On May 27, the State Administration for Industry and Commerce (“SAIC”) and the State Administration of Taxation (“SAT”) jointly issued Notice Gong Shang Qi Jian [2016] No. 97 on cleaning up long-time dormant enterprises to eliminate “zombie enterprises” nationwide and standardize those that operate normally by urging them to submit their annual reports and tax declarations timely and regularly.

The target is enterprises that have failed to submit their annual reports and tax declarations for two consecutive years, except those that have filed for liquidation or entered into insolvency proceedings. If an enterprise has not conducted any business activities for a long time, cannot be reached at its registered or business address and has not declared taxes for two consecutive years, the competent Administration for Industry and Commerce (“AIC”) will revoke its business license in accordance with the Company Law of China (although article 211 sets the time at six months instead of two years).

Other reasons for revocation of the business license include:

  • failure to apply for the new business license (under the “three certificates in one, one certificate one code” policy);
  • failure to register the contact person (i.e., the person in charge of online submission of the annual report);
  • failure to pay social insurance contributions timely; and
  • no capital flows in the bank account for six months.

In addition, SAIC and SAT will exchange information on their platform s, i.e., data on enterprises with abnormal business operation (for SAIC) and data on non-regular enterprises (for SAT).

Date of issue: May 27, 2016. Effective Date: May 27, 2016