We have already introduced the basics of the business suspension system in the “Business Suspension System: A Way Out Under COVID-19 in China (I)”. Here are some more key points you may be interested in.

1. What are the requirements of the business suspension period?

The period of business suspension or dormancy shall not exceed three years. When the period of business suspension filed by the company with the registration authority expires or the cumulative period of business suspension reaches three years, the business operation shall be resumed automatically. Where the company decides to close its business permanently, it shall handle the deregistration procedures in time. Where the company decides to extend the period of business suspension, it shall handle the extension procedures accordingly within 30 days prior to the expiry of such period of business suspension. Besides, during the suspension period, the company shall not conduct business activities, otherwise it shall be deemed to have resumed its business operation.

2. What should you do if you want to resume business operation?

Where the company decides to conduct business activities or have already done the same after filing for business suspension, it shall publicize its termination of business suspension within 30 days on the National Enterprise Credit Information Publicity System. If the company fails to publicize such information as required, it may be subject to a fine of not more than RMB 30,000. If any changes of the items registered or filed occur when the company resumes its business operation, it shall handle the change of registration or filing promptly.

3. Is the business suspension system applicable to the circumstance where the company suspends its business operation without permission?

No. It should be noted that the existing laws and regulations in China do not allow suspension of business without permission. Once established, the companies shall maintain its operation. If a company stopped its business operation for some time, the company may be included in the blacklist for abnormal operation and its business license may be revoked. Such companies that have suspended their business operation for a long time are referred to as “zombie companies”. The market supervision administrations of different levels will eliminate such companies by administrative measures.

4. How can you benefit from the business suspension system?

If you choose deregistration, you are pushing the “exit” button. If you want to resume business operation later, you will have to go over all the procedures for company establishment again, such as applying for the business license and obtaining relevant approvals. However, if you choose business suspension, you are pushing the “pause” button. With the business suspension system, the companies can suspend their business legally without deregistering the company and can resume their business operation easily after surviving the difficulties. In other words, the business suspension system allows the struggling companies to take a break while acknowledging the existence of such companies and retaining supervision over such companies.

During the business suspension period, the companies are entitled to their legitimate rights and interests. Some of the benefits are as follows:

  • Reserve the company name;
  • Reserve the trademarks and patents;
  • Reserve the special license or qualification;
  • Reduce the costs of maintaining a registered office, such as rents and utility expenses.

Since the implementation of the business suspension system in China is at its initial stage, more detailed provisions are to be expected. We shall await the specific rules on the tax declaration and payment of social security funds and housing provident funds during such suspension period. But from the perspective of Chinese lawyers specialized in the foreign-related field, we consider it worthwhile to apply for business suspension or the dormant company status to earn yourself some time to overcome the difficulties while staying tuned for the updates related to this system. If you have any questions about business suspension, please contact us via administrator@legalandwise.com.

 

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