03/08/2012

WELCOME TO THE EU SME CENTRE

A project funded by the European Union

Raise your hand if you can hear me!

www.eusmecentre.org.cn enquiries@eusmecentre.org.cn

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Please continue to submit your text questions and comments using the Questions Panel

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Purpose and expertise

Support EU SMEs to establish, develop and maintain commercial activities in the Chinese market
Free, confidential information and advice, and practical support services An office in Beijing with an experienced multicultural team of 15 persons

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Enquiries
Find the answers for all of your questions!

www.eusmecentre.org.cn enquiries@eusmecentre.org.cn

Market Access Services

Publications

Hot-desks: free, temporary office space in the EU SME Centre to explore local business opportunities

Training, seminar & webinars

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Our Speaker

Ludmila Hyklova, lawyer, spent several years in China as Head of legal and compliance for a large EU privately owned financial group. She has first hand experience with business start ups, foreign investment and has provided legal advice on various China related business strategies.

PRELIMINARY DUE DILIGENCE ON BUSINESS PARTNER AUGUST 2, 2012

A project funded by the European Union

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In Todays Webinar

The 5 steps of Preliminary Due Diligence 1. Ask for the Business Licence!! 2. Is there a Company Chop? 3. Verify the other mandatory documents! 4. Get information of their financial status 5. Check the company operations
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Who can be your Partner

Majority of Chinese companies are honest and willing to develop sustainable business

Importer Distributor Supplier Agent

Landlord of your office JV Partner Service provider

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1. Know what is available

Legal Status
Business

Financial Status

Licence Special Permits Land Use Rights Right to use premises IPR ownership certificates Company Chop

Creditworthiness Letter Financial Statement Capital Verification Report Bank account details

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2. Ask for the Business License!!

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2. Ask for the Business Licence!!

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2. Ask for the Business Licence!!

Business License for Corporation Legal Person
Registered No.: 4xxxxxxxxxxxxx2 Name Yong He Consulting Service Co., Ltd. Address Unit 2-8, 10/F xx Building, Fuhua Road, Haidian District, Guangzhou, Guangdong Legal Representative Lao Wang Registered Capital RMB 2,000,000 Paid-up Capital RMB 2,000,000 Type of Registration Limited liability company Scope of Business Commercial consultancy and corporate management consultancy; Information and business process, sub-contracting services such as system application management and maintenance, information technology support and management, financial settlement, software development Shareholder He Yong Limited Term of Business: January 18, 2007 to January 18, 2057 Date of Establishment: January 18, 2007 Passed 2012 Annual Inspection Registrar: Guangdong Administration for Industry & Commerce (Seal)

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2. Ask for the Business Licence!!

Can be checked on Administration of Industry and Commerce (AIC) websites and at local AIC branch*
www.saic.gov.cn
http://www.saic.gov.cn/ywbl/zxcx/djqyxxcx/index.h

tml

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3. Is there a Company Chop?

Company Chop
NAME must be SAME as on business licence; Equals to signature of person authorized to sign on behalf of the company in Europe

4. Verify the other mandatory documents!

Landlord of your office Ownership certificate is the office allowed to be rented for commercial purpose? On Importer Import licence for the goods some type of goods can be subject to licence Supplier Special permit for manufacturing the product Report from Quarantine and Commodity Inspection Bureau when exporting from China Distributor Distribution permit for certain products a special distribution permit is needed eg. food Service provider Permit for the specific service

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4. Verify the other mandatory documents!

Land Use Right Property Ownership

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4. Verify the other mandatory documents!

Special Permit for Food Distribution

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5. Get information of their financial status

Creditworthiness Letter Both for the company and its shareholder(s) Issued by bank upon request of the partner Capital verification report, financial statements and audit reports Under certain circumstances financial statements may be obtained at the Administration of Industry and Commerce (local branch)* Credit history Applied by partner itself at Credit Reference Centre of PBOC Bank Account Always ask for company account

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6. Check the company operations

Pay a visit at the company's premises go a few times, sometimes unannounced

Visit the distribution network Talk with as many people as possible from the company and pay attention whether they understand their business Talk to suppliers, neighbours, competitors
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Quick Tips
DO NOT Too smooth? Fast? Considerably cheap than market average? Do not engage! DO NOTICE Bank account is the name same as in the contract? Is the account number same in all invoices? Websites? Fixed phone line? Try call a few times. Email address company one or is it @163.com, @yahoo.com? Communication style, is it changing? Contact person, is it changing ?
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Remember

5 Steps of preliminary due diligence:

Business Licence Company Chop Mandatory Certificates/Licences Financial Status Company operations

Personal visit and keep continuous contact Do not rush Ideally have a trusted person in the spot Local professional advice
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Be Aware
Be up to date about the Chinese market with the EU SME Centre:

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