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Additional Articles - Due Diligence

Foreign investors in China must deal with complex ownership structures.  Variable Interest Entities (VIE's) are very common.  While a trip to the Caymans or the British Virgin Islands has various appeals, off-shoring is less desirable than at fist glance: Ownership Laws

 From Deloitte's Chinese Services Group, a useful brief case study:  The situation: Difficulties communicating with business partners In 2000, a Canadian mining company entered the Chinese market and struck a joint venture (JV) partnership with a local company to develop several production assets within the country. However, by 2005, the company had discovered that its profit ownership was significantly lower than had been negotiated, and that its JV partner was withholding key records. In addition, local partners were simply not open to adopting baseline environmental or corporate governance practices.  More: Deloitte's China Services Group - Brief Case Study   

Deloitte has an excellent publication, China M&A Update, which you can access via this link:  http://www.deloitte.com/view/en_CA/ca/services/chineseservicesgroup/index.htm

From Dezan Shira & Associates’,  Legal due diligence is a complex and contentious issue when it comes to joint ventures in China. Many investors seem to regard it as a waste of time and money; they’ve developed a relationship with an existing supplier, feel the guy can be trusted and see no need for delving deep into the Chinese company’s position. Yet it is as this stage that the foreign party can be most vulnerable.  For more:      orcastrategy.com/admin/files/China legal due diligence.pdf 

Equally, financial due diligence is extremely important::  Financial Due Diigence from DSA

 

 

posted...January 20, 2011