Chapter VI Merger, Division, Dissolution and Liquidation

Article 39 Where a specialized farmers cooperative intends to merge with another cooperative, it shall inform its creditors of the matter within 10 days from the date the resolution is made to such an effect. The credits and debts of the merged parties shall be succeeded by the surviving or newly established entity after the merger.

Article 40 Where a specialized farmers cooperative intends to be divided, it shall have its assets divided accordingly, and shall inform its creditors of the matter within 10 days from the date the resolution on division is made. The entities after the division shall bear joint and several liability for the debts of the cooperative incurred prior to the division, except that the written agreement on payment of the debts it concluded with the creditors prior to the division stipulates otherwise.

Article 41 A specialized farmers cooperative shall be dissolved for one of the following reasons:

(1) The causes for dissolution stipulated in the charter arise;

(2) A resolution on dissolution is made by the membership assembly;

(3) Dissolution is necessary because of merger or division; or

(4) Its business license is revoked or its registration is cancelled according to law.

Where a cooperative is dissolved due to the reasons as specified in subparagraph (1), (2) or (4) of the preceding paragraph, a liquidation team composed of the members of the cooperative who are elected by the membership assembly shall be formed within 15 days from the date a cause for dissolution arises, in order to initiate liquidation for dissolution. If a liquidation team cannot be formed at the expiration of the time limit, members and creditors of the cooperative may apply to a people’s court for designating members to form a team for liquidation, and the people’s court shall accept such an application and in a timely manner, designate members to form a liquidation team. Article 42 A liquidation team shall, from the date it is formed, take over the specialized farmers cooperative, and it shall be responsible for disposing of the outstanding businesses which are related to the liquidation, straightening out the assets, credits and debts, distributing the assets left after the debts are repaid, participating in litigation, arbitration or other legal proceedings on behalf of the cooperative and, at the end of the liquidation, handle the formalities for canceling registration.

Article 43 A liquidation team shall, within 10 days from the date it is formed, notify the members and creditors of the specialized farmers cooperative of its formation and announce the matter in newspapers within 60 days. The creditors shall, within 30 days from the date they receive the notification, or for those who fail to receive such notification, within 45 days from the date the announcement is made, declare their claims to the liquidation team. If all the members and creditors receive the notification within the prescribed time limit, the liquidation team shall be absolved from the obligation to make an announcement.

When declaring their claims, the creditors shall explain the matters concerned and provide the certifying documents. The liquidation team shall keep a record of the claims.

During the period of declaration of claims, the liquidation team shall not pay back any debts to the creditors.

Article 44 When a specialized farmers cooperative is dissolved due to the causes specified in the first paragraph in Article 41 of this Law, or when its application for bankruptcy is being processed by a people’s court, it shall not handle any formalities for any member to withdraw from the cooperative. Article 45 The liquidation team shall be responsible for drawing up liquidation plans for paying off the salaries and social insurance premiums of the employees of the cooperative, the taxes in arrears and other debts and for distributing the remaining assets, and shall execute the plans after they are adopted by the membership assembly, or confirmed by the people’s court upon the team’s application.

If the liquidation team discovers that the assets of the specialized farmers cooperative is insufficient to pay off the debts, it shall apply for bankruptcy to a people’s court according to law.

Article 46 When a specialized farmers cooperative is being liquidated for dissolution or bankruptcy, the subsidiaries it directly received from the government which form part of its property shall not be distributed to the members of the cooperative as distributable surplus property, and the measures for disposing of such assets shall be formulated by the State Council.

Article 47 Members of a liquidation team shall be devoted to their duty and perform their duty of liquidation according to law, and they shall be liable for compensation if they intentionally cause losses to the members or creditors of a specialized farmers cooperative or do so through gross negligence.

Article 48 The relevant provisions of the Enterprise Bankruptcy Law shall be applicable to the specialized farmers cooperatives that go bankrupt. However, after the bankruptcy assets are used for paying off the expenses for bankruptcy proceedings and the debts incurred for the common good of creditors, priority shall be given to settling the outstanding accounts resulted from transactions with the farmer members of the cooperatives effected prior to bankruptcy.