In a liquidation exercise, after deducting all the debts and losses, the residual assets will be used to cover undistributed profits, capital surplus, other funds and the liquidation expenses.After all these deductions, the balance that exceeds the amount of the paid-up capital is the net liquidation proceeds, which will be deemed as profit and, as such, subject to income tax. The residual after-tax assets will be distributed to investors according to the following order of priority:
For equity JVs, distribution would be made according to the actual proportion of capital contribution of the respective investors. For cooperative JVs, distribution would follow the terms stated in their contracts and articles of association. For foreign enterprises, distribution would be made according to their articles of association.