In essence, a Corporate Health Check is an assessment performed by an independent party to identify gaps that need to be addressed. As with medical checkups, performing regular China company health checks is necessary to ensure business longevity.
China corporate Health Checks are recommended in the following scenarios:
You ran the China branch of a foreign company
Managing the branch of a foreign company can be challenging. Unfamiliar work culture and communication style, changes in legislation, pressure from the headquarters, and current business environment could be overwhelming.
Independent business health checks can help oversee the operations, identify risks and potentially avoid the burden of compliance issues in the future.
Counterintuitively, according to our two decades of experience, during China’s economic slowdowns foreign-invested businesses always cut costs by reducing their outsourced compliance budgets. Eight times out of ten, companies seek assistance after all, and red flags are always discovered. Some end up paying penalties.
In addition, if you have just been appointed as a China entity Legal Representative (Director/General Manager), you probably want to check what you will be dealing with, especially with the new personal liabilities introduced by the amended Company Law.
You are a startup company
As you juggle tasks, looking to raise capital, protect your IP, and figure out how to stay compliant with Chinese and foreign regulations, things tend to get overlooked. The most common issue is usually the routine accounting work: not understanding the reporting, not getting cash flow projections from your staff accountant, and having tax-related questions left unanswered.
Executing a health check to uncover fiscal gaps will allow you to save costs in the future and focus on growing. While the business is small, risks are easier to mitigate, and these reviews can be occasional rather than regular.
Your business is in the fast growth phase
When the business is expanding the focus tends to shift away from compliance. In general, issues left unseen tend to grow and lead to unpleasant consequences. Making sure the issues are identified and tackled and ensuring your operations are tax-efficient will save you a headache in the future. Trust us, dealing with historical tax issues in China is no fun.
You are considering selling your China business
A Business Health Check can be perceived as a first step of the sale readiness journey.
S.J. Grand offers another customized solution – Road to M&A – geared towards business owners who want to prepare their business for a sale. M&A preparation is a process that allows you to get your operations ready for the buyer side due diligence and ultimately raise valuation.
Depending on your needs, it could be a high-level or an in-depth check. A high-level review is best for a quick compliance evaluation, it is similar to a plane pre-flight check, while the in-depth check will dive into the company’s financial statements and tax compliance, licensing, transactions, social security contributions payments, and internal controls procedures. Depending on the objectives, Health Check can cover a broader scope including legal, HR and payroll, inventory and supplier management, ESG compliance, IT, and cybersecurity.
In most cases, our clients start with a basic overview moving to an in-depth view of a specific area going forward.
Invest in China Safely
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