Chinese Business Lawyers Lead You to WFOE Close Down in China

A number of China WFOEs have been sold over the years. There are various reasons to that, however, Chinese business lawyers have had to put in a lot of hard work to advice people regarding this. There was a time when China’s economy was contracting and with that contract a great number of WFOEs were sold by foreign owners. WFOEs in renowned and powerful cities like Shanghai, Beijing and Dalian were also sold due to this condition. But this is not the real concern, the real concern lied in how to sell China WFOEs. Since, nothing is easy to buy and sell in China, this has always remained a concern for the business owners as well as for the lawyers.

The Biggest Problem with the WFOE (Wholly Foreign-Owned Enterprise)

The off the shelf WFOEs face the problem of not being customized. If the company has been settled up stating a particular business and has sought permission for a specific business, then the owner cannot change the business scope later on by petitioning to the government. Similarly, if the company needs to move its WFOE to a different city or open a branch still doing the same business, it will also need to petition to the government. However, they can still maintain 2 offices. Therefore, doing proper research before setting up a WFOE is truly essential to find out whether you can set it up without any liabilities which include tax, tort, employee and environment. Doing research will enable you to establish it safely and at a cheaper rate. The biggest advantage of buying a WFOE is its speed.

Many people have tried to sell their WFOEs in China and also thought that it would be simple and straight. But, unfortunately, it is not true. However, the problems faced by different people vary. Terminating the approval and the license of WFOE in China is difficult and time-consuming you have to get it done through the long list of government agencies. Moreover, the fees for closing down a WFOE is too much. You could actually leave everything in the hands of the government but if you are shifting to another city within China, then that would be a problem.

The primary licensing authority is the Bureau of Industry and Commerce in China and visiting this place to get the license canceled involves following a proper method. As long as the company existed, you will have to file tax reports and complete the statutory annual audit and renewal process. You will also have to meet all the other requirements from other agencies. The fact that, the company will not engage in any other activity made no difference.

Selling the WFOE

Not just shutting down the company, but also selling it is a problem within China. The first step is to get a buyer which is comparatively easier, but again filling out the transfer notice for business license as a legal person again is difficult and involves filling out a couple of forms. The buyer actually follows the same process which had to be initially followed while setting up the company. The demand to increase the registration money goes on illegally. The negotiations take a convoluted process and thus the buyer has to beat around the bush. It takes a lot of time to complete the entire process which includes discussions, chopping forms, providing capital for registration and also defining the scope of the business. License transfer consumes separate time.

The process of completion will definitely take you closer to the Chinese bureaucrats. The fact is that the local Chinese government is the de facto partner in establishing and closing down a business. Chinese bureaucrats are omnipresent in any body’s business. Sometimes, in a reasonable manner and at other times in a meddlesome way. You have to pursue government officials to give you permission to let go of your business. The formation of WFOE is easier now, but the process for closing it down still remains difficult and time-consuming.

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Chinese Business Lawyers Listing the Do’s & Dont’s in Doing Business with China

Doing business in or with China has its own challenges which is very different from doing business with any other country. Working in and with China is not easy and the Westerners find it very difficult to continue doing business with Chinese counterparts. Here are the 10 commandments to make your business relations with China easy and free flowing.

  • Gather Knowledge This is the biggest challenge for westerners. Any similarities between China and any foreign country in terms of business is not similar. This country has a completely different culture which may not be very healthy for you or your business. The surface similarities will fade in sometime and the reality will be exposed and you have to be prepared for it.
  • CommunistChina is still a communist nation and that will not change, thus, it will be difficult for any capitalist to do business in the Chinese environment.
  • Be PresentDoing business in China definitely requires you to know about their business scenario in person. Providing a duplicate does not help in such a circumstance thus keeping yourself too busy or engrossed in something that is not essentially Chinese will not help you in anyway.
  • Do not get FrustratedThe less frustrated you get, the more you will be able to work with the Chinese business organizations. If all the Chinese guys will start working properly, then there will be no scope for the westerners. Hence, try not to get frustrated with the scenario; instead, try to be patient and gel with them while working.
  • Time is Not Money in ChinaUnlike the west, time does not mean money in China. The Chinese business people do not believe in opportunity cost and thus simple negotiations can drag for a long time. Tactfully avoid getting involved in ‘n’ number of meetings which actually do not accomplish anything.
  • Culturally-Specific ConceptsHonesty, goodwill and long-term benefit along with truth are all culturally relative concepts. These cannot be carried from the west to the east directly. So, you have to control your expectations before starting work with them. Win-win situation is not really an actual outcome of the business meetings and practices in China. Long- term relationship does not mean much in the Chinese context.
  • Secure InformationKeep your information safe and secure and do not divulge anything to someone you do not know personally. Company’s intellectual property and money should not be handed over to anyone else and beware of the Chinese company’s practices because they do leak major information which could cause loss. Do not work with information peddlers.
  • Do not Look for Cheap CompanyDo not settle for the partner with least monetary quote. Such business houses do not get into connections or relations thinking of settling long-term. They are simply interested in making money and thus that increases.
  • Do not Just Sign a DealMake sure that you do not simply sign a deal because you think that signing a contract is the major thing and that Chinese companies are not going to entertain anything after sometime. You will not miss the boat. They are going to be there.
  • Have a Plan BThis is the last piece of advice as a plan B always helps. You should have a plan B at place the plan A goes wrong. It helps to have a plan B along with sense of humour.

Chinese business lawyers always provide help to their clients by telling them what to expect and what to do while doing business in China. You have to keep the differences in mind while also doing business in China and create a blend in terms of business strategies so that they become effective.

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