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How to setup factory in China #3

By Cyrus, on June 3rd, 2010
Number of View: 4160

How to setup factory in China #3Part #2 I had mentioned on juridical person that would help or harm you unless you are prepared and ready for it. So how to prevent most important is your company Mergers and Acquisitions (M&A).

M&A in China is called as 章程 could be registered as bookkeeping by China Commercial and Industrial Bureau (工商局) for law enforcement. If you afraid of your assigned juridical person’s betrayal you could simply state the rules and regulations taking advantage on local jurisdiction to restrict your juridical person. There is a trick here, if your business registration (BR) has no other shareholders but only a juridical person as a representative on local jurisdiction he has the authority and rights to overwrite your M&A, hence you as the boss has no protection. But if your BR consists of a few shareholders and states their authority clearly in M&A, example any alterations on M&A must seek approval during board meeting by all shareholders, this could restrict your juridical person. Furthermore M&A would be submitted to China Commercial and Industrial Bureau for jurisdiction purpose, so you have double protection!

By using above method regardless your juridical person whether is a local or a foreigner you will not have trouble if he sell away your company.If your juridical person is a foreigner and don’t have a Chinese name you have to get a Chinese name register at local immigration department otherwise you can’t authorise him in BR. Remember in China M&A only recognise in Chinese but for your headquarter you could translate into English by a legal firm as a bookkeeping but will not enforce by China jurisdiction. Another importance you have to decide in your BR is your company’s business scope (经营范围), this directly will determine your legal rights in running business in China, be careful on all Chinese terms use and must be cross match with your custom permit if you entitled on free tax imports. Once your BR is registered other licenses like hygiene permit, environmental permit would be easier to apply but you could state the contact person in other license as different name, not mandatory on juridical person! This would give you better advantage using your trustworthy person to monitor your juridical person progress on any betrayal in other government authorities.

In my next article I will discuss further on local management, a good starting will save you lots of money otherwise will become a time bomb!


 

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