Starting A Due Diligence In China

What are the most authentic ways to verify a China company? The following two methods are crucial: a. Visit the company address; b. Visit local authority that is responsible for company registration. The appropriate authority is the local Administration of Industry and Commerce (AIC). You can find the actual company information at local AIC: date of incorporation, address, legal representative, registered capital, contact information, business setting, business type, business term, annual inspection performance, etc. Most AIC websites give a company search function for a small charge.

Basic Required Documents when buying stock in a Chinese company: Company documents: articles of association, business license, WFOE approval, listing and track record of appointment of directors and officers, etc.; Annual audit and tax statements and all speaking with and notices in the tax regulators, both national and local; Real estate documentation: ownership, lease, mortgages, etc.; Employee list, and copies of employee contracts and records for tax and social welfare payments; Insurance documents; Significant existing contracts with vendors and customers; Existing financial assertions; Track record of distributions to shareholders; Listing of lawsuits as well as other claims, if any; Index of hard belongings and vehicles; Intellectual property: trademarks, patents, copyrights, technology licenses; Checklist of loans payable and guarantees payable and contingent, if any; Environmental approvals/licenses and annual environmental inspection reports.

The most significant distinctions we end up finding between a Chinese company acquisition together with a domestic company acquisition are these simple: Many, if not completely of the documents of the Chinese company are, practically enough, in Chinese. China requires far more government sign-offs and registrations compared to the United States. But overall, the objectives and the strategies are not all that different. In both cases, the goal is to discover as much as you can concerning the company to be acquired and to structure the offer so as to maximize the returns for your client going forward.

Legal due diligence just before trying out a joint venture in China is therefore a necessity not only to find if there are any skeletons lurking, but in addition to determine where the current managerial operations are in the actual company and what needs to be changed to bring it into compliance both with an increased amount of consideration in the Chinese regulators but in addition with the international specifications the foreign investor must adhere too. Accordingly, legal due diligence both gives peace of mind within the actual situation, can raise any areas of concern, and also shows a blueprint for which must be performed to upgrade the possible businesses future integrity.

Business Licensing: Is the Chinese companies’ existing scope of business suitable for the intentions for the joint venture? Are all the required operational licenses in place? Are they transferable to the joint venture? These include all issues that need to be responded to, and the means for these licensing rights executed to transmit them where required to the JV. Additionally it is beneficial for the trader to notice expiry dates on these, and ensure that renewals are performed on time. This is also true of the Chinese company. Business licenses in China have to be renewed. If his license to operate expires in 12 months and you are committing upfront finance for a 20-year joint venture, you need to assess the risk factor of his own licensing renewal scenario. It is also smart to confirm the name of the legally responsible person on the Chinese business license is equivalent to the person you are managing, and if not, determine why.