Restructuring Options for Companies in China
In the current context of COVID-19, a number of foreign-invested companies in China have sought corporate restructuring to enhance the sustainability of their operations, to strategically improve its business management, to strengthen its ability to compete in the market and to promote its innovation.
The effectiveness of a company restructuring plan will be determined by many factors. It therefore helps when businesses have a good understanding of the challenges that can surface in each restructuring option and choose the most appropriate strategy for their entity.
Different options open to foreign investors for company restructuring in China
- External restructuring
External restructuring usually refers to the restructuring of the company equity, control rights, and assets to achieve relevant business purposes.
Typical strategies under external restructuring include equity acquisition, asset transfer, merger, split-up, divestiture, etc.
- Internal restructuring
Internal restructuring refers to alterations made internally on operations, capital, supply chains, human resources (HR), systems, legal frameworks, as well as locations of a company to make the business more integrated and profitable.
To implement internal restructuring, companies are suggested to conduct a series of reviews on their operations, such as financial review, legal review, HR audit, supply chain review, and so on, to find out the existing issues and identify areas that can be improved. For example, through financial review, the company will have a chance to find out the neglected flaws in their current policies and practices and thus make relevant arrangements in advance to ensure the liquidity and stability of their company finance.
We, SONG Ltd., are specialized in regulatory affairs, tax, finance, and advisory services across a large range of sectors for clients of all sizes of business. When you prepare for the external/internal restructuring, we can provide professional assistance, such as audit/Due Diligence/VDD preparation/Managing the acquisition or resale process of a company or a group.
