Before the cancellation of foreign-funded enterprises, it is important to note that profit distribution should be conducted in advance.

Foreign-funded enterprise A, located in Shanghai, has been operating stably for over ten years and has accumulated considerable distributable profits during this period. Last year, due to the financial constraints faced by its overseas parent company, A was required to quickly complete the cancellation process and transfer the accumulated funds back to the parent company.

In order to reduce expenses, company A decided to assign the cancellation procedures to its internal staff. However, due to the lack of relevant experience, A failed to distribute the profits to the parent company before initiating the cancellation process. Additionally, numerous delays occurred during the cancellation process, resulting in the cancellation work taking a year to complete and failing to be timely. This led to the overseas parent company having to pay additional financing costs exceeding half a million dollars due to the delay in receiving the funds.

Given this, we recommend that foreign-funded enterprises planning to cancel their registration should prioritize the distribution of distributable profits to investors before initiating the cancellation process to avoid delays in the repatriation of funds due to the cancellation procedures.

If enterprises encounter any doubts or require professional advice during the cancellation process, please feel free to contact us for consultation.

Mike Chang

Partner

mikechang@shanghaiinvest.com