Due Diligence of Chinese Companies

1. Due diligence of Chinese companies

Due diligence investigations are usually conducted before the acquisition of a company, but they may also be conducted for other purposes, including to audit the management of a subsidiary. Due diligence investigations to audit the management of Chinese subsidiaries may be carried out to confirm whether there has been any appropriation of company assets by employees of the Chinese subsidiaries, divulgence of the company’s confidential information or any other criminal acts by the employees, such as commercial bribery, and to confirm whether the compliance systems to prevent these issues are in place and functioning properly. Of these issues, commercial bribery (the offering and receipt of commercial bribes between private companies), for example, is a crime that does not exist in Japan, and therefore employees who have been seconded to Chinese subsidiaries from Japan may commit it unintentionally. However, as restrictions on commercial bribery have been strengthened in recent years, it is certainly worth carrying out a due diligence investigation to confirm that the employees of Chinese subsidiaries have not engaged in commercial bribery.

2. Key points when exercising due diligence regarding Chinese companies

When conducting a due diligence investigation of a Chinese company, the investigation must naturally proceed subject to Chinese law. Further, if the due diligence investigation is not carried out with an understanding of the operation of Chinese laws in practice, Chinese commercial practices and areas where disputes often arise in China, the inevitable result is an imperfect investigation that overlooks major issues.

3. Services provided by Kuroda Law Offices

We have worked on a large number of due diligence investigations involving Chinese companies and have extensive knowledge and know-how relating to due diligence for Chinese companies. This enables us to conduct swift and appropriate due diligence investigations, taking into account the points mentioned above.

The major services we provide in relation to due diligence of Chinese companies include: