Question 1

How does due diligence work?

Accepted Answer

Essentially we are triangulating information from many different sources and comparing it to what you have been told and any documentation you may have. Frequently we encounter mismatches.   Typical examples include: companies that don’t exist, pretend to be much larger than they are or do not have the correct business licences for the trade being discussed. Just like due diligence at home we are testing the reputation and good standing of your prospective partner.

Question 2

When is the right time to do due diligence on our Chinese partners?

Accepted Answer

A really good question. The short answer is if you are seriously thinking of forming a relationship do due diligence. Why spend the time and money going to China to progress discussions before verifying  what you have been told?   We have discussed this in an article here

Question 3

We are already operating in China and everything seems fine. Should we still do due diligence?

Accepted Answer

Simply yes, it’s never too late. If you have already started business in China then you have already exposed yourself to reputational and likely financial risks. We are always surprised that even some of our most august institutions like NHS Trusts have not preformed due diligence in Chin.

Question 4

Is the basic report sufficient?

Accepted Answer

A basic report is just that - it should be regarded as a first stage test. It will tell you if the company exists, registered capital will tell you something about the size of company and the business scope will tell you what the business is licenced to provide. A full report can be considered a sufficient desktop exercise, however before a deal is done we recommend you consult a suitably qualified Chinese Lawyer - Michael from our team will be happy to discuss all your legal needs in China.

Question 5

What exactly is in the report?

Accepted Answer

Please see sample report here

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