Since the pandemic, China has closed its borders to international travelers -- personal, leisure, or business -- for two whole years. As early as August 2020, the Wall Street Journal noticed that an estimated 250,000 business executives were stuck abroad and could not get back to China, leaving their local operations unattended.
The challenge for doing business in China in 2022
Even though the rest of the world is reopening, with recent rising cases in China and Hong Kong some China observers expect China to continue with its zero-COVID policy for 2022. While there is a step-by-step guide in a recent USA Today article about how to get a visa to China during COVID, the practical difficulties are significant. In fact, most business people who need to take care of their business operations in China in person will find it almost impossible to actually get there if they are currently out of the country.
Because of the challenges many business owners and executives face in China, Trustiics recently conducted a survey of more than 50 Chinese lawyers registered on Trustiics.com. These are senior lawyers representing over 20 leading Chinese national law firms. The survey is about the impact of China’s continuous closure on legal matters in international businesses’ daily operations in China.
Thankfully, international business owners and executives can handle some of their China business remotely. There are other matters which may not require your presence, but that you should authorize a local Chinese lawyer or qualified agent to handle. Finally, some matters do require your presence in China, and you will thus have to wait until you can travel there in order to address them in person.
Below, we summarize the three categories of situations. If you have any specific questions or needs, please contact us by sending an email to support@trustiics.com
What are the legal matters that you can handle remotely for your China business?
As a matter of Chinese law and local practice, business owners/executives or in-house counsel can handle these matters remotely from their home countries. You can use Zoom meetings or other online means, with or without the help of a local Chinese lawyer. Here is a list:
- Hiring or firing local employees
- Verifying basic information of Chinese companies (simple legal due diligence)
- Signing commercial contracts, such as international sales contracts with Chinese companies
- Signing shareholders resolutions of a China subsidiary, if the subsidiary company’s shareholders agreement, articles of association, and JV contract (if applicable) permit
- Signing board resolutions of a China subsidiary, if the subsidiary company’s articles of association and JV contract (if applicable) permit
- Signing office lease of a China subsidiary
- Terminating office lease of a China subsidiary
- Terminating residential lease of a China subsidiary
- Searching trademark availability in China
What are the legal matters that will NOT need your presence in person, but SHOULD be handled by an authorized person?
As a matter of Chinese law and local practice, these legal matters will not need your presence in person. However, you should authorize a vetted local Chinese lawyer or qualified agent to deal with them:
- Setting up a subsidiary, branch company or representative office in China
- Closing and liquidating a subsidiary, branch company, or representative office in China
- Making trademark or patent filing
- Fighting IPR infringement such as making trademark invalidation filing
- Sending attorney’s demand letter to counterparty
- Sending IPR Infringement Cease and Desist letter to counterparty
- Conducting comprehensive legal due diligence on Chinese companies
- Opening up bank accounts of a China subsidiary
- Making annual filings of a China subsidiary
- Attending local board meetings (if company articles of association require such meetings to be conducted in person)
- Filing lawsuit or initiating arbitration in China
- Defending a litigation or arbitration in China
- Enforcing international arbitration in China
What are the legal matters that require your physical presence?
As a matter of Chinese law and local practice, these legal matters require your physical presence. Thus, they will have to wait until you can travel back to China:
- Attending board and shareholders meetings if this is required by the company’s articles of association or JV contract
- Opening bank accounts for your local operations in most cities in China
- Negotiating major commercial contracts. Although not legally required, as a matter of practice, negotiating long-term or high-value contracts with Chinese parties should be done in person.
- Contract signing with most state-owned enterprises in China
- Onsite due diligence on potential Chinese partners, e.g. to check out the qualifications of a potential OEM