After an enterprise legal person has its business license revoked, can it be the subject of litigation? The Supreme Law's Views and the Latest Rules
September 25, 2009, 08:
Author | Attorney Nafisa
Introduction
ZHIHENG URUMQI
The revocation of a business license does not constitute a “death certificate” for a corporate legal person; prior to liquidation and deregistration, the entity may still appear in court in its own name.
Many company executives mistakenly believe that once a business license is revoked, the company “dies” and can no longer participate in litigation. This is a common misconception. In fact, the revocation of a business license is merely an administrative penalty imposed by the competent authority on an enterprise, and it only eliminates the enterprise’s qualification to conduct business.
The termination of a corporate legal person’s status must be effected through lawful liquidation and the subsequent cancellation of its business registration. Prior to the cancellation of its registration, the corporate legal person retains its legal status and may still bring lawsuits or defend in its own name, exercise its rights as a creditor, and assume its obligations as a debtor.
One
Revocation vs. Cancellation: Completely Different Legal Natures
In business and legal contexts, “revocation” and “cancellation” must never be confused with one another.
Revocation of business license:
Property: Administrative penalties are compulsory punitive measures imposed by market regulatory authorities on enterprises that violate the law, such as those engaging in false registration, operating beyond the scope of their business license, suspending operations without justification, or evading annual report submissions.
Consequences: Cease business operations. The company’s business operating license has been forcibly revoked, but its legal person status remains intact.
Cancellation:
Property: is a mandatory procedure for the termination of a corporate legal person’s status; it constitutes an administrative licensing act issued upon application and also represents the sole lawful means for an enterprise to exit the market.
Consequences: Termination of legal person status. Only after liquidation and completion of deregistration can a corporate legal person be deemed to have legally “ceased to exist.”
Key difference:
Revocation is a “passive” penalty, whereas deregistration is a “voluntary” exit. After a business license is revoked, the enterprise may no longer engage in market-related business activities; however, its legal person status remains intact, and it continues to be entitled to claim debts and assume liabilities.
Two
Standing in Litigation: The Supreme People’s Court’s Reply and Judicial Practice
The explanation is the final word.
After a company’s business license has been revoked, does it still possess standing to sue? This issue was once controversial in past judicial practice, but a clear conclusion has now been reached.
In its 2000 replies to the Gansu and Liaoning Higher People’s Courts (Letters No. 23 and No. 24 of the Supreme People’s Court [2000]), the Supreme People’s Court explicitly stated:
After a corporate legal person has its business license revoked, it shall undergo liquidation in accordance with the law. Upon completion of the liquidation proceedings and registration of the company’s dissolution with the administrative authority for industry and commerce, the corporate legal person shall cease to exist. Therefore, from the date on which a corporate legal person’s business license is revoked until the date of its deregistration, such corporate legal person shall still be deemed to be in existence and may engage in litigation activities in its own name.This principle has been incorporated and codified in subsequent judicial interpretations.
Article 64 of the "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" stipulates:
“Where a corporate legal person is dissolved, the corporate legal person shall be the party until it has been lawfully liquidated and deregistered; if it is deregistered without undergoing lawful liquidation, the shareholders, promoters, or investors of the corporate legal person shall be the parties.”
This means that during the “Schrödinger” period between revocation and deregistration, the company remains a proper party to litigation.
Three
Practical Application: Who Represents a Business Whose License Has Been Revoked?
company’s participation in litigation
So, who specifically is authorized to represent an enterprise whose business license has been revoked in litigation?
A liquidation committee has been established:The head of the liquidation committee shall represent the company in litigation.
No liquidation committee has been established:The company shall be represented in the litigation by its former legal representative.
It should be noted here that,Although an enterprise whose business license has been revoked still retains the capacity to be a party in litigation, its legal capacity is restricted; that is, the enterprise may no longer engage in any business activities unrelated to liquidation.
After a company’s business license has been revoked, it shall, in accordance with the law, carry out liquidation, settle its claims and debts, and prepare for the final cancellation registration.
Four
New mandatory deregistration rule: If no deregistration application is filed within three years,
The registration authority may take compulsory action.
The newly revised Company Law of 2023 has established a system for the compulsory cancellation of company registration. In accordance with this, the State Administration for Market Regulation has formulated the “Measures for the Implementation of the Compulsory Cancellation of Company Registration,” which will come into effect on October 10, 2025.
Applicable Conditions:According to this regulation, if a company fails to apply to the company registration authority for cancellation of its registration within three years from the date its business license is revoked, it is ordered to close, or it is otherwise dissolved, the registration authority may compulsorily cancel its registration.
Program:Before the compulsory deregistration procedure is initiated, the registration authority will issue a public notice through the National Enterprise Credit Information Publicity System for a period of 90 days.
Right of objection:During the announcement period, relevant departments, creditors, and other interested parties may file objections.
Core Consequence:Even if a company is forcibly deregistered, the liabilities of its original shareholders and liquidation obligors remain unaffected. This means that creditors can still hold shareholders liable.
Five
Risk Warning: Dual Risks to Enterprises and Creditors
Reminder
For enterprises and shareholders:
Revocation is not a “get-out-of-debt-free card,” and deregistration is certainly not a ploy to evade liability. Attempting to evade debt by directly deregistering without going through liquidation is futile. On the contrary, it may result in shareholders being held jointly and severally liable for the company’s debts, even within the scope of their capital contributions.
When a company applies for deregistration, it must carry out liquidation in accordance with the law and accurately declare its creditors’ rights and liabilities. If a company registers for dissolution without first undergoing liquidation, its shareholders may be held liable for the company’s debts.
For creditors:
Even if the debtor company has had its business license revoked, it may still be designated as a party to the lawsuit. If a company is forcibly deregistered, creditors may, within three years, apply to have the registration reinstated or require the shareholders to assume liability.Six
Key Points of the Case
A construction company was sued in court for failing to pay its material suppliers. After the case entered the enforcement phase, the company’s shareholders proceeded directly toDeregistration (deregister) without conducting liquidation, attempting to evade debts totaling several million yuan.
The executing court ultimately ruled to change the shareholder to the party subject to enforcement, successfully recovering the entire outstanding debt. This case clearly demonstrates that dissolving a company does not serve as the “end” of its debts; rather, it may mark the “beginning” of holding shareholders accountable.
Author
Introduction
Nafisa Shohreti
Partner at Zhiheng (Ürümqi) Law Firm
Business Area
Corporate legal advisory services, corporate dispute resolution, contract disputes, labor disputes, family and marital matters, enforcement and enforcement objections, etc.
Since commencing practice, I have handled over one hundred civil and commercial cases with a multidisciplinary professional skill set, seamlessly integrating the entire dispute-resolution process from litigation through to enforcement. He is particularly adept at resolving complex and contentious disputes, proficient in bilingual services in both Chinese and Uyghur, and capable of seamlessly serving a diverse, multi-ethnic clientele. We are committed to safeguarding our clients’ legitimate rights and interests through efficient and pragmatic strategies, and we strive to provide professional, precise, and client-centered legal solutions.
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Zhiheng · Introduction