Steve Dickson wrote a great article entitled China Due Diligence. Not Optional – that I will steal and copy at length. His article appears on the China Law Blog.
Most companies are not aware that due diligence is required whenever you do any kind of business with a Chinese company. If you do not already know the Chinese company with which you will be conducting business, you must confirm that the company really does exit and that you are dealing with the actual company and not an impostor.
Substitute Chinese with Korean and we have a good article for this blog.
I had a client contact me asking for advice on how to collect a Korean debt of USD 150,000. I first asked the client for the name of the debtor and he gave me the name JH Park. I asked if he had any other information and he said he had an email address. Don’t send anyone money before reading: Due Diligence of Korean Companies.
He noted that he saw the website and I noted that the website has only an email address and the name JH Park. I felt really bad for this guy and agreed to try to dupe the “JH Park” into revealing more information, but of course, the man was too smart to fall for our fishing exercise. Thus, we are left with a fake Gmail account and a name that is more common than Joseph Smith in Utah.
Steve seems to experience the same issues I experienced working in Korea.
It is easy in China to fake company seals, business cards, bank accounts and even a website. The unsuspecting foreigner makes a deal with the impostor and sends funds to the bank account. Product never arrives. The foreigner contacts the well established Chinese company and that company truthfully responds by saying “we have never heard of you.” It turns out the foreigner had been dealing with a fake, virtual company the entire time. This happens all the the time in China. Trust me when I tell you we see instances of this at least once a month.
Please, my friends at the China Law Blog and I have said numerous times, please do your due diligence. Read the below articles and one can get a better sense of what due diligence actually means.
- Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts
- Listen to My Mother: JVs in Korea (Translated from Korean)
- Debt Collection Cases in Korea on the Rise: Due Diligence Brother
I love Steve Dickson (in a Philadelphia way), since he is the smartest guy on the other side of the Yangtze and one of the most interesting and creative thinkers in law. I know, enough of the brown-nosing. Hope he invites me one day to meet him in China. His blog may be found at: www.chinalawblog.com and the article may be found HERE.
Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law for our litigation services.
- Korea Due Diligence for Joint Ventures, Licensing, OEMs and Buying a Korean Company
- Korea Contracts Don’t Forget the Counter-party: Due Diligence before Executing an Agreement in Korea
- Employment Background Checks in Korea: Not so Different from China
- Korean M & A Due Diligence Checklist: Mergers & Acquisitions Due Diligence in Korea
- Acquiring Shares in Closed Korean Corporations in Exchange for Products at Discount: Don’t Forget the Due Diligence in Korea
- English-Speaking Business Lawyers in Seoul, Korea: Corporate Law & Compliance Team at IPG Legal
- Credit Rating Agencies in Korea: Due Diligence of Your Supplier, Franchisee, Joint Venture Partner & Distributors
- Capturing Chinese Tourist Money in Korea: Retail Opportunities in Korea
- Collecting an Unpaid Invoice from a Korean Bankrupt Debtor
- Forming a Joint Venture in Korea, China & Southeast Asia: Listen to My Mother