Taiwan has a bankruptcy legislation that guarantees creditors their right to share the assets of the bankrupt company proportionally. Secured interests in property are acknowledged and put into practice through a registration system. In this article, our company formation agents in Taiwan explain how to close a company in Taiwan.
Investors who believe that it is favorable to end the activities of a business that is struggling financially can opt for voluntary company liquidation in Taiwan, which is initiated by the debtor company and not by its creditors.
Winding up a company in Taiwan involves several mandatory steps and it is handled according to the Company Act and other relevant laws, such as the Bankruptcy Law. For the purpose of ending the activities of a company, all Taiwan-registered legal entities are subject to local bankruptcy proceedings.
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The liquidation procedure in Taiwan
The liquidation phase includes the steps needed to gather the company’s assets and pay its creditors. If any assets remain afterward, they are distributed among the company shareholders. Once this step is complete, the company can be closed, meaning that it will be wound up.
Voluntary winding up a company in the Philippines is generally simpler and more direct compared to liquidation during bankruptcy.
A prior evaluation performed by our team which also specializes in Taiwanese company registration is useful before the start of the procedure needed for winding up a company in Taiwan. Our team can also help you open a company in Taiwan.
Company liquidation steps
Under the Company Act, the company liquidation in Taiwan is performed by the company directors. Exceptions apply if stated otherwise in the Articles of Association or if the shareholders already named a liquidator.
Our team lists some of the key phases required to close a company in Taiwan:
- During the liquidation period in this country, the liquidator has to inspect and liquidate the company assets and draft the financial statements, as well as perform a property inventory.
- The liquidator has to submit the above-mentioned documents to the supervisors in order to be examined and obtain the shareholders’ meeting approval, as well as to file them with the court.
- The liquidator must issue a public notice requiring creditors to submit their claims. This is an important step in winding up a company in Taiwan;
- Once all claims are collected and debts are paid off (including tax liabilities), the liquidator distributes any remaining assets to the shareholders;
- The distribution is done according to each shareholder’s contribution or ownership stake in the company, only after the company’s financial obligations have been settled. If you are a resident of Taiwan and you need legal assistance in closing your company, our team remains at your disposal;
- After performing the steps above, the liquidator has to draft an income and expenses statement and a profit and loss statement for the liquidation within a maximum of 15 days. He/she must file it together with all the statements and records of accounts to the supervisors in order to be reviewed.
Our Taiwanese company formation consultants can provide further details on this matter. We can also help entrepreneurs to set up a company in Taiwan.
The following video summarizes the main requirements for closing down a company in Taiwan:
Closing a branch in Taiwan
Foreign investors can close their companies in Taiwan, including branches. However, some conditions must be met before closing it:
- All debts owed by the branch to third parties must be settled. If the branch’s assets are insufficient to cover these debts, the foreign company must pay them;
- The branch must have ceased its business activities before initiating the liquidation process in Taiwan;
- The branch must end all employment contracts (according to the Labor Law and its regulations).
There are also some specific documents that must be prepared before closing a branch. Our specialists in company formation in Taiwan will mention the most important ones:
- A copy of the board resolution from the foreign company authorizing the liquidation of the Taiwanese branch;
- Financial statements (from the end of the last fiscal year to the date the business closed its operations);
- Copies of business tax and corporate income tax records;
- Seals of the company’s representatives and branch manager;
- The liquidator’s identity document is required;
- The branch’s statutory documents and other official documents.
Our company registration agents in Taiwan can help foreign companies close their branches.
Court-ordered company liquidation
The district court can order the closing of a company in Taiwan. However, this happens in exceptional cases, such as:
- The company cannot financially recover from its debts. Shareholders can submit a petition to the district court to review the company’s situation and, if approved, the court will wind up the company in Taiwan;
- The company does not comply with legal requirements;
- The company has been inactive for more than 6 months and does not declare that it discontinued its business activities.
Our team can help you open a company in Taiwanor close it, depending on your business goals.
Alternatives to liquidating the company
When a company’s assets cannot cover all its debts, the directors must file a bankruptcy petition. However, for public companies there is an alternative option – reorganizing the company. In this case, the company may need to suspend its functioning during the reorganization process. Our company formation specialists in Taiwan will briefly describe the reorganization process.
Reorganization can be a successful alternative to liquidating a company in Taiwan. To pursue this, the company must file a petition with the district court detailing the company’s financial difficulties. It must also demonstrate that reorganization is a suitable option for reviving its business operations.
If approved, the court will appoint a reorganizer to manage the company’s affairs and oversee the restructuring process. The court will also appoint an inspector to monitor the reorganization process.
If you are interested in knowing more about the reorganization option for a legal entity that is in financial difficulty, our agents who specialize in Taiwanese company formation can answer your initial questions.
Statistics concerning dissolved companies
Investors do not think about the possibility of having their company dissolved or for it to have its licenses revoked when they first start the process needed to set up a company in Taiwan. However, this is a reality and according to the Department of Statistics, the number of companies that were dissolved or had their licenses revoked in May 2024 was 2,015. Other data shows that:
- in May 2023 there were 1,869 entities that were dissolved or that had their license revoked;
- in June and September 2023, there were 2,600 companies in this situation and 2,108, respectively;
- in January 2024, 2,155 companies were dissolved or had their license revoked.
If you have more questions about a Taiwan company liquidation, or for assistance to open a company in Taiwan, please contact us.