On October 10, 2025, China officially implemented the Implementation Measures for the Compulsory Cancellation of Company Registration System (“the Measures”), issued by the State Administration for Market Regulation (SAMR). This policy marks a major step toward improving the efficiency and transparency of China’s corporate exit mechanisms, ensuring that long dormant or non-operational companies are properly removed from the business registry.
Reforming China’s Enterprise Exit System
The introduction of the Measures aligns with the broader reform goals outlined during the Third Plenary Session of the 20th Central Committee of the Communist Party of China. These reforms aim to enhance the business environment by addressing inefficiencies in the enterprise deregistration process. For years, a significant number of companies in China have existed only on paper, either inactive, suspended, or unable to conduct business activities. The new Measures seek to clean up these “dead in name only” entities, promoting a more dynamic and competitive marketplace.
By standardizing procedures and providing clear administrative guidelines, the policy ensures that company deregistration follows a consistent and legally compliant process across all regions. This strengthens corporate governance and enhances the credibility of China’s business ecosystem.
Scope and Eligibility for Compulsory Deregistration
Under the new framework, companies that have failed to apply for deregistration within three years after the revocation of their business license, an order to close, or other administrative actions are subject to compulsory deregistration. This process targets businesses that have effectively ceased operations but remain registered, occupying market resources and administrative capacity.
However, the Measures exempt certain industries, such as commercial banks and other entities requiring prior approval for deregistration recognizing their systemic importance and the potential implications for public interest.
A Transparent and Structured Deregistration Process
The compulsory deregistration process will be conducted through a 90-day public announcement period, during which relevant authorities, creditors, and other stakeholders can raise objections via the National Enterprise Credit Information Publicity System or in writing. If objections are deemed valid, the cancellation process will be terminated. Otherwise, upon expiration of the announcement period, the registration authority will proceed with deregistration, invalidating the company’s business license and terminating its legal existence.
This procedural transparency is designed to ensure fairness and protect the rights of affected parties while streamlining the administrative workload of market regulators.
Reinforcing Accountability and Legal Obligations
A key principle of the Measures is that compulsory deregistration does not absolve shareholders or responsible parties from existing legal or financial obligations. The former shareholders and liquidation obligors remain liable for capital contributions, debts, and other legal responsibilities. This provision is intended to prevent individuals or entities from using deregistration as a means to evade legal or financial accountability.
Moreover, in specific circumstances such as pending litigation or matters involving public interest the registration authority retains the power to reinstate a company’s registration upon request by relevant stakeholders.
Enhancing Interdepartmental Coordination
The implementation of the Measures also calls for stronger data sharing and interagency collaboration. The SAMR will integrate information systems connecting company registration, administrative licensing, taxation, and labor-related authorities. This digital interconnectivity aims to enhance regulatory efficiency, improve monitoring capabilities, and support the enforcement of company deregistration across jurisdictions.
Promoting a Healthier Market Environment
The compulsory deregistration system represents a significant advancement in China’s business environment reform. By removing inactive entities, the policy helps free up valuable market resources such as company names and reduces administrative and judicial burdens. Ultimately, this reform contributes to a more transparent and efficient market, encouraging fair competition and improving the overall quality of economic activity.
The new Measures reinforce the principle of “survival of the fittest” within China’s corporate landscape, a necessary step in fostering sustainable and high-quality economic development.