When dissolving a company, why should we need to set up a Liquidation Committee


There is a biological pharmaceutical co., ltd., its production conditions do not meet the standards, the management confusion, a large number of unqualified products are sold in the market illegally which cause accident, the government order it to close. The material suppliers come to ask for debt collection but the company has no answer. How to settle the case?


"Company Law" Article 184 stipulates: If a company was dissolved in accordance with the provisions of S.181 (1), (2), (4) and (5), it should be, within fifteen days, since dissolution, establish a liquidation committee to begin the liquidation process. For a limited liability company, it should be formed by its shareholders, for a shares limited company, it should be formed by its board of directors or by those people nominated at the shareholders' meeting. Failure to establish the liquidation committee, the creditors may apply to court to designate the relevant staff forming the liquidation committee. The court shall accept the application and promptly organize a liquidation committee.

Once the company determines to be dissolved, it should promptly set up liquidation committee to replace the original actuator - board of directors, which specializes in property and debts settlement. According to the above provision, if the government order the closure and the decision in writing deliver, after fifteen days, the company does not set up the liquidation committee, the material suppliers and other creditors may apply to the court seeking for certain personnel designated to form the liquidation committee.

"Supreme People's Court on the application of the "Company Law" provides on several issues (2) Article VII: The Company shall, in accordance with Article 184 of the Companies Act provisions, base on grounds for dissolution, within fifteen days, set up the liquidation committee to begin the liquidation process.

Should any one of the following circumstances occurs, the creditors shall apply to court and the court will accept:

  1. Te dissolved company fails to set up liquidation committee ;
  2. Although the liquidation committee formed, it deliberately delays the liquidation process;
  3. To iquidate illegally which may seriously harm the interests of the creditors or the shareholders .

With the circumstances listed above paragraph 2, the creditor has yet to initiate the liquidation application, shareholders may apply to court for a liquidation committee to liquidate the company, the court should be admissible.

Article 18: limited liability company's shareholders, directors and controlling shareholders of shares limited liability company, if it has not establish liquidation committee within the prescribed time limit which leads to property devaluation, loss, damage or destruction, within the time scope the creditors’ claim, the court will act in accordance with applicable laws.

Limited liability company's shareholders, directors and controlling shareholders of shares limited liability company, if fails to comply with its obligations, causing major properties, account books, important documents and other loss, which make it un-liquidated, the creditors claim its right and liability for corporate debt, the court shall act in accordance with laws. If the above situation cause by artificial, creditors may propose the ultimate beneficial owners of the company to bear the respective civil liability and the company’s debt. The court will act in accordance with the laws.