Analysis on the Liability of a Company after Forced Cancellation of Registration from the Perspective of Creditors

Author | Attorney Liu Shiqing

Introduction

ZHIHENG

On September 9, 2025, the State Administration for Market Regulation promulgated the “Measures for the Implementation of the Compulsory Deregistration System for Companies” (hereinafter referred to as the “Measures”), which will come into effect on October 10, 2025. This Measures represents the specific implementation of Article 241 of the Company Law, as amended in 2023, concerning the system of compulsory cancellation of company registration, and innovatively establishes mechanisms for filing objections to compulsory cancellation and applying for restoration of registration.

This article aims to analyze, from the creditors’ perspective, the issue of liability following a company’s compulsory dissolution. It focuses on how creditors may, through legal proceedings, assert their rights against the company’s former shareholders and the liquidation obligors, and accordingly proposes relevant recommendations for safeguarding creditors’ interests.

1

The institutional implications of compulsory deregistration

According to Article 2 of the Measures, if a company has not applied to the registration authority for deregistration within three years from the date its business license was revoked or it was ordered to close or be dissolved, the registration authority may, in accordance with Article 241 of the Company Law and Article 8 of the Regulations of the State Council on Implementing the Registered Capital Registration Management System of the People's Republic of China, forcibly cancel its registration.

The implementing authority for this system is the company registration agency, and its primary target is long-dormant “zombie enterprises.” The registration authority may identify enterprises that meet the criteria of “having been revoked, closed, or deregistered for three years without applying for cancellation” and forcibly cancel their registration, thereby achieving market clearance.

In practice, “zombie enterprises” are often subject to compulsory dissolution because the original shareholders or the liquidators are either unable or unwilling to fulfill their liquidation obligations, or because the enterprise’s financial records are in such disarray that liquidation is impossible, thereby leaving creditors’ rights unsecured. In this scenario, how should creditors enforce their rights? The primary issue is to identify the party liable.

Two

The entity responsible for liabilities following compulsory deregistration

Article 241, paragraph 2, of the Company Law and Article 9, paragraph 2, of the Measures both explicitly stipulate that the compulsory cancellation of a company’s registration does not affect the liabilities that the original shareholders and the liquidation obligors are required to bear under the law. Therefore, creditors may assert their rights against the original shareholders and the liquidation obligors.

Sources of liability include statutory obligations and contractual obligations. The liability of original shareholders primarily arises from their failure to fulfill, or their incomplete fulfillment of, their capital contribution obligations. The liable parties include the company’s promoters, the transferors of equity prior to the company’s dissolution, and the ultimate shareholders. The liquidator refers to the entity that is required under Article 232 of the Company Law to perform the liquidation obligations. Directors are the statutory liquidators, unless otherwise provided in the company’s articles of association or unless the shareholders’ meeting resolves to appoint another person.

Therefore, following the company’s compulsory dissolution, creditors may seek recourse from the original shareholders (including founders, historical shareholders, and ultimate shareholders) as well as the liquidation obligors (such as directors or persons designated by the articles of association or the shareholders’ meeting). It cannot be ruled out that creditors may, based on instances during the company’s existence in which directors, supervisors, and senior management have breached their duties of diligence and loyalty to the detriment of external creditors, or where the controlling shareholder or other shareholders have abused the company’s separate legal personality to harm creditors’ interests, pursue the liability of the company’s directors, supervisors, senior management, as well as the controlling shareholder or other shareholders in accordance with the law.

Three

Analysis of the Paths for Creditors to Pursue Liability

After the creditor has identified the liable party, it may assert its rights in the following ways:

To hold the original shareholders liable, it is necessary to verify whether they have engaged in any acts of underpayment or defective capital contribution. In accordance with the Company Law’s provisions regarding the five-year subscription period for capital contributions and the acceleration of debt maturity, creditors may request shareholders who have not fully paid up their contributions to assume liability for repayment within the corresponding scope.

To hold the liquidator liable, it must be proven that they failed to promptly establish a liquidation committee in accordance with the law, resulting in the depreciation or loss of the company’s assets. According to Article 18, Paragraph 1 of the "Judicial Interpretation (II) of the Company Law," the liquidator shall bear liability for damages within the scope of the losses; this liability constitutes general tort liability, and creditors must bear the burden of proof regarding the damages and the causal relationship, which is relatively difficult in practice.

Four

Two Recommendations for Improving the Creditor Protection Mechanism

Based on the foregoing analysis, the current compulsory deregistration system still falls short in protecting creditors. The author hereby offers the following recommendations:

First, creditors may, pursuant to Article 233 of the Company Law, request the court or the relevant administrative authorities—including the department that issued the decision to revoke the business license, order the company’s closure, or dissolve it, as well as the company registration authority—to appoint personnel to form a liquidation committee. Through the liquidation proceedings, they can identify potential liability on the part of shareholders, directors, de facto controllers, and other relevant parties, and thereby assert their rights.

Second, shareholders, directors, controlling shareholders, and the actual controllers of a company subject to compulsory deregistration bear significant fault and liability for the company’s inability to undergo liquidation, thereby harming the interests of creditors. It is recommended to add a direct recourse system for the aforementioned liable parties within the compulsory deregistration regime. This could draw on Article 20 of the "Judicial Interpretation (II) of the Company Law" concerning companies that have been deregistered without undergoing liquidation, clarifying that if a company cannot be liquidated due to compulsory deregistration, creditors may require shareholders, directors, controlling shareholders, and actual controllers to assume liability for the company's debts.

This measure helps compel the entities associated with “zombie enterprises” to actively fulfill their liquidation obligations, safeguard creditors’ rights and interests, and enhance the efficiency of market exit.

Conclusion

The compulsory deregistration system is an important measure for optimizing the market entity exit mechanism, but its implementation must also take into account the protection of creditors’ interests. Only by clearly defining the responsible parties, streamlining the recovery channels, and refining the institutional framework can we achieve a harmonization of legal outcomes and social impact. We look forward to further fostering a business environment that is both honest and orderly, as well as clean and healthy, through institutional improvements and practical exploration.

Author

Introduction

Liu Shiqing

Partner at

, Commercial Arbitrator

New Talents in Foreign-Related Law of the Guangdong Lawyers Association

Member of the Shenzhen Lawyers Association’s Legal Service Group for High-End and Instrumental, Modern Fashion Industries

Member of the Christian Three-Self Patriotic Movement Committee of Bao’an District, Shenzhen/Head of the Legal Affairs Group

Member of the Sixth Shenzhen Shareholder Litigation Research Association

Previously worked at a real estate investment firm, specializing in corporate law and corporate compliance, mergers and acquisitions, equity disputes, and commercial dispute resolution. Has served government entities and large private enterprises, with extensive experience in corporate compliance, economic contracts, equity structuring, family and inheritance matters, and labor‑management disputes. Skilled at effectively resolving conflicts through communication and negotiation.

Areas of Expertise：

Corporate law and corporate compliance, corporate financing and mergers & acquisitions, foreign investment and family succession matters, as well as legal services for administrative and religious affairs.

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Zhiheng · Introduction