Closing down a company refers to the process by which a business or organization is made to stop activities or rendered nonexistent. To close down a business means that the company will stop business or cease to operate. Closing a business or company in Taiwan requires some critical steps, which we will be looking into in this article.
Closing a company is a process that entails many steps. In order to successfully close down a company in Taiwan, a legal dissolution has to be processed. Moreover, deregistration has to be done to dissolve the business together with its state of incorporation.
If you are considering closing a business anywhere around Taiwan, this article has got you covered on the process and steps to take.
Common Reasons for Closing Down a Company in Taiwan
Closing down a company in Taiwan can result from a variety of strategic or operational reasons. Business owners may choose to dissolve their company due to long-term unprofitability, where sustaining operations becomes financially unviable. In other instances, companies may be closed as part of a corporate restructuring plan, especially if the business is shifting its focus to other markets or industries. Legal compliance challenges or changes in government regulations may also influence the decision to close. In some cases, companies are established for specific projects, and once those objectives are met, there is no further need to maintain the business entity.
What Are The Different Ways Closing Down A Company In Taiwan?
Different reasons can lead to the closure of a company in different ways. If such a company is to be closed, the owners are obliged to follow particular rules before closure. All creditors involved must be paid in full, the right authorities have to be informed. The bank account of the company will also be closed down. The following are some of the ways companies are closed in Taiwan.
1. Company Dissolution
Company dissolution is the simplest and most cost-effective way to close a company, particularly one that still has a healthy financial situation. But directors must adhere to certain rules before closure. Paying all creditors in full, shutting business bank accounts, and submitting final accountings are other factors needed to be in place.
For full company dissolution in Taiwan, the company needs to have ended trading three months before application. The company’s name will then be stroked off the register after full compliance with essential conditions.
2. Voluntary Liquidation
This is also a solvent liquidation that involves the use of a licensed professional. It is more costly to execute than the regular dissolution. The liquidator takes charge of all the necessary steps and legal actions involved in the liquidation of the company. It is a type of business closure that is instigated by the creditors of a failing company. It is usually adopted when the company is in the debt and the owners feel there is little chance of rescuing the situation.
3. Compulsory Liquidation
This happens when a creditor takes legal action against a company through petitions and lawsuits. If such a petition is granted, compulsory liquidation follows. Winding up of the company begins and the company is eventually closed down and the company name is deregistered from the list of companies. All business assets and properties are then sold to pay creditors and clear off debts.
At Premia TNC, we are concerned about your business and will be ready to provide you with further details regarding company deregistration in Taiwan.
Legal vs. Voluntary Procedures for Closing Down a Company in Taiwan
There are two primary procedures for closing down a company in Taiwan: voluntary dissolution and court-ordered dissolution. Voluntary dissolution is initiated by the shareholders or directors of the company when they decide that continuing business operations is no longer necessary or beneficial. This process typically involves a resolution passed at a shareholders’ meeting and adherence to specific regulatory steps, including tax clearance and deregistration. On the other hand, legal or court-ordered dissolution may occur when a company faces insolvency, bankruptcy, or serious legal violations. In such cases, a court may mandate the closure of the business, and the process is overseen by relevant legal and financial authorities to ensure compliance with all applicable laws.
Company Dissolution in Taiwan
In the case of company dissolution, the legislature in Taiwan guarantees shareholders their right to share the assets of the business proportionally.
To proceed with the close of closing of the company in Taiwan, the business owners have to put a few next steps in place. A liquidator may then be appointed to help oversee the liquidation and closure of the company. Company dissolution in Taiwan entails the following steps:
1. Reach an agreement for business closure
In the case of the voluntary close of company, only the entrepreneurs (in case of numerous owners) or the sole proprietors may agree on the decision to close a company. A meeting may be held for corporations with more than one owner to vote on deciding whether to go ahead with the close of the company or not.
2. Notify and pay workers
The employees of the company have to be informed of the decision. Final wages should be paid. And all debt settled. If the company is undergoing liquidation, the assets of the company may be sold and used to cover up debts.
3. Tax clearance
The shareholders have to ensure all due tax payment has been made ahead of the liquidation date. A final tax return should be done in other to fully exempt the company from incurring tax debts.
4. File articles of dissolution
Once the decision to close a company has been made, the next step is to complete the filling paperwork for dissolution. The dissolution application should include relevant information such as:
- The name of the business
- Date for dissolution to take effect
- Reasons for dissolution
- Information on any legal pending action
5. Complete all legal actions
The liquidator then needs to forward the mentioned documents to the shareholders for examination, after which the documents are submitted to the court. A property inventory alongside the company’s full financial statement should also be included.
Finally, after the company’s accounts are closed, the liquidator must compel the company’s creditors to declare their rights of claim and divide the remaining assets to each shareholder according to the percentage of their contribution.
If you stay in Taiwan and you need professional assistance in closing your company, our team of experts at Premia TNC is always ready to help you with any legal company matters in and around Taiwan.
Post-Dissolution Responsibilities After Closing Down a Company in Taiwan
After closing down a company in Taiwan, certain post-dissolution responsibilities must be fulfilled to ensure full legal compliance. Business owners are required to retain important accounting records and tax documents for several years following dissolution, typically for auditing or legal reference purposes. Additionally, any outstanding liabilities or obligations must be settled, and former directors or shareholders may still be held accountable if unresolved issues arise post-closure. Companies with international stakeholders may also need to provide formal notice to foreign partners, banks, or affiliated entities to prevent complications. Completing these steps helps ensure a smooth transition and avoids future regulatory complications.
Timeframes and Expenses for Closing Down a Company in Taiwan
The timeline for closing down a company in Taiwan generally ranges from two to six months, depending on the company’s structure, financial standing, and how quickly required clearances are obtained. The process involves several administrative procedures, such as obtaining tax clearance from the National Taxation Bureau, submitting dissolution documents to the Ministry of Economic Affairs, and canceling business licenses. The associated costs can vary but often include legal or compliance-related expenses, government filing fees, and accounting or auditing charges, particularly if final financial statements must be prepared. Efficient planning and thorough documentation can help streamline the overall process and minimize delays.
FAQs About Closing Down A Company In Taiwan
What else to take into account after closing down a company?
Note that the dissolution of a limited liability company may have tax implications for the company and other shareholders if not properly addressed. Any tax-related proceedings should be properly planned ahead of time. Keep the company’s accounts and financial records for the period specified by law, even if the company has been closed down.
The financial statements of the company, should be retained for at least ten years after the fiscal year ends. Ensure to cancel any insurance policies and other legal matters associated with the limited liability business after it has been closed down.
Can I close a business with debt?
Yes, a business or a limited company with debt can be closed. If you own or direct a company that have incurred serious debt, closing the company as the best possible solution is possible. However, legal investigation with strict rules usually follows and these might result in severe consequences in case of a fraudulent claim.
Can you start a new company after closing the previous one?
Starting a new company after closing the previous one is possible. However, there might be restrictions to the new company. If a company is liquidated, a new company can be formed at the same time with the same directors. In such a case, the previous name may not be reused, particularly if it had undergone compulsory liquidation.
