Transcript www.emita.org.uk

“The Business Network for
International Trade”
Castlet Ltd
Setting Up A Business
In China
By Bryan Carr
Castlet Limited
• Designers and manufacturers of
industrial process equipment.
• High Voltage power supplies for
Electrostatic Precipitators.
• Applications in Power Stations, Steel
and Cement works, and Incineration
Plants.
History
• Company founded in 1974.
• By 1980 85% of UK market.
• By early 2000 25% world market
outside of China, USA and Russia.
• By 2005 had supplied 19 new power
stations in China.
• Always interested in having a
company in China.
GROWTH OF COAL FIRED
POWER STATIONS IN CHINA
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1949 2MW
1980 65MW
2003 285MW
2010 438MW
2020 660MW
Before 2004 emission limit 200mg/m³
After 2004 emission limit 50mg/m³
• October 2004 gave paper at Chinese
pollution control conference.
• Many Chinese companies wanted us
to joint venture with them.
• Selected Shanghai Resistor a state
owned company which was up for
sale.
• Wholly Foreign owed enterprise
(WFOE).
Shanghai Electric Group
Shanghai Enterprise Development
Shanghai Petrol Chemical Company
Shanghai Resistor
Shanghai Resistor
Minhang District
• Employed 340 people.
• 4,700m² manufacturing/office
space.
• Output capability 400 power
supplies/annum.
• Present output 100 per annum.
• Average wage £75/month.
MINHANG DISTRICT
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Located SW suburbs of Shanghai.
About 50 minute drive from centre.
Population about 750,000.
Inward investment by 2400
companies.
• Total FDI £5 billion from 40 countries.
• Exports £1.4 billion/annum.
QUALIFICATONS TO BID
• LETTER TO MOTHER COMPANY
– Your company profile
– Accounts showing assets
– Testimonials
– Reason you want to buy
– Products you will introduce to China
– How you will make workers conditions
better at work
MUST AGREE
• Employ minimum of 70 people for minimum of 3
years.
• Wage structure for different classes of staff
• To pay:
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Medical insurance
Pensions
Unemployment insurance
Housing fund
Total 62% add on costs
ASSET VALUATION
• Impartial Asset valuation.
• Public announcement of sale, asset value
and registered capital.
• 20 working days to register interest for
qualified bidders.
DOCUMENTS REQUIRED FOR
REGISTER OF INTEREST
• The following documents in both English
and Chinese, notarised by
• Solicitor with legal authority to notarise
documents.
• Foreign and Commonwealth Office.
• Chinese embassy.
• Letter from bank sufficient funds.
• Minutes of shareholders meeting
authorising the company to register
interest. Signed by all shareholders.
• Share subscription agreement.
• Memorandum and Articles of
Association.
• Company certificate of incorporation.
• 21 September 2005 – Castlet only
bidder.
• Due diligence revealed a horror
story.
• Many of the debtors did not exist.
• Over inflated assets.
• Motor vehicles with no registration
documents.
• Overall very poor Quality Audit.
Plan B
• Identified suitable premises just a
short distance from Shanghai
Resistor.
• Invited senior managers to view.
• Priced all equipment needed.
• Made sure Mother Company were
aware of Plan B.
• Mother company agreed only to
sell certain assets.
• Legal agreement and warranty to
ensure Castlet only responsible
for events after signing.
DOCUMENTS REQUIRED TO SET
UP A WOFE
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Five independent Chinese names
Applications letter
Business registration certificate
Passport copy of legal representative
Bank reference letter
Office leasing agreement – chopped by landlord
Passport copy of proposed Board and CV with 2 two
inch photographs
• Environment protection, fire protection and sanitation
certificates
• Tax, finance, customs, VAT registration certificates
• Foreign exchange licence
In parallel and independent of all
this activity.
• Located suitable manufacturing of printed
circuit boards.
• Made sure nothing in documents related to
Castlet.
• Order via reliable trading company.
• Cost reduction of about 50% from UK
supply.
“The Business Network for
International Trade”