Perspective | What Should Creditors Do When the Company Assuming Guarantee Liability Is Deregistered During the Guarantee Period?

The company assuming the guarantee liability (hereinafter referred to as the "Guarantee Company") does not automatically have its external guarantee obligations extinguished upon dissolution. From the perspective of civil law principles, there are only a few statutory reasons for the termination of creditor-debtor relationships, including repayment, Escrow , set-off, exemption, and other circumstances stipulated by law or agreed upon by the parties. Article 557 of the Civil Code also outlines six statutory scenarios under which a debt is extinguished—but the dissolution of a corporate legal entity is not among them. Therefore, a secured claim does not automatically become extinguished merely because the guarantor entity ceases to exist. In essence, corporate dissolution is a procedural event that does not alter the nature or existence of the underlying claim itself; rather, its impact is limited to the parties involved in the debt relationship, not the claim itself. As commonly understood in legal theory, the completion of the liquidation process merely signifies the transfer of the company’s liabilities from the corporate entity to other parties—without affecting the creditor’s substantive right to enforce the claim.

Specifically regarding guarantee obligations, the dissolution of a company does not automatically discharge the guarantor's liability if the guarantee period is still ongoing. The guarantee contract remains legally valid and effective as long as the company exists, and the guaranteed claims are duly protected by law. Once the company is dissolved during the guarantee period, the legal relationship between the creditor and the guarantor continues to exist—but now, since the guarantor’s legal standing has ceased to exist, the creditor must identify an alternative entity to assume the guarantor’s obligations. In other words, the dissolution of the guaranteeing company does not result in the automatic cancellation of debt obligations; the guarantor’s liability is not "wiped out" simply because of the company’s dissolution. Therefore, the creditor can still enforce rights under the original guarantee contract, though the challenge will be determining "to whom these rights should be asserted."

It is important to note that Article 692 of the Civil Code stipulates that the guarantee period refers to the time frame within which the guarantor assumes liability, and this period cannot be suspended, interrupted, or extended. If the creditor fails to assert the guarantor's liability within the agreed or statutory guarantee period, the guarantor will be exempt from responsibility once the period expires. Furthermore, the dissolution of a company does not cause the guarantee period to be suspended or restarted. Therefore, even if the guarantee company is dissolved, the creditor must still promptly exercise its right to claim the guaranteed debt during the guarantee period; otherwise, the creditor may lose the right to pursue the guaranteed debt due to the expiration of the guarantee period. In short, the dissolution of a company does not affect the continuation of the guaranteed debt, but creditors must pay closer attention to the time limits to avoid losing their ability to recover the guaranteed debt because the guarantee period has lapsed.

In summary, the guarantee liability undertaken by the company as the guarantor during its existence will not automatically cease upon its subsequent dissolution. The guarantee claim remains intact, as the obligation to fulfill the debt simply lacks a direct obligor. Creditors must pursue legal avenues to transfer this responsibility to another qualified entity, thereby ensuring the continuation of their claims. The following sections will explore the specific impact of corporate dissolution on the succession of guarantee obligations, as well as the various legal remedies available to creditors.

When a company undergoes liquidation and dissolution, any remaining assets after settling its debts shall be distributed to shareholders or investors in accordance with the law. Article 236, Paragraph 2 of the Company Law explicitly states: "The company's remaining property shall be distributed according to the proportion of shareholders' contributions or shareholdings." Thus, as successors to the rights and obligations of the company, shareholders naturally assume responsibility for the debts corresponding to the remaining assets they receive, effectively becoming the entities obligated to settle these outstanding liabilities. This legal principle also applies to the assumption of corporate guarantee obligations: If, at the time of the company's dissolution, there are still unresolved or undetermined guarantee debts, then, since the remaining company assets have already been allocated to the shareholders, it follows that the shareholders should bear the responsibility for settling these guarantee debts—up to the extent of the assets they have received. Under the limited liability system, a company's debts are, in principle, settled only within the scope of the company's assets. After the company is dissolved, however, the shareholders become the successors to those assets; therefore, any unpaid debts must continue to be discharged by the shareholders using the company assets they have inherited.

It is important to emphasize that the "inheritance" of a company's debts after its dissolution does not align with the traditional concept of civil inheritance; rather, it represents a unique form of succession rooted in the principle of limited liability. Shareholders who have fully paid their contributions are liable only to the extent of their remaining share in the company’s assets, and their obligation to settle outstanding debts is shared proportionally based on their initial investment or distribution received. Any liabilities exceeding the value of the assets distributed to shareholders will, in principle, no longer be covered by the shareholders’ personal assets—thus preserving the boundaries of their limited liability. As such, shareholders’ responsibility for inheriting the company’s residual debts is strictly capped by the actual value of the company assets they have inherited.

Although the law does not explicitly specify who bears the responsibility for post-dissolution debts of a company, based on the aforementioned principles of civil law and the principle of fairness, judicial practice generally recognizes that creditors can directly assert their rights against the company's original shareholders according to the original creditor-debtor relationship. For instance, in case No. (2022) Jing 01 Min Zhong 6940, the Beijing No. 1 Intermediate Court addressed the situation where a company’s dissolution led to the non-performance of contractual obligations, stating: "Since the education company has now been dissolved, its rights and obligations should be inherited by Zhang." This ruling supports creditors' ability to directly claim breach-of-contract liabilities from the company's shareholder, Mr. Zhang. Similarly, this judicial stance applies equally to guarantee claims: the dissolution of a guarantee company does not prevent creditors from seeking compensation from its shareholders under the terms of the guarantee contract.

Of course, when creditors directly sue shareholders to hold them liable for guarantee obligations, they should take into account the unique nature of rights and responsibilities among shareholders as well as between shareholders and the company. In practice, it is common for all shareholders to be named as joint defendants, with creditors seeking that these shareholders bear joint and several liability—or proportional liability—for repaying the debt, within the scope of any remaining company assets available for distribution. Courts typically rely on this principle when determining the amount each shareholder is required to compensate. Since shareholders are liable only to the extent of their proportionate share of the inherited property value, creditors pursuing this legal route must carefully verify the actual amounts distributed to each shareholder at the time of the company’s dissolution. Moreover, in their lawsuit, creditors should explicitly limit their claims to this exact amount, ensuring compliance with the legal principle of shareholders’ limited liability. It is important to note, however, that if the company’s assets are already insufficient to cover even a single outstanding debt—and thus there is no surplus left for distribution—creditors relying solely on the "property inheritance" theory may face obstacles due to the lack of a tangible basis for inheriting assets. In such cases, creditors might consider exploring alternative legal avenues, such as asserting liability for unlawful liquidation. Simplified Cancellation The joint liability for false guarantees will be enforced, leading to the personal compensation responsibility of the individuals involved.

When a company's guaranteed debt is written off, it may still exist as an "contingent liability," such as when the primary debt has not yet matured or no default has occurred. In such cases, liquidation groups often fail to make repayment arrangements—but this does not necessarily mean that creditors' rights are lost. If, during the guarantee period, the primary debtor subsequently defaults, triggering the confirmation of the guarantor's liability, the debt then becomes a typical post-closure residual obligation. Courts generally hold that liquidation groups have a legal duty to notify and disclose these outstanding or unsettled guarantee claims; failure to do so constitutes illegal liquidation, for which the responsible liquidators must bear corresponding liabilities. In Case No. (2021) Supreme People's Court Min Shen No. 2048, the Supreme Court explicitly stated: A company, acting as a guarantor, knowingly proceeded with liquidation and dissolution despite being aware of its existing external guarantee obligations, without notifying the creditors. This was deemed a failure to fulfill its statutory liquidation duties. Consequently, the court upheld the original trial court's ruling, holding the members of the liquidation group personally liable for repaying the company's guaranteed debts. Thus, even if the guarantee claim has not yet triggered an actual demand for payment at the time of the company's dissolution, the company cannot evade its future guarantee responsibilities by simply going through the dissolution process. Failure to properly manage or disclose such guarantee debts during liquidation could lead to accountability for those responsible once the debts eventually come due.

In reality, many companies opt for the "simplified deregistration" procedure to achieve a swift closure. This process requires all investors to commit that the company has no outstanding debts. However, if it is later proven that this commitment was false, shareholders will be held jointly and severally liable for the company's pre-deregistration debts. Article 240 of the Company Law explicitly states that once a company is deregistered through the simplified procedure, all shareholders assume joint and several liability for the company's debts incurred prior to the deregistration filing. Therefore, in scenarios where a company’s guarantor attempts to evade debt obligations by using the simplified deregistration process, creditors can directly hold all shareholders accountable for settling the debt based on the shareholders' original commitment—without needing to separately prove that the liquidation process was unlawful. For instance, in Case No. (2021) Supreme People's Court Zhi Min Zhong 2123, the guarantor company’s shareholders were ultimately found liable for the company’s debts because their commitment in the "Commitment Letter from All Investors," stating that the company had no unresolved liabilities, turned out to be untrue. This type of commitment liability effectively reinforces the principle that shareholders inherit the company’s debts, enabling creditors to safeguard their rights more effectively.

In summary, the succession of debts following a company's dissolution primarily occurs at the shareholder level through the corporate legal entity guarantor. Whether it is derived from the principle of "succession of rights and obligations" under civil law or arises from the commitment liabilities specifically stipulated in the liquidation process, the original shareholders of the company may ultimately become the entities responsible for assuming the guaranteed debts. Of course, aside from shareholders, other parties bearing responsibility during the company's liquidation and dissolution—such as members of the liquidation committee, actual controllers, directors, and others—may also be held liable to creditors under certain conditions. The following section will analyze the various recovery avenues available to creditors, along with their respective applicable scenarios, by examining relevant judicial cases.

[Case Details] An education consulting company, acting as the debtor, borrowed funds from a financial institution, with shareholder Zhang providing a joint and several liability guarantee. After the loan matured, the debtor failed to repay the debt. During the guarantee period, the education company completed deregistration. Consequently, the creditor filed a lawsuit, seeking liability for repayment from Zhang as the shareholder.

[Referee] The court ruled: "Since the education company has been deregistered, its rights and obligations should be inherited by Zhang." Therefore, the creditor's claim for repayment based on the loan agreement and the guarantee relationship is justified and is hereby upheld.

[Commentary] In this case, the court affirmed the principle that shareholders inherit the company's outstanding debts after its dissolution, particularly under guarantee contracts, where shareholders are required to fulfill the original company's repayment obligations within the scope of the company's remaining assets. Notably, in this instance, Zhang was the company's sole shareholder and also served as the guarantor himself; accordingly, the court directly ordered him to assume full responsibility for repaying the entire debt, further demonstrating its commitment to protecting the interests of creditors.

[Case Details] Mingren Company provided joint and several guarantees for the debts of others. However, during the term of the principal debt obligation, Mingren Company voluntarily dissolved, underwent liquidation, and completed its deregistration—without notifying the creditor, Agricultural Development Bank's certain branch, about the external guarantee obligations. After the principal debtor defaulted, the creditor filed a lawsuit against the principal debtor and subsequently added members of Mingren Company's liquidation committee as defendants.

[Referee] The court found that Yan and other members of Mingren Company's liquidation team, fully aware that the company had assumed guarantee liabilities to the Agricultural Development Bank of China, failed to notify creditors as required by law when proceeding with the company's dissolution. This constituted an illegal liquidation process. Relying on Article 19 and Article 20 of the Second Judicial Interpretation of the Company Law, the court ordered the liquidation team members to assume liability for repaying the company’s guaranteed debts. The Supreme People’s Court dismissed the application for retrial, upholding the original judgment.

[Commentary] This case clarifies the rule under which the liquidation obligor bears liability for compensating on guarantee debts due to failure to fulfill the notification obligation. Specifically, if a corporate guarantor is deregistered during the guarantee period without notifying the creditor, the entity responsible for liquidation must compensate the creditor for any losses incurred as a result—essentially covering the debt in full. Therefore, for creditors, once they discover that the guarantor has been deregistered and they have not received any notice, they should promptly gather evidence to claim compensation for the unlawful infringement of their liquidation rights, thereby indirectly safeguarding their guaranteed claims.

[Case Details] Guokang Company applied for simplified deregistration after providing an external guarantee for a loan, with all investors declaring in the commitment letter that the company has no outstanding debts. However, it was later discovered that there were still unpaid debts, prompting creditors to file a lawsuit demanding that the shareholders assume liability for repayment.

[Referee] The court held that the shareholders of Guokang Company, in their cancellation commitment, assured "no outstanding debts or liabilities, or that all debts have been fully settled." However, this assurance proved to be inconsistent with the actual facts. Therefore, according to the commitment, the shareholders should bear joint and several liability for settling the company's debts. The court ruled that the two shareholders shall jointly and severally repay the debt in question to the creditor.

[Commentary] This case directly establishes the shareholders' liability for repayment based on their commitment to cancel the company, eliminating the need for creditors to separately prove defects in the liquidation process. The shareholder commitments made during the simplified cancellation procedure carry legal force, and any misrepresentation will result in personal liability for the shareholders involved. This approach provides creditors with a more streamlined avenue for recovering their debts: if a guarantee company exits via simplified cancellation without fully settling its obligations, creditors can immediately invoke the shareholders' commitment letter to assert their claims against all shareholders. Such a practice also reflects the court's commitment to safeguarding transactional integrity and upholding the principle of good faith, effectively preventing shareholders from exploiting the simplified cancellation process to evade debt obligations.

As previously mentioned, when creditors encounter a situation where the guarantee company is deregistered during the guarantee period, they generally have three viable or complementary recovery paths to choose from: asserting repayment liability against the company’s shareholders, claiming compensation liability from those responsible for liquidation, and demanding accountability from relevant parties based on the commitment documents. The practical considerations for each of these approaches are discussed below.

Creditors may, based on the original creditor-debtor relationship (such as loan agreements and guarantee contracts), directly sue the shareholders of a company that has been dissolved, demanding that they fulfill their guarantee obligations within the scope of the property inherited by the successor company. The legal basis for this approach lies in the principle of succession of rights and obligations regarding the company’s outstanding debts, as discussed earlier: when shareholders acquire the remaining assets from the company’s liquidation, they simultaneously assume an equivalent obligation to settle the debts corresponding to those assets.

Defendant entity: In principle, all shareholders of the company should be named as joint defendants. On one hand, since all shareholders collectively inherit the company's assets and liabilities, it is essential that they participate jointly in the litigation. On the other hand, this approach ensures that no responsible party is overlooked, preventing a single shareholder from raising defenses based on the argument that they bear only partial responsibility. If there are numerous shareholders, the complaint may list all registered shareholders along with their actual contributors. Additionally, even if an individual does not hold shares in name, if it can be proven that they effectively control the company and may have already distributed its assets, such a person could also be included as a defendant—this measure is taken to prevent them from evading liability by hiding behind another's name.

Request Scope: It is recommended that the claim clearly specify each shareholder's liability for repayment, limited to the company assets they have received. For instance, the court order could state: "The defendant(s) shall repay the plaintiff's claims within the scope of the liquidation assets they have inherited." If a liquidation report or other relevant evidence can be obtained to verify the actual amounts distributed to shareholders, it would further clarify the specific amounts or proportions each shareholder is required to bear. This approach not only aligns with the principle of limited liability but also simplifies the court's judgment process. As for shareholders who have not yet received any assets, if there is indeed no evidence of asset distribution, their liability may be waived discretionally, allowing the focus to shift toward holding the benefiting shareholders accountable—thereby enhancing the likelihood of successful enforcement in the future.

Key points for presenting evidence: Creditors must prove the existence and scope of the guaranteed debt, including the underlying debt contract, the guarantee contract, the fact of the principal debtor's default, as well as the type and extent of security stipulated in the collateral agreement. This part is similar to typical guarantee disputes. Secondly, creditors need to demonstrate that the company has already been dissolved and that the defendant was a shareholder at the time of dissolution. If additional liquidation and distribution documents can be obtained, they can further substantiate how each shareholder assumed the company's assets. However, in practice, liquidation reports are often difficult to acquire, and courts may not even mandate their submission by creditors. Therefore, based on the information available, creditors can present preliminary evidence to argue that shareholders should bear the burden of proving they did not receive any assets; otherwise, it will be presumed that they have indeed inherited those assets and benefits.

If the company's guarantor engages in liquidation activities that violate legal provisions during the deregistration process, resulting in the creditor’s guaranteed claims being unable to be satisfied through liquidation, the creditor may file a tort lawsuit against the entity with liquidation obligations, seeking compensation for the resulting damages. Articles 18 to 20 of the "Judicial Interpretation II of the Company Law" outline specific scenarios under which liquidation obligors are liable to creditors, including failure to liquidate on time, leading to asset depreciation; negligence in performing duties, causing the loss of accounting records and rendering liquidation impossible; malicious disposal of assets to evade debts; submitting false liquidation reports to fraudulently obtain deregistration approval; and completing deregistration without undergoing lawful liquidation procedures. Among these, the last two scenarios are particularly relevant when improper company deregistration adversely affects secured creditor claims.

Defendant entity: According to the laws applicable at the time the illegal act occurred, determine the identity of the entity with liquidation obligations. Prior to the revision of the Company Law, the liquidation obligors for limited liability companies were all shareholders, while for joint-stock companies, they included directors and controlling shareholders—as well as the actual controller. Therefore, if a guarantee company is a limited liability company, it typically lists all shareholders as defendants; however, if it’s a joint-stock company or has been dissolved under the manipulation of the actual controller, directors, controlling shareholders, and the actual controller themselves may also be added as defendants accordingly. After the latest revision of the Company Law, the responsibility for liquidation has shifted entirely to the directors. This means that for companies entering liquidation after July 1, 2024, the board of directors will primarily oversee the liquidation process—shareholders are no longer legally obligated to carry out liquidation. Under these circumstances, if unlawful liquidation occurs (e.g., failure to notify creditors), creditors should seek compensation by naming directors and members of the liquidation committee as defendants, rather than solely suing the shareholders. Of course, if shareholders actively participated in the liquidation process—or even engaged in other illegal activities during liquidation—they can still be held liable as direct infringers and thus named as defendants alongside others. In summary, the defendants should include those directly responsible for the liquidation who committed unlawful acts, commonly encompassing the company’s major shareholders, directors, senior executives, members of the liquidation committee, and the actual controller.

Key points for presenting evidence: Creditors must prove that the defendant engaged in specific illegal conduct during the liquidation and deregistration process, establishing a direct causal link between such misconduct and the failure to satisfy the creditors' claims. Key pieces of evidence include: ① The fact that the company was dissolved without following the legally mandated liquidation procedures; ② Evidence of the defendant's negligence—such as submitting a false liquidation report or failing to fulfill notification obligations; ③ Proof of creditor losses—demonstrating that the primary debtor failed to repay the debt, the company’s assets were insufficient to cover the outstanding claims, and the creditor’s rights could no longer be satisfied from the company’s remaining assets due to the deregistration. The amount of loss should correspond to the outstanding balance of the creditor’s claim. If these requirements are met, the court may determine that the defendant’s unlawful liquidation activities have harmed the creditors’ interests, thereby obliging the defendant to compensate for the resulting damages.

As previously mentioned, the commitment letter issued by shareholders under the simplified deregistration procedure serves as a crucial basis for creditors seeking recovery of their claims. If the guarantee company exits via simplified deregistration while the debt remains outstanding, creditors can directly rely on the commitment letter to assert their rights—without needing to prove whether the liquidation process was conducted illegally. Specifically:

Simplified Cancellation Commitment: In the simplified deregistration process, all investors must commit that the company has no outstanding debts or that any existing debts have already been fully settled. If this commitment proves to be false, it will be deemed by law as a guarantee or even an assumption of liability for the company's debts by the shareholders themselves. Article 240 of the new Company Law explicitly grants legal enforceability to such commitments, holding shareholders jointly and severally liable for fulfilling these obligations. Therefore, creditors are entitled to file a lawsuit based on the contents of the commitment letter, demanding that all committing shareholders assume joint and several liability for the company’s debts. Typically, courts will directly uphold the creditors' claims. To support their case, creditors need to present the "Commitment Letter from All Investors," which is retained by the industrial and commercial authorities, as solid evidence proving both the content of the commitment and the authenticity of the signatories' signatures. Fortunately, this crucial document can usually be obtained relatively easily through a request to the market regulatory agency.

Voluntary Liquidation Commitment: In the general dissolution and liquidation process, the law does not mandate shareholders to make any commitments. However, in practice, it is not uncommon for shareholders or third parties to voluntarily include statements in the liquidation report such as, "All of the company's debts and liabilities have been fully settled; any outstanding matters shall be the responsibility of the person making this commitment." Once such a commitment is issued and the company subsequently dissolves, it creates a contractual obligation binding on the creditor. If creditors later discover that their claims were overlooked during the company's dissolution, they can fully rely on this commitment clause to hold the guarantor accountable for fulfilling the repayment obligation. The Supreme People's Court has also upheld similar claims in precedent cases. For instance, in Case No. (2019) Supreme People's Court Min Re No. 195, a company's shareholder had previously pledged in the liquidation report, "I shall bear all responsibilities for any inaccuracies in the liquidation report." After the company was dissolved, creditors filed a lawsuit, and the court ruled accordingly, ordering all shareholders to compensate the creditors for their losses. Therefore, creditors should carefully examine the liquidation documents for any such commitment statements. If found, they can directly file a lawsuit based on the commitment, demanding that the guarantor fulfill its contractual obligations—grounded either in Article 186 of the Civil Code, which addresses "third-party commitments to settle debts," or treated as a contract executed toward a third party, obliging the guarantor to honor its promises as agreed.

Key points of evidence and claims: The key evidence for this type of claim is the written commitment document. Creditors can apply to the original company registration authority to retrieve the deregistration files, which typically include the liquidation report, shareholders' meeting resolutions, and the filed commitment letter, among other documents. Once the commitment document is obtained, verify the signatories and the content to determine the proper defendant(s) and the scope of the claim. If the commitment explicitly states that a particular shareholder or third party assumes full responsibility for the debt, creditors may sue that individual or entity to repay the entire outstanding amount. However, if the wording merely indicates "assuming corresponding liability," it could be interpreted as requiring full compensation for the creditor's losses. Notably, commitment-based liabilities often carry joint and several liability characteristics—especially in cases where simplified deregistration commitments clearly stipulate that all investors bear joint and several responsibility. Therefore, creditors should name all parties involved in the commitment as co-defendants to ensure no one is overlooked.

In summary, the cancellation of a guarantee company does not mark the end of creditors' efforts to protect their rights. Instead, creditors can adopt a multifaceted approach, employing various legal strategies such as contract claims and tort actions, while focusing on shareholders and entities responsible for liquidation, to hold these parties accountable for fulfilling the repayment obligations that originally should have been borne by the guarantee company.