Gyms, educational institutions, and beauty salons typically operate on a prepaid model customers pay a large upfront fee to cover future usage for one or two years. These businesses often use marketing gimmicks "monthly passes being cheaper than single sessions" or "annual passes more affordable than monthly plans" to lure customers. However, after making payments, many consumers find their prepaid funds or unused courses vanish without a trace. In recent years, countless such cases have emerged, leaving countless victims with no recourse for legal action.
1. Gym, beauty shop and educational institutions run away to give rise to "professional store closures"
The situation gyms, beauty salons, educational institutions, and other businesses disappear without a trace, leaving consumers with no recourse for rights protection, has always been deplorable. In recent years, this problem has worsened with the emergence of "professional store closure operators" who collude with businesses to shut down stores and infringe on consumers legitimate rights. These "professional store closure operators" typically target companies through online or offline channels, assess their debt levels, and collect commissions based on total liabilities. They manipulate procedures such as changes in legal representatives, capital reduction, and bankruptcy liquidation under the Company Law of the Peoples Republic of China, using private negotiations and secret agreements to help prepaid service providers facing operational difficulties evade debts and transfer assets. This serves as a legal facade for illegal purposes.
Professional store closers often stage promotional campaigns under store anniversary or other pretexts to lure customers advance payments. This explains why gym memberships have been reported closed within a month of activation in recent years – these are traps set by both professional closers and businesses to further deceive consumers before permanent closure.
The closure of stores led by "job closures" not only leads to the failure of consumers to refund their prepaid fees, but also leads to the delay of employees salaries, which seriously disrupts the order of market economy, impacts the social credit system, and makes consumers reluctant to pay for prepaid consumption.
2. What legal responsibilities should "professional shop closers" and merchants bear for conspiring to close shops and infringing on consumers rights?
(1) Civil liability: Beijings first case of "professional store closure" to assume liquidation responsibility
Case Summary: Wang, a regular customer at a yoga studio, had been making recurring payments for classes since 2021. In October 2023, he discovered the studio had vanished! After attending just two more sessions, Wang found the company had been deregistered two weeks prior, with its shareholder and legal representative changed to Xue Mou before the closure. Consequently, Wang filed a civil lawsuit demanding compensation from Xue Mou for the unutilized membership fees.
Xue argued that he should not be held responsible because he did not receive the money, and that he had signed a contract with his previous boss and was only providing services, not running away.
During the court hearing, it was established that the closed yoga studio was owned by Company A, with Liu Mou serving as its legal representative and sole shareholder. On September 13,2023, Liu Mou signed a Share Transfer Agreement with Xue Mou, transferring 100% of Company As equity to Xue Mou. The following day, Xue Mou became the legal representative and sole shareholder of Company A. On September 28 of the same year, Company A applied for deregistration. The Liquidation Report in the deregistration documents stated: "1. All debts and credits have been settled; 2. All taxes and employee salaries have been cleared."
The court further established that multiple posts on Xues WeChat Moments stated: "High-priced acquisition of beauty salon, hairdressing, and wellness club members (if your business ceases operations for any reason, we can help you discharge debts for your members) available throughout Beijing." This indicates that Xue was essentially the professional store operator mentioned earlier in the text.
The court ruled that Xue, as a "professional company operator" and sole shareholder, had knowingly submitted a "Liquidation Report" claiming completed debt settlement while ignoring substantial outstanding creditor claims. By applying to the Market Supervision Bureau for company deregistration without proper liquidation, he committed fraudulent acts to obtain corporate deregistration through false documentation. This enabled Wang to be excluded from legitimate debt settlement procedures, resulting in unrecovered claims. Consequently, Wang was entitled to claim compensation from Xue for corporate debts. As the revised Company Law had not yet taken effect at the time of judgment, the court ordered Xue to assume liquidation liability under Article 185 of the original Company Law [1] and Article 19 of the Supreme Peoples Courts Judicial Interpretation on Several Issues Concerning the Application of the Company Law of the Peoples Republic of China (II) [2], requiring him to compensate Wang for over 8,000 yuan in unused membership card funds.
Legal Commentary: The aforementioned case demonstrates that attempts by businesses and professional store operators to evade debts through equity transfers or company deregistration are legally unfeasible. Particularly, Article 88(3) of the New Company Law stipulates that shareholders who maliciously transfer equity to harm creditors interests shall still bear supplementary liability, thereby exposing these deceptive practices as utterly futile.
(2) Administrative liability: Beijing Public Security Bureau and Beijing Municipal Supervision Bureau announced the first case of administrative punishment for "professional store closure"
1. The Art Umbrella series
Three intermediary agencies—Beijing Chaolai International Business Consulting Co., Ltd. (hereinafter "Chaolai International"), Sichuan Shunlijie Enterprise Management Consulting Service Co., Ltd. (hereinafter "Sichuan Shunlijie"), and Chuangqi Future (Beijing) Enterprise Management Consulting Co., Ltd. (hereinafter "Chuangqi Future") —provided closure services for the struggling education and training institution "Art Umbrella". These agencies facilitated the companys registration changes by recruiting Jia Mou, a debt-bearing individual, as a nominal legal representative, submitting fraudulent registration documents, and concealing critical facts.
After ascertaining the above illegal facts, the market regulatory department made an administrative penalty according to law:
First, the illegal act of submitting false registration materials to obtain company change registration (filing) under the "art umbrella" of closed enterprises shall be punished. According to the relevant provisions of the Company Law of the Peoples Republic of China, the parties concerned shall be ordered to correct immediately and fined 100,000 yuan.
Secondly, penalties were imposed on three intermediary agencies for providing fee-based services to businesses undergoing closure, submitting false materials, and concealing critical facts to facilitate proxy registration of company changes. Pursuant to Article 71(2) of the Detailed Rules for the Implementation of the Regulations on the Administration of Market Entities of the Peoples Republic of China, "Chao Lai International" had its illegal gains confiscated at 9,300 yuan with a maximum fine of 100,000 yuan; "Sichuan Shunlijie" received confiscation of 18,800 yuan in illegal proceeds along with a maximum penalty of 100,000 yuan; while "Chuangqi Weilai" faced confiscation of 700 yuan in illicit gains coupled with a 20,000 yuan fine.
2. The "Wood Art" series of cases
Han (individual) provided closure services for the unprofi education and training institution "Muyi Art" by recruiting Zhang as a "nominal" legal person and shareholder, submitting false materials and concealing important facts to handle the companys change registration (record) for "Muyi Art".
After ascertaining the above illegal facts, the market regulatory department made an administrative penalty according to law:
First, the company "Wood Art" submitted false registration materials and concealed important facts to obtain the company change registration (filing) for the closed enterprises, and was punished for the illegal act. According to the relevant provisions of the Company Law of the Peoples Republic of China, the party concerned was ordered to correct immediately and fined 180,000 yuan.
Secondly, penalties were imposed on Han and Zhang for submitting false materials and concealing critical facts to facilitate illegal company registration changes. Pursuant to Article 71(2) of the Detailed Rules for the Implementation of the Regulations on the Administration of Market Entity Registration of the Peoples Republic of China, Han was fined 50,000 yuan and had his illegal gains confiscated amounting to 60,000 yuan. Zhang received a fine of 10,000 yuan and had his illegal gains confiscated totaling 7,000 yuan.
The market regulatory authorities simultaneously revoked the false registration of "art umbrella" and "wood art", and identified nine natural persons, including Han, Zhang and Jia, as the directly responsible persons for the false registration. They were not allowed to apply for market registration again within three years from the date of revocation of the false market registration.
Legal Insights: The recent t crackdown by Beijings Public Security Bureau and Market Supervision Administration on "professional store closures" has been widely applauded. This operation not only effectively curbed the rampant practices of these unscrupulous operators but also served as a clear warning to consumers. It reminds people that if merchants theyve invested in disappear, they should report any suspicious activities to the police or market regulators. Once verified, offenders face hefty fines, ensuring consumer rights are protected.
In addition to the legal provisions involved in the aforementioned civil and administrative cases, Article 7 of the Supreme Peoples Courts "Interpretation on Several Issues Concerning the Application of Law in the Trial of Prepaid Consumption Civil Dispute Cases (Draft for Solicitation of Comments)" stipulates: If an operator fails to fulfill contractual obligations to deliver goods or services due to operational difficulties after collecting prepaid payments, they shall promptly settle accounts. If a third party assists the operator in evading debts, causing losses to consumers, courts shall support consumer claims demanding t liability from both the third party and the operator. Although this judicial interpretation has not yet been officially promulgated, it demonstrates the governments active efforts to combat collusion between merchants and "professional store closures" that infringe upon consumer rights.
How should consumers safeguard their rights?
The reason why I wrote this article is because I saw the report on "professional store closers" in Sanlian Life Weekly. One attitude of professional store closers made me angry, so I would to share it with you here. The content of Sanlian Life Weekly is quoted as follows:
Chen Xus clientele primarily consists of clients in major cities Shanghai and Beijing. However, there are exceptions. This year, he assisted in handling the closure and legal entity change of a swimming early education institution in a prefecture-level city in northern China, involving an amount of 20-30 million yuan. Chen Xu (a professional business termination specialist) proudly stated that among all cases he handled, the litigation rate was only around 10%. "Refunds arent parents top priority—they need to be able to continue classes else," he explained, noting his role lies in rapidly establishing course transfer channels, " operators dont need to intervene throughout the process." Chen Xu accurately captured many consumers psychology. Lawyer Gan Zhibin told this publication that such cases involve high litigation costs, leading many to abandon their claims, which creates opportunities for illegal practices. In recent years, five or six consumers annually consult Gan Zhibin, but most leave without follow-up after consultations. "Firstly, legal fees might not significantly differ from their remaining balance, and secondly, the process is extremely time-consuming with uncertain returns."
The psychology of these former employees who left their jobs reveals they were confident consumers wouldnt pursue legal action, which emboldened them to act recklessly and infringe on more consumer rights. Heres a crucial message: Consumers must actively protect their rights. Such cases typically involve large groups of victims. When consumers collectively file lawsuits or reports against institutions fleeing the scene, both market regulators and courts will pressure management to resolve refund issues. I recently handled a successful case of an educational institution fleeing (see enforcement completion notice below). Despite six months of delays, clients ultimately received full refunds. The key success lay in the massive collective action, which forced the institution to gradually refund prepaid fees in installments.
Finally, the author would to remind consumers to actively safeguard their legitimate rights and interests and fight against malicious businesses and professional store closers. Both the court level and the municipal supervision bureau have successful cases of cracking down on professional store closers, which will bring more confidence to everyone.
[1] Article 185 [Creditors Claim Submission] The liquidation committee shall notify creditors within ten days of its establishment and publish an official notice in a newspaper within sixty days. Creditors must file their claims with the liquidation committee either within thirty days of receiving the notice or within forty-five days if they did not receive the notice.
When a creditor declares his claim, he shall state the relevant matters of the claim and provide supporting materials. The liquidation team shall register the claim.
During the period of claim declaration, the liquidation team shall not pay off the creditors.
[2] Article 19: shareholders of a limited liability company, directors and controlling shareholders of a t stock company, or the actual controllers of a company maliciously dispose of corporate assets after dissolution, causing losses to creditors, or fraudulently obtain deregistration from the company registration authority through false liquidation reports without lawful liquidation, the Peoples Court shall uphold creditors claims for corresponding compensation liability against such parties in accordance with the law.
[3] a shareholder transfers the equity which has been subscribed but not due for payment, the transferee shall assume the obligation to pay the capital contribution; if the transferee fails to pay the capital contribution in full and on time, the transferor shall assume supplementary liability for the capital contribution not paid by the transferee on time.
