INTRODUCTION
BB is a British SME, selling a very niche product. Historically, BB has been manufacturing its products in the UK on a small scale. Over the years, BB has established its name in its field, their product is recognised as a leader amongst its peers.
Due to planned expansions, BB has decided to shift its manufacturing base to China, where goods can be produced at a much lower cost and larger scale.
BB is in the final stage of negotiations with the Chinese manufacturer, who claims to have to ability to manufacture the goods at the agreed quality and quantity.
RISKS
By handing over the manufacturing task to the Chinese manufacturer, BB essentially faces the risks of:
- Gives away its IP rights to the China party
- Reputational risk should there be a drop in quality of the product
HOW WE HELPED
Icy Green successfully assisted BB in the following areas, ensuring a smooth venture into China:
A: Corporate Structure
- Chinese party is a bona fide business
- Company name, address, registration number
- Business activities permitted to carry out
- Corporate ownership
- Legal Representatives
- Company Articles
- Registered Capital
- Financial accounts
- Tax registrations and payments
- Debt
B: Premises
- Office inspection
- Factory inspection (announced and unannounced)
- Conditions at the factory (eg. ISO level, hygiene, safety)
- Chinese company’s right to use premises
- Business activities are permitted at the relevant premises
- Machinery is indeed installed at the premises (upon BB’s specific request)
- Workers’ rights
- Other irregularities, eg. Whether there are any other companies on site, other products, would IP rights be protected, quality of goods produced.
C: Chinese Entity Formation
- Formation of a Chinese entity as a Wholly Owned Foreign Enterprise (WOFE)
- Opening business bank account with foreign currency denomination
- Setting up a small office presence in China
- Tax planning
- Linking local businesses
- Linking local government authorities
- HR – hiring and paying staff
