Opinion: Roadblocks to corporate due diligence

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clpstaff &clp articles

Company records were once easy to access in China, but a series of high-profile scandals in 2012 have caused a clampdown. John Kuzmik and Xu Changrong look at how the SAIC has to strike a balance between privacy and legitimate public access to corporate records

Everyone has heard stories about the difficulties of performing transactional due diligence in the face of unscrupulous individuals and companies in China bent on hiding information relevant to the transaction. To hear the tales, one might conclude that every transaction party in China keeps two sets of books, hides real ownership interests and obfuscates liabilities. To be sure, the process of due diligence can be a challenging one even in an advanced commercial jurisdiction and in China there are many cultural, legal and systemic barriers to transparency. Still, the horrific reports of transactional fraud in China may be obscuring an evolving issue that since 2012 has had an impact on nearly every corporate transaction in China.

Since that time, corporate records that are maintained by the State Administration for Industry and Commerce (SAIC) have been closed to the public. Consequently, without a court order, even lawyers are unable to view, let alone copy, a Chinese company's basic information.

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