Due diligence | 2023-12-06
A supplier’s salespeople and the company’s website always confidently tell the buyer that their factory is strong, production capacity is sufficient, and the quality is high. However, if you delve deeper into some background information about this company, you may discover that the actual situation might not be as the company claims.
Recently, while conducting background checks for our clients, we revealed that some companies are rebranding to eliminate trading elements from their names. They remove terms like “trade” or “international trade” from their company names.
For instance, we observed Company A, established in October 2021 under the original name “ABC International Trading Limited.” However, a year later, in November 2022, the company changed its name to “ABC Steel Group Limited.”
The deliberate removal of trade-related elements from their names suggests that these companies might aim to avoid revealing their actual nature as trading companies to clients.
The change in company names often coincides with alterations in business scopes and other information. In the case of Company A mentioned above, we observed that while removing the “trade” characteristic from the company name, Company A added some manufacturing activities to its original business scope.
However, we also noticed that in the industry code attribute, Company A’s record shifted from “Other Wholesale” to “Metal and Metal Ore Wholesale,” indicating that its primary business activities remain.
In the case above, Company A claims to have factories in four locations in China. However, upon conducting searches on public information channels for Company A's recruitment records, information from multiple job recruitment websites indicates that Company A is hiring predominantly for procurement and sales roles. There's no evidence of recruiting for roles related to production, manufacturing, quality, or similar functions. Additionally, Company A mainly recruits from foreign language universities in the local area.
The job positions a company advertises can reflect its business activities to a certain extent. An investigation of recruitment records can reveal the actual business activities of the company.
We also conducted media searches, including Company A's own website, for publicly available materials such as images and videos. We discovered that the pictures used on A Company A's webpage purportedly depicting the interior of their factories might be downloaded images from the internet.
Furthermore, in a promotional video of Company A found in a WeChat article, the labels on the products within Company A's factory seemed to belong to another larger steel manufacturing company, suggesting that Company A is primarily involved in trading rather than production.
Company A claims to have invested hundreds of millions of RMB to establish production facilities in four provinces in China. However, the situation contradicts this claim: Company A has zero employees contributing to social security, and its initial registered capital was only 1 million RMB. Although this later increased to 10 million RMB, no funds were paid into the equity, only a subscribed amount.
Contradictory information from various sources might explain the existence of misleading or exaggerated claims regarding the company's production capacity.
- End -
Read more articles ...
Company law of China | 2023-01-29
1. BackgroundThe Administrative Measures for the List of Subjects with Seriously Illegal or Dishonest Acts under Market Regulation (the "List") has become effective since 1 September 2021. As early as 2014 to 2015, the State Council of China has alre ......
Read the full article
Due diligence | 2023-06-04
As a service provider in company search services in China, our clients frequently ask us the following questions"I want to know whether the business of this company in China is legitimate?","Is this company listed in any blacklist?", and"Just need to ......
Search Chinese companies and get search automatically generated reports in minutes
See a sample report
Conduct a search
We write articles about knowledge and insights for conducting company searches and due diliegnce for Chinese companies. The articles are based on our extensive local experience.
Explore more articles
A checklist for conducting background checks
on a Chinese supplier before purchasing from it
Terms and conditions
Instant Company Search
Pre-deal Supplier Screening
Open Company Lists
Request a name research
Check order status
Retrieve a report
Contact for support
Subscribe to our product updates, special offers and articles.
We provide tools and services on public information search for companies in China. Our mission is to organize public business information in emerging markets and make it accessible through automated tools and value-added services to provide insights into your business decision.
© 2024 Knowaco.com - All rights reserved.