Company restructuring involves a series of significant corporate changes and actions and it is done when the company is facing financial or operational problems. It is important to recognize the potential problems early on and begin a well-designed restructuring strategy aimed at saving the company. Corporate restructuring in China can have certain hurdles for the foreign investor. Our lawyers in China can help evaluate your case, draw up a good restructuring plan and implement the necessary changes.
Restructuring strategy: cutting costs
Company underperformance is often a cause for considering company restructuring in China. This can occur in any business field and it has to do both with the sector in which the company operates (if it is a less profitable, seasonal business) and with management mistakes that took place at one point during the company’s existence. Downsizing the company can be a solution. This option includes transferring staff to other positions and reducing staff. This second option must be considered in terms of the employment law in China which prohibits employers from firing their personnel under certain grounds or more than 10% of the workforce without announcing the Labour Bureau.
When a company needs to cut down staff members it is advisable to know both the rights of the employer and the employee. One of our Chinese lawyers can provide you with complete legal counseling for this matter.
Tax and creditor issue in corporate restructuring in China
Apart from downsizing, corporate restructuring also has another key component: dealing with creditors and any tax issues that may arise during the business restructuring process. The company’s creditors should be informed of all the management and financial changes that are planned for the company.
Tax aspects to consider during a business restructuring process in China include tangible and intangible assets, cash and equity, debt. Failure to reorganize the debts of the company and to deal with the existing financial issues can result in bankruptcy. The main goal of any company restructuring in China is to keep the company operational (to the best of the abilities) and minimize any business disturbances.
For a better understanding of how a company in China can be restructured, please watch the video below:
We invite you tocontactour law firm in China for more information and personalized advice on company restructuring in China.