DissolutionLiquidation.PDF

大成 Salans FMC SNR Denton McKenna Long 1 PRC Labor and Employment Law Newsflash April 2016 Solutions for Employment Relation during Corporate Dissolution/Liquidation Not a few shareholders determine at their discretion to withdraw investment and dissolve their foreign-funded companies as a result of economic downturn in China. Employment relation settlement, employee placement and severance pay constitute an important part of the work of corporate dissolution and liquidation and what the shareholders and the liquidation group concern most. Now I analyze and study on relevant legal issues as below. I. Legal Basis for Ending of Employment Contract Pursuant to item (5) of Article 44 of the Employment Contract Law, an employment contract shall end if the employer has its business license revoked, is ordered to close or is closed down, or decides on early dissolution. It is likely to figure out that a company going through dissolution and liquidation will be closed down eventually and disqualified as a party to the employment contract so that the contract will no longer be performed but cease to be valid. II. End Date of Employment Contract For corporate dissolution upon the shareholders’ decision or resolution, no end date of employment contract is defined in any law or regulation. In practice, “end date” is deemed as, different in opinion: (1) the date when the shareholders make a decision or the shareholder meeting adopts a resolution on dissolution; (2) the date when deregistration is completed with the administration for industry and commerce; (3) the date of formation of the liquidation group; and (4) the date of completion of liquidation (subject to the date when the liquidation group submits the liquidation report to the shareholders or the shareholder meeting). Theoretically, in the event of corporate dissolution, the employment contract ends due to disqualification of the employer as a party to it. In such c