4 - Due Diligence Flashcards
Goal of DD
Obtaining full disclosure relative to the investment target
Permitting a fair evaluation of the transaction
when foreign investor and Chinese partner agreed to build a new production facility on and undeveloped parcel of land, required substantially less investigation bc only existing asset at the time is the land
greenfield projects
SOE
State owned enterpries
Prior to the ______ , allowing foreign lawyers, accountants and investment bankers liberal access to financial and operation records and documents of an SOE could have violated the state secretes regime and subjected the offender to server punishments.
Open door policy
To be most effective the DD checklist should be in what language?
Chinese, even if the Chinese side my be fluent in English, because the personelle actually compiling the responses my only be able to read Chines
What other tactics besides DD should be used to gain complete picture of the target?
on site visits, interviews with mgmt, public searches and extensive follow ups
Typically what level of mgmt have better access to the detailed information requested during DD?
middle level managers, authority tends to be concentrated with senior mgmt, senior mgmt may not be the best source ofthe degree of detailed information
the process through which an individual or institution takes on financial risk for a fee. This risk most typically involves loans, insurance, or investments. The term underwriter originated from the practice of having each risk-taker write their name under the total amount of risk they were willing to accept for a specified premium.
underwriting
the Chines gov is increasingly concerned about protecting the ______ and ______.
environment and punishing polluters, a well informed investor in China will engage an environmental consultant to conduct a thorough and environmental audit/environmental audit report
Each commercial entity that is organized as a legal person in China must have a ________ with a scope of business permitting its ops and in the case of a company it must have articles of assocation
business licenses
FIE, EJV, CJV, WFOE
foreign-invested enterprise, equity joint venture, cooperative JV, wholly foreign owned enterprise
In an asset deal, permits and licenses are usually ____ transferable.
not, the newly established FIE buyer must separately apply for new permits, which could involve sig time delays and disrupt bus ops.
On of the most difficult DD issues in both a share and asset purchase is what?
Land use and building ownership rights
a uniform tax rate of ___ applies to both FIE and enterprises with domestic investment in China
25%
_____is the tax governments place on legal documents, usually in the transfer of assets or property. Governments impose _____, also known as ____ taxes, on documents that are needed to legally record certain types of transactions. This includes legal documents recording marriages, military commissions, and the sale or transfer of a property.
Stamp duty
