Cutting your losses when restructuring China operations
Foreign companies are contemplating how to restructure their loss-making or low-profit China operations. There are several good options available, and several unwise choices, too. By Ghislain de Mareuil and Julie Tong, DLA Piper, Shanghai.
Issue: March 2009
Keywords (click to search):
[restructuring]
[DLA Piper]
[bankruptcy]
[outsourcing]
[employment]
[asset transfer]
Although restructurings often involve mergers and acquisitions (for example, selling out the struggling business or combining it with another company), this article will not address those specific and wide-ranging options but will concentrate on other issues related to restructuring and closing down, from a strategic level.
When a China-incorporated foreign-invested company is loss-making or insufficiently profitable, several options are available to it, including downsizing or closing down. There are also specifics to consider when the company to be restructured is part of a larger group.
What not to doOne option when a business is poorly performing should be clearly ruled out: fleeing. The media has reported cases of investors and managers simply running away, leaving their businesses and – they hoped – all liabilities including unpaid debts and wages, behind them. Doing this is not only illegal, but short-sighted as it implies never doing business in China again. Furthermore, new...
Please login or register below to read this article.