Entity Closure Timeline: The 6-Month Wind-Down Process Explained

Why Companies Close Entities — and What’s at Stake
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In today’s volatile global economy, even the best-laid expansion plans may face a sudden course correction. From shifting strategic priorities to cost restructuring or post-M&A integration, entity closure — the process of legally shutting down a business entity in a foreign market—is becoming more common among mid-sized and large enterprises.

But closing an entity is far from a simple administrative task. It involves complex legal, compliance, and financial processes that can take up to 6 months or more, depending on the jurisdiction.

In this article, we’ll walk you through a typical 6-month wind-down timeline, highlight the risks and requirements at each stage, and explore how Employer of Record (EOR) solutions can help you retain critical talent without a legal entity.

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A 6-Month Entity Closure Timeline: Step-by-Step

Month 1: Strategic Planning & Internal Alignment
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• Conduct cost-benefit analysis of maintaining vs. closing the entity
• Inform key stakeholders (finance, HR, legal, operations)
• Review existing contracts (employee, vendor, lease, tax)

Tip: This is also the stage where businesses start assessing Employee Termination risks and potential EOR pathways to avoid total talent loss.
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Month 2: Begin Regulatory and Legal Processes
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• Notify government and tax authorities of intent to close
• Initiate corporate resolution and board approvals
• Engage legal counsel for jurisdiction-specific procedures

Compliance Note: In markets like China, India, and Indonesia, entity de-registration can involve multiple government agencies, each with its own documentation trail.

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Month 3: Employee Communication & Offboarding Plans

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• Draft separation agreements compliant with local labor laws
• Prepare for severance obligations and notice periods
• Provide support resources to affected employees

According to the International Labour Organization (ILO), severance payments in Asia can range from 15 to 30 days’ salary per year of service.

Source: ILO Global Database on Severance Pay
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Month 4: Settle Financial & Tax Obligations
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• Clear outstanding tax filings and payments
• Close corporate bank accounts
• Reconcile intercompany and vendor payables

In Singapore, failure to comply with final tax obligations can result in penalties of up to SGD 5,000 per offense.

Source: IRAS Singapore
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Month 5: Final Employee Terminations & Transition Planning
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• Complete termination procedures and issue final payslips
• Transfer knowledge internally or to external partners
• Offer outplacement or rehiring opportunities via EOR
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Month 6: Formal Deregistration & Closure
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• Submit final closure forms to government agencies
• Receive formal deregistration certificates
• Archive all corporate records and HR files per legal requirements

In Indonesia, companies must maintain employee records for at least 10 years post-closure.

Source: PwC Doing Business in Indonesia

Risks and Complexities in Entity Closure

Entity closure isn’t just about paperwork. It introduces risks across multiple dimensions:

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Can You Retain Talent Without an Entity? Yes — Through EOR.
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One of the toughest consequences of closing a local entity is losing your top local talent. But there’s a smart alternative: Employer of Record (EOR) services.

An EOR allows you to retain and legally employ staff in a country without owning a legal entity there. The EOR acts as the legal employer, handling compliance, payroll, benefits, and local regulations—while your team continues working for you operationally.

‍Benefits of EOR for Companies Closing Entities:
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• Retain key staff without the cost of running a full entity
• Maintain continuity during transitional periods
• Avoid complex labor law risks or penalties
• Flexibly scale back up if market conditions improve
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Why Companies Choose AYP’s EOR Services

AYP helps companies across Asia navigate entity closure while preserving business continuity. With 14+ country coverage, localized compliance expertise, and transparent pricing, AYP is your trusted EOR partner for complex transitions.

Ready to Wind Down Without Losing Momentum?

Entity closure is never easy—but it doesn’t have to be disruptive. With a structured timeline and the right partners, you can close your local entity while retaining your best people through EOR.

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Talk to AYP today to learn how our EOR solutions can support your wind-down strategy.