Foreword

During the spread of the novel coronavirus, many companies will not survive the economic winter, and it may be a helpless but wise choice to withdraw from the market.With the continuous improvement of China's credit investigation system, just to shut down business without liquidation will bring endless troubles to enterprises and investors.

Compared with compulsory bankruptcy liquidation, enterprises should consider independent liquidation to gain the initiative to exit the market and minimize the follow-up responsibility of investors.With more than ten years of experience in corporate bankruptcy and liquidation, Shanghai Nuo Di Law Firm brings you the legal questions and answers related to independent liquidation.

Question 3: Who is responsible for the liquidation?

Answer: The person responsible for liquidation is not only the shareholders, but also the directors and actual controllers of the joint stock limited company.

Nuo Di’s comment: Article 18 of Rule No. 2 of the Supreme People's Court on some Application Issues of Company Law of the People's Republic of China stipulates:" where limited liability company's shareholders, directors and controlling shareholders of a company limited by shares do not set up a liquidation team to start liquidation  within the statutory time limit, thus cause devaluation or any loss of company property, if creditor claims its debt against them within the scope of the losses and they shall bear the liability for compensation, the people's court shall support it in accordance with the law."

The second paragraph of this article stipulates:"where the shareholders of a limited company, the directors and the controlling shareholders of a joint stock limited company fail to perform their obligations due to negligence, resulting in the loss of the company's main property, account books and important documents, etc., and thus the liquidation is impossible, if the creditors claim that they shall be jointly and severally liable for the company's debts, the people's court shall support it in accordance with the law."

The third paragraph of this article stipulates:"if the above situation is caused by the actual controller and the creditor claims that the actual controller bears the corresponding civil liability for the company's debts, the people's court shall support the claim according to law."

Therefore, according to this law, the person responsible for liquidation is not only the shareholders, but also the directors and actual controllers of the joint stock limited company.

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Question 4: Where the interests of creditors are harmed without liquidation, is there any statue of limitation?

Answer: No. 

Nuo Di’s comment: The meaning of company liquidation for creditors is to liquidate the claims of all corporate creditors with the existing assets of the company. The creditors of the company shall have the right to receive a corresponding share of the creditor's rights in accordance with the law. If the assets of the company are not enough to pay off all the claims, when the company and the creditors can not reach a settlement agreement, the claims are only paid off in proportion through the bankruptcy of the court; If the outcome of the bankruptcy proceedings is that the company has no property available to repay its debts, the creditors' claims must be cleared by law.This is the full contents of liquidation.

After the cause of company dissolution occurs, the subject of liquidation liability fails to liquidate according to law, which directly infringes the right of creditors of the company to obtain the repayment of claims according to law. When the liquidation of the company should be carried out legally till the cancellation of the company according to law, this right of creditors has been continuously violated, which is the "continuous infringement" stipulated by law. Failure to perform the liquidation obligation is both a tort and a serious violation of the company law.

As long as the company is not canceled according to law, the liquidation obligation of the liquidation subject will always exist. Article 20 of Rule No. 3 of the Supreme People's Court on some Application Issues of Company Law of the People's Republic of China makes clear a regulation that where the creditors make a request to the shareholder to make up the capital contribution, if the shareholders defend that the claim exceeds the statue of limitation, the people's court shall not support the defence.With reference to this provision, the shareholders' supplementary contribution responsibility and liquidation responsibility are one of the shareholders' responsibilities, which are completely similar.The shareholder's obligation to liquidate beyond the statute of limitation will not be upheld by the court.

Therefore, there is no statue of limitation for the creditors to claim against shareholders for compensations if they fail to perform their duty of liquidation.

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