Due Diligence

3 Essential Types of Due Diligence When Doing Business in China

 

Type One: Corporate Assessment (CA): Stability, Assets & Reputation of a Chinese Company

The Corporate Assessment (CA) is the ideal tool for clients who want viability into the stability, assets & reputation of a target company.

This report is particularly of value if you are:

  • Thinking about entering into a business arrangement with a Chinese company to buy or sell goods.
  • Exploring a JV or investment partnership with a Chinese entity.
  • Considering litigation against a Chinese company. If a company doesn’t have assets, it’s not worth the effort to fight and win only to remain uncompensated!

It is recommended to conduct the CA on new business partners and have follow up reports done periodically (at least once per year) to expose any changes in the stability, assets and reputation of the target company. Discounts are available for multiple reports if booked in advance.

Visit here to see a sample CA report and learn more about the service/fee structure.

Type Two: Red Flag Assessment (RFA): Risk, Scams & Fraud

Evaluate your exposure on a given transaction/deal when buying from a Chinese company

The Red Flag Assessment (RFA) is the ideal tool for clients who are buying from Chinese suppliers.  The RFA will help you source safe, avoid scams and confirm that the terms of the deal are fair.

Visit here to see a sample RFA and learn more about the service/fee structure.

 

Type Three: General Counsel (GC):  Contract Review & Business Advisory Services

Consider our General Counsel Service if you would like to have a lawyer:

  • Review the terms of your investment in a Chinese company
  • Advise on the risks involved in selling goods & services to a Chinese company
  • Consult on other agreements such as exclusive distributorship arrangements and licensing agreements with Chinese parties.

Visit here to learn about the GC service & fee structure.

 

FAQ for Due Diligence

Are both the CA and RFA needed if I want to source product from China?

The two reports are designed to complement each other and it is recommended you conduct both forms of due diligence on new suppliers.  By engaging both reports, you will protect yourself from both possible pitfalls:

Danger One:  A legit business issues you a bad deal.

Danger Two: A scam/fake/unlicensed business issues you what appears to be a fair deal.

Because a legit company could issue unfair terms of trade in your particular deal, it is important to evaluate both the company and the given transaction.

How to determine if the supplier can meet my expectations for quality and lead time if I source from China?

Because a legit company could have fair terms of trade but a very sloppy quality system, in additional to the CA and RFA, it is also worthwhile in conduct an audit of the target company’s quality systems plus have a pre-shipment inspection done before final payment is made.

Lab testing, quality audits and product inspections are outside the scope of ABL’s legal services, but you may visit here for introductions to our endorsed service providers in the fields of inspection/audit/lab testing.

What are the most important steps I need to take if I want to be safe when partnering with China company? And the costs?

Recommended Action Plan for minimizing risk when doing business with a Chinese company

 

Key Process Service/Tool Cost Frequency
Make sure the partner is legit. Corporate Assessment (CA): Stability, Assets & Reputation Visit our rate sheet. 1 time per year for each key business partner?
Have a good contract in place. Templates and Customized Contracts Under 1000 USD for a highly customized bilingual contract.  More details here. Once your template is in place, you can use it over and over again with multiple partners.