WHY FOREIGN INVESTORS SHOULD PLAN FOR A GRACEFUL EXIT
VSNRY In The News: Foreign companies investing abroad are well advised to plan as carefully for a possible exit as they do for moving into a market, finds Erika Morphy. This is because in countries such as China, not getting this right can mean more than just reputational risk.
Many foreign companies go to China intent on making money in a giant market. Often they successfully navigate the many challenges and succeed. Inevitably, though, some fail and, as they try to exit, they come to one last ignominious hurdle from the country that has defeated them: they need permission from local government officials to shut down.
Stanley Chao, principal at Asian specialist advisory company All In Consulting, says there are many regulations in China governing how to close a business, and most companies operating there are familiar with them. However, foreign companies often do not grasp that they cannot go to a local government office and simply announce it is closing. “That creates problems,” says Mr Chao. “That creates penalties. That creates inquiries from the local tax bureau.” In the worst-case scenario, a corporate officer can be arrested if he does not close down a company properly, adds Mr Chao.
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Originally published at www.FDIintelligence.com