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...
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