Question raised

Company A and Company B filed a lawsuit in court due to a dispute over the purchase and sale contract of goods, and the court ruled that Company A shall compensate Party B for losses of more than one million yuan. During the compulsory execution process, Company A quietly processed the cancellation registration without paying off the above-mentioned debts or notifying Company B to declare its creditor's rights. Upon discovery, Company B, based on the commitment letter submitted by Company A's shareholders to the registration authority during the cancellation process stating that "all debts have been fully repaid, and if the commitment is untrue, I will repay them myself", applied to the court to add or change Company A's shareholders as the executed party, and ultimately successfully obtained compensation.

Lawyer analysis

The "Company Law of the People's Republic of China (Revised in 2023)" (hereinafter referred to as the "New Company Law"), which came into effect on July 1, stipulates five ways of company deregistration: general deregistration, simplified deregistration, compulsory deregistration, deregistration after bankruptcy liquidation, and deregistration after compulsory liquidation. The company's deregistration means the termination of its legal personality, and creditors cannot sue the deregistered company to hold it responsible. However, this does not mean that its outstanding debts will also terminate, and creditors can make claims according to different circumstances.

Firstly, the new Company Law stipulates that for general deregistration and deregistration after compulsory liquidation, the liquidation team should conduct liquidation before deregistering the company. The liquidation team has the authority to clear the creditor's rights and debts, and the members of the liquidation team shall be liable for compensation for the losses caused to creditors due to intentional or gross negligence. Therefore, if the company is deregistered through general deregistration or after compulsory liquidation, creditors may demand that the liquidation team assume compensation liability for outstanding debts.

Secondly, the new Company Law stipulates that if a company has not incurred any debts during its existence or has already paid off all debts, with the commitment of all shareholders, the company registration can be cancelled through a simplified procedure in accordance with regulations. If the company cancels its registration through a simplified procedure and the shareholder's commitment is untrue, they shall bear joint and several liability for the debts before the cancellation of registration. Therefore, if the company is deregistered through a simplified cancellation method, creditors can demand that shareholders bear the responsibility for repaying outstanding debts.

Once again, the new Company Law stipulates that if a company's business license is revoked, ordered to close down, or revoked, and it has not applied for cancellation of company registration with the company registration authority for three years, the company registration authority may make a public announcement through the National Enterprise Credit Information Publicity System, and cancel the company registration after the announcement period expires. If the company registration is cancelled in accordance with the provisions of the preceding paragraph, the responsibilities of the original shareholders and liquidation obligor of the company shall not be affected. Therefore, if the company is deregistered through compulsory cancellation, creditors can demand that the company's shareholders and liquidation obligor (as stipulated by the new Company Law, directors are the liquidation obligor of the company) bear compensation liability for outstanding debts.

Fourthly, according to the Enterprise Bankruptcy Law of the People's Republic of China, if the administrator fails to perform their duties diligently and faithfully in accordance with the law, causing losses to creditors, the administrator shall bear compensation liability in accordance with the law. Therefore, if the company is deregistered after bankruptcy liquidation, for outstanding debts (except for those that have been declared but the bankruptcy property is insufficient to repay), if it is caused by the negligence of the administrator, creditors can also demand that the administrator bear compensation liability.

In addition, according to the "Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) (Revised in 2020)", creditors may also demand that shareholders of a limited liability company, directors and controlling shareholders of a joint stock limited company, and the actual controller of the company bear the responsibility for repaying outstanding debts in the following circumstances: 1) Shareholders of a limited liability company, directors and controlling shareholders of a joint stock limited company, and the actual controller of the company use false liquidation reports to deceive the company registration authority into handling the cancellation of legal person registration; 2) The company's deregistration without liquidation resulted in the inability to proceed with liquidation.