China company verification and Due Deligence Handbook
Check if a Chinese company is legitimate
Signing a contract or doing business with a company in suspension, revocation, liquidation or deregistration is risky. Because the company is incapable of performing a contract, and your deposit can turn into bad debts.
1. How to know if a Chinese company is legitimate or not?
If a Chinese company is in deregistration status, the company is dead in legal. Obviously, It is impossible to complete a transaction with a company is “deregistration” status.
A Chinese company in revocation means the company is revoked to be terminated and its legal entity status will be canceled. For sure, you will not do business with such a company.
Foreign business entities should conduct business transactions with Chinese companies that are in a state of existence. Existence status means: the enterprise exists and continues to operate normally according to the law.It is also referred to as open, normal, and registered status.
2. How to check the status of a company?
I would recommend an official query website National Enterprise Credit Information Publicity System.
The specific query steps are as follows：
1.2.1 Visit the website to enter to the below page:
You need to enter the company name in Chinese, the click the query. Please noted that before querying, you need to know the Chinese name of the company.
If the company being queried exists, the query results will appear as follows.
1.2.2 Click the search results to enter the result page.
If you could see the below status “存续”, it means the company is running normally.
1.2.3 Are there any other status for Chinese companies?
Yes, In China, there are generally eight types of company business status.
1.Business status existence（存续）means: A business exists and continues to operate normally under the law. Also referred to open, normal, registered.
2.Business status in business（在业）means: the normal start-up production of enterprises, new enterprises including part of the production or trial operation.
3. Business status revocation，unregistered（吊销） means: revocation of enterprise business license, is the administrative punishment made by the bureau of industry and commerce for illegal enterprises. After the enterprise's license is revoked, it should be liquidated in accordance with the law, and the liquidation is completed and registered for industrial and commercial cancellation before the enterprise legal person is eliminated.
4. Business status cancellation（注销） means: The enterprise has ceased to exist and has lost its legal personality
5. Business status move out（迁出）means: the change of the competent business registration authority, move away from a competent authority.
6. Business status move in（迁入） means: the change of business registration authority, move to a competent authority.
7. Business state cessation（停业） means: for some reason, the enterprise is in the end of the period to stop production and business activities to resume production after the conditions have changed.
8. Business liquidation（清算） means: After dissolution according to the articles of incorporation and declaration of termination of business due to bankruptcy, revocation and other reasons, a comprehensive inventory of the enterprise's property, claims and debts is conducted, and economic activities of collecting claims, settling debts and distributing remaining property are carried out.
2.What information about the Chinese company should be verified before transaction?
A foreign business entity should at least check some important information about the actual controller (controlling shareholder), registered capital, paid-up capital, company status, etc of the Chinese company that you are going to trade with.
2.1 The specific and basic company information you should know is as follows:
Official Company Name
Registration Status
Business Operations Status
Registration Number
Registered Address
Company Type
Date of Establishment
License Expiry Date
Legal Representative
Supervisor
Registration Bureau
Registered Capital
Paid-up Capital
Staff Size
Business Scope
Director Name
Director Title
Shareholder Name
Shareholder Holding
Date of Latest Investment
Beneficiary natural person name
Actual Control Person
2.2 How to acquire the basic information of a Chinese company?
In China, legally registered companies are issued a business license by the Market Supervision Administration. Although the business license is only one piece of paper, it shows the most important information about the company. Generally, the business license contains the following 9 important information: unified social credit code, company name, company type, legal representative, registered capital, date of establishment, business term, and business scope.
How to verify the authenticity of the business license of a Chinese company, please follow the above introduction to enter the official website of National Enterprise Credit Information Publicity System, and follow the method introduced above to enter the Chinese name of the company to search the query, if the query result and the company name on the business license have been, then this business license is authentic. Of course, before searching, you need to get the electronic version of the business license from the Chinese company.
After obtaining the name of the Chinese company, compare it with the signature on the contract to confirm if it is the same company. In the future, if a dispute arises between the two parties over the performance of the contract, the company with the signature can be legally identified as the subject of legal action, and the foreign business entity can file a lawsuit or arbitration against the Chinese company.
- Why should you check the import and export qualification of a Chinese company?
When you need to import a product or technology from China, the company in China should have import/export authority. Otherwise, the transaction cannot be completed.
- How to check the import/export qualification of Chinese companies?
I would recommend an official website to check the information. Specific operation is as follows:
3.1.1 Visit the official website http://credit.customs.gov.cn/. The below web page appears.
3.1.2 If the company searched has the right to import and export, the query results page will appear.
In Chinese “正常” refer to normal. Then the company can do import and export business.
- Why should you check the quality certificates of our Chinese suppliers?
If your Chinese supplier is a factory, generally the factory will have an ISO quality certificate indicating that the factory quality system meets the relevant standards. For some industries involving public safety and personal health such as medical industry, pressure vessel industry, toy industry, etc., special certification is also required. Before a transaction occurs, foreign buyers are advised to verify the relevant quality certificates of their Chinese suppliers as much as possible.
- Why You Need to Review Patent IP of Chinese Companies?
In China, there are three types of patents: invention, utility model and design, among which invention patents have the highest technical content and can best represent the core competitiveness of an enterprise. The technical content of utility model patents is relatively lower than that of invention patents, while design patents focus more on the design of product appearance. Therefore, by looking at a Chinese company's patents, one can also understand the technical level of the company.
- Why is it important to understand the involvement of Chinese companies in lawsuits?
First of all, I would like to introduce a real case. A Turkish company purchased two injection molding machines from Ningbo, China. The Ningbo company was later sued in a Chinese court for a debt dispute and was found to be unsuccessful and liable for a large amount of compensation. The Chinese company was later applied for enforcement, and the property being enforced included the two injection molding machines purchased by the Turkish company. The two injection moulding machines were seized by the court and auctioned off to pay the court's judgment claim.
Before dealing with a Chinese company, you should understand the company's financial situation and verify whether the company has commercial loans or bank loans and whether the company's assets are pledged or mortgaged to creditors. Find out about the company's past court cases to understand the disputes the company is involved in and to assess the size of the company's potential legal liability arising from the litigation. Most importantly, inquire whether the company is subject to court enforcement to ensure that the transaction is secure.
