　　II. Solving the problem of lack of investors and legal representatives to smooth exit channels

　　Multiple measures will be taken to smooth exit channels by solving problems such as difficulties in forming resolutions or failure to sign materials due to the absence of investors and legal representatives in the process of deregistration of business entities.

　　(4) Notifying shareholders by way of announcement Where a notice fails to be given to all shareholders of a limited liability company due to the loss of contact of a shareholder and his/her refusal to cooperate, it may be given by way of announcement on a newspaper above the provincial level. Afterwards, a shareholders' meeting shall be convened to form a resolution that must be voted on and approved by a certain proportion of shareholders as stipulated in laws and the articles of association. Upon completion of the liquidation according to laws, an application shall be filed to the registration authority for deregistration.

　　(5) Defining the liquidation responsibilities of relevant entities. If the deregistration materials of the invested business entities cannot be signed because the shareholders (investors, affiliated firms) have been deregistered, the superior administrative units of the deregistered entities, the shareholders registered at the time of deregistration or other legal successors can sign the resolution and handle the deregistration.

　　(6) Combining legal representative change and deregistration procedures. If the legal representative of a company is unable to sign the deregistration application materials due to his/her loss of contact, non-cooperation or death, there is no need to change the legal representative, and the person in charge of the liquidation group legally established by the company's shareholders can sign the deregistration document. If the deregistration document must be signed by the legal representative, the deregistration can be handled with the application materials signed by the new legal representative.

　　III. Strengthen the linkage between the government and the court to promote the use of judicial process in the exit mechanism

　　Governmental agencies shall work with the people's courts to continuously improve the quality and efficiency of business entities exiting the market through judicial process, and actively promote the rapid liquidation of business entities undergoing compulsory liquidation and bankruptcy procedures.

　　(7) Overcoming liquidation difficulties through compulsory liquidation. If the liquidation obligor fails to perform the liquidation obligations or it is difficult to establish a liquidation group to carry out liquidation, the shareholders or creditors may apply to the people's court for compulsory liquidation. Upon completion of the liquidation, the liquidation group shall apply to the registration authority for deregistration with the people's court's ruling on the termination of compulsory liquidation and other materials.

　　(8) Simplifying procedures and materials for the deregistration of bankrupt companies The administrator shall directly handle the deregistration of bankrupt companies and its branches with the people's court's ruling on the termination of bankruptcy proceedings, the decision on the appointment of the administrator, and the deregistration application. The tax clearance certificate and deregistration announcement procedure are not required. If the business license cannot be fully returned, the administrator shall issue a statement, and the registration authority shall announce the cancellation of the business license through the National Enterprise Credit Information Publicity System.

　　(9) Supporting the administrators in performing their duties in accordance with laws If the deregistration materials need to be sealed by bankrupt companies, the materials may be sealed by the administrators. Where the signature of the legal representative of a bankrupt company is required, the person in charge of the administrator may sign the materials.

　　IV. Optimizing the functions of the deregistration digital service platform to facilitate online processing

　　Efforts will be made to improve the functions of the online service platform called Shanghai Online Business Registration, fully capitalize on the advantages of online processing of the platform, and provide legal, clear and transparent deregistration services for business entities, so as to effectively meet their actual needs for convenient and efficient exit from the market.

　　(10) Adding departments for handling deregistration on online service platforms. It is imperative to further expand the range of departments that can cooperate with the deregistration business through the Government Online-Offline Shanghai, and incorporate more deregistration services of departments closely related to the deregistration of business entities into the deregistration module of Shanghai Online Business Registration.

　　(11) Carrying out the reform of e-deregistration. Shanghai will accelerate the digital transformation of the business entity deregistration model and improve the functions of Shanghai Online Business Registration by adding application services such as digital signature and business license delivery, aiming to promote the electronic deregistration of business entities. Attempts will be made on the simultaneous processing of business license cancellation and tax deregistration.

　　V. Supporting business entities in closing temporarily according to the actual situation to reduce their maintenance cost

　　A buffer will be provided for the business entities that experience temporary hardship, which will allow them to moderately "hibernate" via closure to reduce their maintenance cost.

　　(12) Seeking "one-window handling" for closure matters Business entities can submit the closure application through the Shanghai Online Business Registration, and the market regulation department will synchronously share the closure information with the tax, human resources and social security, provident fund, and healthcare security departments. This will achieve the "one-window handling" for closure matters. The relevant department will inform business entities of the handling results through the online service platform.

　　(13) Taking differentiated management measures for entities in the closure period The registration authority shall not identify the business entities in the closure period as those that "fail to open business for more than six months without justifiable reasons after its establishment, or voluntarily cease business for more than six consecutive months after opening", include them as those that will be liquidated for their non-operation for a long time, regard them as those that are "unable to contact via the registered domiciles or business premises", and list them as companies with "abnormal business operations" or marked as abnormal business status. A business entity that goes out of business may apply to the registration authority for the replacement of its domicile with the address where legal documents are sent. If the rental relationship of the original domicile has been terminated, it may be used by other new business entities as their domiciles.

　　(14) Standardizing the responsibilities of business entities in the closure period and regulatory measures Business entities in the closure period shall publish the annual reports on time. Business entities that have filed closure applications are, in principle, not included in the library of companies that shall undergo special inspections and double random inspections. Generally, active inspections like "double random inspections and public disclosure" will not be conducted except for handling of complaints, reports and other problems.

　　(15) Smoothing closure exit channels Where a business entity resumes operations after closure, it shall be made public on the National Enterprise Credit Information Publicity System. If the business entity ceases to operate after closure, there is no need to announce the resumption of operations. The deregistration procedures shall be handled according to laws after liquidation.

　　The Opinions took effect on February 18, 2024 and will expire on February 17, 2029.

　　Shanghai Municipal Administration for Market Regulation

　　Shanghai Municipal Tax Service of the State Taxation Administration

　　Shanghai Municipal Human Resources and Social Security Bureau

　　Shanghai Municipal Healthcare Security Administration

　　Shanghai Provident Fund Management Center

　　January 18, 2024