Participant in Action Following Revocation of Business License
-----Jason Wang

A participant to a proceeding is commonly a natural person or legal person that has the right to participate in the action. According to the Code of Civil Procedure of the People's Republic of China and judicial interpretations from the Supreme People's Court, types of participants in Chinese legal proceedings are natural person, legal person and other organization. One of the basic principles for participants to legal proceedings is that the participant has direct beneficial relationship with the subject of dispute. The following is a short analysis of a participant to a legal action where it involves the revocation of a business license.

According to China's current Administrative System of Industry and Commerce, enterprises are annually reviewed by the Administration of Industry and Commerce (AIC). When a company does not go though this review, the AIC has the right to revoke the company's business license. So how does a person participate in legal proceedings against a company that has had its license revoked?

One point to consider is that the company's legal position does not automatically disappear. The initial revocation of a business license is an administrative punishment that can be reversed if the company completes the review. The entity is not automatically cancelled so it's legal position remains and it has the right to enter into the legal action, but there different forms of participation that vary depending on the situation associated with the revocation of the business license:

1. If the enterprise is in liquidation, then the liquidation committee should serve as the participant in the proceedings. This situation is legal and common, and is addressed in the Code of Civil Procedures.

2. If the enterprise does not have a liquidation committee, then two situations may arise:

{1} if management of the enterprise is still in place, or if the board still exists, it can form a liquidation committee, which can enter into the action in the name of the entity as a participant in the proceedings.

{2} if nobody can be found, and there is no management or board available to form a liquidation committee, the shareholders of the enterprise may participate in the legal proceedings in the name of the company. It is important to note however, that the Code of Civil Procedures holds that the principal demand of a participant to legal proceedings is there must be direct beneficial relationship with the case. As shareholders do not necessarily meet that criteria, and would wind up assuming an amount equivalent to the amount of contributed capital, it is not a good idea for shareholders to participate.

The above represents my personal view and analysis. As there are always several possibilities in practice, it is difficult to point to one single regulation or interpretation. Overall however, it is important to know the status of who you are dealing with.