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A real and fresh case about why only checking business registration information is insufficient to avoid scams

A real and fresh case about why only checking business registration information is insufficient to avoid scams

Due diligence | 2023-04-11

In our last post, we explained why verifying a business license is not enough to avoid scams. Today our analysts noticed a real case in the news about the risk of fake business registration information.

According to some domestic media in China, a few days ago, a private company named Guoheng Foundation Holding Group Co., Ltd. (hereafter “Guoheng Foundation”) updated its registration records to change its sole shareholder from a private company to several large enterprises owned by central governments and state-owned funds, such as State Power Investment Group Co., Ltd. and China Energy Investment Group Co., Ltd. 

However, just two days after the change records were publicized, two companies registered as the new shareholders issued official statements that Guoheng Foundation falsified the shareholder information by forging relevant documents submitted to the registration authority. The new shareholders have no business ties with Guoheng Foundation.

The purpose of Guoheng Foundation in deceiving the registration authority through false shareholder information is to create a powerful appearance. By conducting a few more checking procedures, we may find inconsistencies that the Guoheng Foundation exaggerates its business capabilities.

Our analysts conducted a more detailed background check based on Guoheng Foundation's company search report (Riskplus) automatically generated and have some observations.

1. The company was established in recent months with zero paid-in capital and shared the same business address with several other companies

Basic information

2. The company reduced its registered capital by RMB 240M (80%) in recent changes, and at least two new shareholders clarified that they have no business connections with the company

Change records

3. Abnormalities noted in other companies having the same Legal Representative as the Guoheng Foundation

  • In 2018, another company, represented by the Legal Representative of Guoheng Foundation, was marked as cannot be contacted in a government inspection;
  • The numbers of employee with social insurance coverage were from zero to one in companies having the same Legal Representative; and
  • Operational records, such as WeChat public accounts, websites, emails, and promotional information, cannot be found.

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Your supplier might be a shell company

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