Case Studies

Liquidation and WFOE de-registration for a European auto parts company

A European auto parts company decided to close down its factory in China and exit the market due to various reasons. The factory had been operating for the past 10 years and hired 120 employees at its peak.

Acadia was engaged by the client to first design an exit plan. We helped the client to draw out a step-by-step project map indicating the key elements in the exit plan. After presenting the plan to the client’s board, the client gave us the green-light to appoint Acadia as the project lead to carry out the exit plan.

We worked with the client’s China management team to prepare a closure announcement to send to factory employees. We drafted a layoff schedule to let go of the remaining 80 employees in 4 stages and calculated the N+2 severance pay package according to the board decision.

Our finance team worked out an AR/AP schedule to sell the inventory to the factories customers and use the money to pay for the employees’ severance pay. With help from the local management team, the client was able to sell most of the production machinery for more than the residual value.

After we the factory collected all remaining local revenues and paid for all expenses, Acadia helped to make proper adjustments to the accounting books, preparing for tax de-registration. We discussed with the tax authority on key issues that might trigger tax implications, such as overseas intercompany payments, bad debts, and export VAT. In the end, we were able to reach an agreement with the tax bureau on the final tax calculation and completed the tax clearance process.

With the approval from the tax bureau, we also completed the entity de-registration with AIC. Lastly, we helped to remit the remaining balance in the client’s China bank accounts back to the headquarters and close the accounts.

Leave a Comment