Issues Concerning the Civil Liabilities in the Case of Disappearance, Closeout, etc. of the business license

 2018-06-22  8


· Area of Law: Legislative Affairs Judicial Assistance

· Level of Authority: Local Judicial Documents

· Date issued:10-09-2001

· Effective Date:11-07-2001

· Status: Effective

· Issuing Authority: Beijing Municipality

 

Opinions of Higher People's Court of Beijing Municipality on Some Issues Concerning the Subject of Action and the Assumption of Civil Liabilities in the Case of Disappearance, Closeout, Dissolution, Revocation of the business license or Deregistration of Enterprises
(Adopted on October 9, 2001 at the 22nd meeting of the Judicial Committee of Beijing Higher People's Court)
According to the General Principles of the Civil Law of the People's Republic of China, the Civil Procedure Law of the People's Republic of China, the Company Law of the People's Republic of China, and the relevant judicial interpretations of law, as made by the Supreme People's Court, some opinions as follows are hereby given with regard to the problems concerning the judgment of the status of a subject of action, the subject of liquidation and the assumption of civil liabilities, as arising in the judicial practice in the case of disappearance, closeout, dissolution, revocation of the business license or deregistration of an enterprise:
I. Actions in the case of disappearance of an enterprise
(1) If, in an action, the legal person license of the enterprise (defendant) has not been cancelled, though, the court cannot find out the whereabouts of the enterprise either in its principal place of business, place where its principal office was located, or place of registration as a legal person, as furnished by the plaintiff, the court shall request the plaintiff to give further information about the address of the defendant; in the case of failure of the plaintiff to give such further information or where such further information still cannot give the whereabouts of the enterprise, the case shall be deemed not in conformity with the provisions of Article 108(2) of the Civil Procedure Law, and the court may make an order to reject the complaint.
Where there is a joint debtor (joint defendant), who has not disappeared and can respond to the charges, the service to the disappeared defendant shall be made by announcement.
(2) Where the enterprise does not respond to the charges or appear before the court but it has property and personnel at its principal place of business, place where its principal office is located or place of registration as a legal person, it shall be served either by announcement or by delivery to such place.
II. Actions in the case of closeout of an enterprise
(3) The closeout of an enterprise means the enterprise has permanently ceased its business activities. Closeout of an enterprise is a form of termination of an enterprise. In practice, closeout is generally realized in two ways: the enterprise itself applies for closeout; or if the enterprise has not conducted any business activities after six months from receipt of its business license or if the enterprise has ceased its business activities for at least a year, such enterprise shall be deemed as closed. Where an enterprise suspends its business for reorganization but not for termination, it shall not be deemed as closed.
(4) If, in an action, according to the evidence furnished by the plaintiff, the court ascertains that the enterprise (defendant) has ceased its business activities for at least a year and that is not a suspension of business for reorganization, the enterprise may be held as closed .
Where the enterprise has no property or personnel but it is ascertained that the corporate seal and the license of the enterprise are kept by the competent authority at the higher level, the enterprise shall be deemed as closed even though it is not in any of the situations as specified in (3).
The annual check-up a closed enterprise shall affect the court's judgment as whether the enterprise has been closed.
(5) Any closed enterprise shall conduct liquidation according to law. The closed enterprise shall keep its legal person status until its deregistration.
(6) Where, after an enterprise is closed, a liquidation group is formed for the liquidation of the credits and debts of the enterprise, such liquidation group shall enjoy the legal person status in place of the closed enterprise, and shall be the defendant in any action brought by a creditor against the closed enterprise.
(7) If, after an enterprise is closed, no liquidation group is formed for the liquidation of the credits and debts of the enterprise, the creditor may sue the closed enterprise and the subject of liquidation as joint defendants.
The court shall also accept the case even the creditor brings an action only against the closed enterprise.
(8) The court shall accept the case, if, after an enterprise is closed, a creditor brings an action against the subject of liquidation, requiring the latter to bear liabilities for shortage of investment, illegal withdrawal of capital, illegal transfer of property for shirking liabilities or liquidation responsibility.
(9) If, after a case has been filed for first instance, the defendant is found to have been closed, the court may, at the application of the creditor, add the subject of liquidation as a joint defendant.
(10) In the event that a debtor is closed out during second instance, if a liquidation group has been formed for the liquidation of credits and debts of the debtor, such liquidation group shall directly take the place of the closed enterprise and become the subject of action; if no liquidation group has been formed for the liquidation of credits and debts of the debtor, the proceedings shall remain in progress. To render the subject of liquidation to be liable for shortage of investment, illegal withdrawal of capital, illegal transfer of property for the purpose of shirking liabilities or liquidation responsibility, the creditor shall bring a separate action.
III. Actions in the case of dissolution of an enterprise
(11) The dissolution of an enterprise means that the enterprise, according to the decision of the competent authority at the higher level, makes deregistration by itself or through the competent authority at the higher level so that the legal person status of the enterprise goes out of existence. Upon the decision of dissolution, the enterprise shall liquidate its credits and debts according to law, and the deregistration shall be made after such liquidation.
The term “dissolution of an enterprise” only means that where it is decided that an enterprise is to be dissolved but the formalities for deregistration has not been handled or completely handled. Matters relating to an enterprise that has made the deregistration shall be handled according to the provisions for deregistered enterprises.
(12) In the case of dissolution of an enterprise, if a liquidation group is formed for the liquidation of credits and debts of the enterprise, such liquidation group shall be the subject of action, and may bring actions and respond to charges. For any action brought by a creditor against the dissolved enterprise, the liquidation group shall be the defendant.
(13) In the case of dissolution of an enterprise, if no liquidation group is formed for the liquidation of credits and debts of the enterprise, the authority making the decision of such dissolution shall participate in proceedings as the subject of liquidation. The dissolved enterprise and the authority making the decision of the dissolution shall be joint defendants in any action brought by a creditor.
(14) The court shall accept the case if, after an enterprise is dissolved, any creditor brings an action against the authority making the decision of such dissolution, requiring the latter to assume liquidation responsibilities.
IV. Actions in the case of revocation of the business license of an enterprise
(15) The revocation of an enterprise's business license is an administrative sanction on a violating enterprise given by the administrative department of industry and commerce in accordance with laws and regulations concerning the administration of industry and commerce. Though an enterprise legal person loses its capacity of conducting business after its business license is revoked, its legal person status shall remain in existence until the its deregistration.
(16) In the case of revocation of the business license of an enterprise, if a liquidation group is formed for the liquidation of credits and debts of the enterprise, such liquidation group shall be the subject of action, and shall be the defendant in any action brought by a creditor against the enterprise whose business license has been revoked.
(17) In the case of revocation of the business license of an enterprise, if no liquidation group is formed for the liquidation of credits and debts the enterprise, the same enterprise and the subject of liquidation shall be joint defendants in any action brought by a creditor.
If a creditor brings an action only against the enterprise whose business license has been revoked, the court shall accept the case.
(18) If, after the business license of an enterprise is revoked, a creditor brings an action against the entity setting up the enterprise or the subject of liquidation, requiring the defendant to assume liabilities for shortage of investment, illegal withdrawal of capital, illegal transfer of property for shirking liabilities or liquidation responsibilities, the court shall accept the case.
(19) If, after a case has been filed for the first instance, it is found that the business license of the defendant has been revoked, the court may, at the application of the creditor, add the subject of liquidation as a joint defendant.
(20) In the event that a debtor's business license is revoked during the second instance, and a liquidation group has been formed for the liquidation of credits and debts of the debtor, such liquidation group shall directly take the place of the enterprise whose business license has been revoked and become the subject of action; if no liquidation group has been formed for the liquidation of credits and debts of the debtor, the proceedings shall remain in progress. To render the subject of liquidation to be liable for shortage of investment, illegal withdrawal of capital, illegal transfer of property for shirking liabilities or liquidation responsibilities, the creditor shall bring a separate action.
(21) In the case of revocation of the business license of a creditor, if a liquidation group is formed for the liquidation of credits and debts of the creditor, such liquidation group shall participate in the proceedings as a subject of action and succeed to the creditor's rights and obligations in the proceedings.
In the case of no liquidation group, the subject of liquidation may apply for participating in the proceedings as a joint plaintiff; the fact that the subject of liquidation does not apply for such participation shall not affect the progress of the proceedings.
(22) In the case where the business license of an enterprise has been revoked and no liquidation group is formed, if the subject of liquidation has its business license revoked or makes deregistration earlier than the enterprise does, the proceedings shall remain in progress because the legal person status of the enterprise has not disappeared.
If the subject of liquidation has formed a group of liquidation prior to the revocation of the business license the enterprise, such liquidation group may participate in the proceedings together with the enterprise as a joint subject of action. If the subject of liquidation has its business license revoked earlier than the enterprise does and no liquidation group is formed after such revocation, or if the subject of liquidation makes deregistration earlier than the enterprise does, no action shall be taken against any of them.
V. Actions in the case of deregistration of an enterprise
(23) An enterprise shall cease to have a legal person status upon its deregistration.
(24) In the case of deregistration of an enterprise, if the subject of liquidation or any third person has undertaken to the administrative department of industry and commerce that he shall succeed to the credits and debts of the enterprise, the creditor may bring an action against such subject of liquidation or third person, rendering them to be liable for the clearance of debts.
(25) In the case of deregistration of an enterprise without being liquidated, if any third person undertook to be responsible for the liabilities of the enterprise when the enterprise was deregistered with the administrative department of industry and commerce, the creditor may bring an action either against the subject of liquidation or against such third person, rendering them to be liable for the clearance of debts; the creditor may also brings an action against both of them, requiring the joint defendants to assume the joint liabilities for debt clearance.
(26) Where a deregistered enterprise is a creditor, if there is a successor of the rights and obligations of the deregistered enterprise, such successor may apply for taking the place of the deregistered enterprise and becoming the subject of action; if there is no successor of the rights and obligations of the deregistered enterprise or the successor states not to participate in the proceedings, the proceedings shall be terminated.
VI. Subjects of liquidation
(27) The subject of liquidation shall be determined in light of the ownership of the enterprise that is closed, dissolved, has its business license revoked, or is deregistered:
1) In the case of a state enterprise, the competent authority at the higher level shall be the subject of liquidation;
2) In the case of a collectively owned enterprise, the entity or department setting up the enterprise or the investor of such enterprise shall be the subject of liquidation;
3) In the case of a jointly operated enterprise, all investors of the enterprise shall be the subjects of liquidation;
4) In the case of a subsidiary of any parent company, the parent company shall be the subject of liquidation;
5) In the case of a limited liability company, all shareholders of the company shall be the subjects of liquidation;
6) In the case of a joint stock limited company, the subjects of liquidation shall be those as specified by the articles of association of the company or appointed by the shareholders' meeting to be responsible for liquidation; if the shareholders' meeting fails to appoint a liquidation group, the shareholders who have appointed members of the board of directors shall the subjects of liquidation;
7) The liquidations of foreign investment enterprises shall be conducted according to the Measures for Liquidations of Foreign Investment Enterprises, for which, a liquidation group (liquidation committee) shall be formed. If no liquidation group is formed, all shareholders shall be the subjects of liquidation. In the case of a Chinese-foreign equity joint venture or a Chinese-foreign contractual joint venture, if the foreign party no longer exists, the Chinese shareholder shall plead for applying the special liquidation procedures so as to conduct special liquidation, for which, a special liquidation committee shall be formed. If no special liquidation committee is formed, the Chinese shareholder shall be the subject of liquidation.
(28) If a creditor brings an action against someone who is not the right subject of liquidation, the court shall make an order to reject the complaint.
(29) Where there is a relatively large number of shareholders of a company, if any creditor is to bring an action against the shareholders, requiring them to assume liquidation responsibilities, such action may be brought either against all of the shareholders or against some of them.
Where a creditor brings an action against some of the shareholders of a company, such shareholders shall be those specified by the articles of association of the company to be responsible for the liquidation, or the major shareholders of the company, or shareholders who have appointed members of the board of directors.
However, where a creditor requires the shareholders to assume liabilities for shortage of investment, illegal withdrawal of capital or illegal transfer of property, the defendant shall be the shareholder who should be responsible for such shortage of investment, illegal withdrawal of capital or illegal transfer of property.
(30) Where a creditor applies for adding any subject of liquidation after he has brought an action against a limited liability company or joint stock limited company, if there is a relatively large number of subjects of liquidation and no liquidation group can be formed according the relevant provisions, the court may directly decide the membership of the liquidation group and specify a time limit for the liquidation, provided that the members of such liquidation group thus designated by the court shall be the shareholders who have appointed members of the board of directors.
VII. Civil liabilities of subjects of liquidation
(31) The basic civil liability of a subject of liquidation participating in proceedings shall be the liquidation responsibility.
Liquidation responsibility includes: 1) to clear up the assets, credits and debts of the relevant
enterprise, and to satisfy the claims made by the creditors with assets of the relevant enterprise; 2) to apply for bankruptcy of the debtor in accordance with the relevant provisions of the Bankruptcy Law and the Civil Procedure Law, if the assets of the relevant enterprise falls short to clearing off its liabilities.
(32) When ordering any subject of liquidation to assume any liquidation responsibility, the court shall specify a time limit for such liquidation. Such time limit shall be decided by the court according to the specific circumstances and, generally shall be a period of six months.
(33) Where a creditor brings an action against both an enterprise and the subject of liquidation, if the subject of liquidation is held responsible for the liquidation, the court shall make a judgment that the debtor should perform his obligation of performance, and that the subject of liquidation should assume the liquidation responsibility and the liability for clearing off the debts with the debtor's property subject to liquidation.
Where a creditor brings an action only against the subject of liquidation, requiring the latter to assume liquidation responsibilities, the court may make a judgment that the subject of liquidation should assume the liquidation responsibilities.
(34) Where any subject of liquidation fails to perform its liquidation responsibility within the time limit specified by the court, or within one year after the closeout, dissolution, or revocation of the business license of the relevant enterprise, the creditor may directly apply to the court for the court's designating the personnel from the relevant entity to make liquidation. Where any intermediary agency is designated by the court to make such liquidation, the liquidation expenses shall be borne by the subject of liquidation.
(35) Where any subject of liquidation fails to perform its liquidation responsibility within the time limit specified by the court, or within one year after the closeout, dissolution, or revocation of the business license of the relevant enterprise, and such failure causes any loss or depreciation of or damage to the property of the enterprise, which results in actual damages to the creditor's right of claim, the subject of liquidation shall be liable for such damages to the creditor.
The above-mentioned liability for damages shall be limited to the extent that such damages to the creditor are caused by the failure of the subject of liquidation to perform its liquidation responsibility.
(36) Where any investor of an enterprise, as subject of liquidation, falsely states its investment amount though the amount actually made by it is up to the minimum amount as specified by law for an enterprise legal person's registered capital, or commits any act of illegal withdrawal of capital or illegal transfer of assets for shirking liabilities, such subject of liquidation shall be liable for the damages to the creditor to the extent that such damages are caused by any of the above-mentioned illegal acts of the subject of liquidation.
(37) Where any investor of an enterprise, as a subject of liquidation, falsely states its investment amount and the amount actually made by it is not up to the minimum as specified by law for an enterprise legal person's registered capital and, by the time of the action, the capital owned by the enterprise is not up to such minimum amount, the enterprise shall be considered not having a legal person status. If the enterprise's property falls short of clearing off its debts, the subject of liquidation shall assume the liabilities for such clearance.
(38) If, when deregistering an enterprise with the administrative department of industry and commerce, any subject of liquidation undertakes to be responsible for the remaining credits and debts of the enterprise, or falsely states that the enterprise's credits and debts have been completely settled, such subject of liquidation shall be liable to the relevant creditor for clearance.
Where any creditor fails to claim his rights during the liquidation of an enterprise, he shall lose his right to clearance after the liquidation of the enterprise's credits and debts has been duly completed, and in this case, the subject of liquidation shall not be liable to such creditor.
(39) Where any creditor does not require the subject of liquidation to assume the liquidation responsibility but to assume the liabilities for damages or satisfaction either alone or together with the relevant enterprise, if there is no reason for the subject of liquidation to assume any of such liabilities, the court shall make a judgment rejecting the claim made by the creditor against the subject of liquidation.
VIII. Miscellaneous
(40) Where any enterprise has its business license revoked, since its capacity for rights and capacity to act are restricted, it shall cease all business activities other than liquidation. Where a liquidation group is formed, such liquidation group shall be the subject of action, and the group leader shall be the person in charge. Where no liquidation group is formed, the court shall indicate the enterprise in legal documents and give accounts, in the statement of facts ascertained, for the revocation of the enterprise's business license.
The legal representative, person in charge or authorized agent of an enterprise with its business license revoked may participate in proceedings in the capacity of the legal representative, person in charge or authorized agent of such enterprise. If any alleged legal representative or person in charge fails to prove such capacity of his, he shall be required to present a certification issued by the administrative department of industry and commerce or the relevant entity.
(41) Where, in any proceedings, the creditor claims that the enterprise (defendant) has falsely stated its investment amount, the burden of proof relating to such claim shall be on the enterprise or the entity setting up the enterprise.
(42) Where any liquidation group serves as the subject of action, or where any enterprise and the subject of liquidation serve as joint subjects of action, the cause of action shall be determined according to the provisions of the Supreme People's Court concerning the causes of action for economic cases, and the cause of action thus determined shall not be changed for the participation of the liquidation group or subject of liquidation in the proceedings.
Where any creditor brings an action against a subject of liquidation requiring the latter to assume the liquidation responsibilities, the cause of action shall be determined as enterprise liquidation.
Where any creditor brings an action against a subject of liquidation requiring the latter to be liable for any shortage of investment, illegal withdrawal of capital or illegal transfer of property, the cause of action shall be determined as tort and damages.
(43) The present Opinions shall come into force as of the day when they are issued. If there is any discrepancy between the Answers to Problems Arising in the Trial of Economic Cases, as made by this court, or any other opinions as given by this court and the present Opinions, the latter shall prevail. The present Opinions shall apply to cases which have been accepted but not concluded by the effective date the present Opinions.