Our client is a fast-growing North American manufacturing company. The client came to ICS TRUST with significant issues relating to their manufacturing focused Wholly Foreign Owned Enterprise (WFOE) in central China. Their key employees, the General and Finance managers whom they had relied on for control and operations of the WFOE decided to leave the company very suddenly and as a result the client had no direct knowledge of the remaining staff or the situation on the ground in China. They faced challenges related to securing the “chops” (seals or stamps), inventory, relevant tax and computer systems passwords, and keys and control of the local bank account. The company was also unaware of the whereabouts of the WFOE company vehicle and complaints against it had been submitted at the local labour bureau due to the late payment of salaries.

ICS TRUST established a strategic working partnership with the company, with the goal of regaining full control of the Chinese subsidiary and making it fully compliant. Following an intensive review by ICS TRUST, we discovered the client was also faced with a number of important compliance tasks including the preparation of the annual financial audit, of the foreign exchange audit as well as the performance of the annual joint inspection. They were also behind in filing the monthly Business Tax and VAT return, filing the quarterly Enterprise Income Tax return and preparing the annual tax resources investigation and annual tax clearance. The Chinese subsidiary had already incurred penalties for late filing and payment.

The client also had to prepare written legal documents for the termination of employment signed by both employer and employees and the notification of the termination of employments to the Social Securities Bureau. There was an ongoing requirement to pay third parties including the client's China landlord.

ICS TRUST Role:

1. Partnership: The client retained ICS TRUST Trust to help them retake full control of their operation, reinstate and maintain full compliance with PRC laws and regional regulations for the Chinese subsidiary, thereby giving the client time to decide on their future plans for China.
2. Expert Team: ICS TRUST created an internal team to focus on this project, consisting of senior managers, relationship managers, and implementation staff.
3. Translation: ICS TRUST translated and explained a number of key documents for the client, better allowing them to understand the current situation and the steps to resolve the crisis.
4. Evaluation: ICS TRUST did a comprehensive evaluation of the Chinese subsidiary with the information available to determine the legal, accounting and operational status of the company and its bank accounts, and its compliance needs and thereafter deliver a full report to the client.
5. Planning: ICS TRUST did an initial conference call briefing with the client to understand their future plans in China in order to pursue the correct end-state for the Chinese subsidiary.
6. Strategy: ICS TRUST created a detailed action plan to regain control of the company and reestablish full compliance. This included the development of a detailed handover strategy with the ex-Finance manager and establishing good relations with the last remaining staff, a timeline and work flow for tax filing, and creation of detailed spreadsheets to ensure ICS TRUST and the client could track every single important document.
7. Transfer: On the clients behalf ICS TRUST completed payment transfers to a number of third-parties, including the landlord.
8. Cultural Business Expertise: Contact was established with the ex-Finance manager and over the course of a three week Mandarin-language negotiation ICS TRUST staff was able to transition her from being intransigent to cooperative and schedule a handover meeting in time to allow a number of important tax deadlines to be met. ICS TRUST successfully had the labour complaint against the Chinese subsidiary voluntarily withdrawn.
9. Full Compliance: Following intensive preparation, ICS TRUST staff executed a very successful handover meeting. Every single important document was obtained, as were all of the chops, keys and the company vehicle. ICS TRUST also explained the situation to the local tax office and the outstanding fines against the Chinese subsidiary were lowered by 45%. Following the handover, ICS TRUST was able to achieve full compliance for the company, through various tax filings and inspections.
10. Virtual CFO: ICS TRUST then put the client on a customized Virtual CFO solution in order to keep the WFOE compliant while the clients decided on their next step in China. ICS TRUST now performs all monthly tax and compliance filings, the annual tax return and audit, executes chops and payments and reviews key documents.

Conclusion:

The client was able to regain full control of their Chinese WFOE, bring it back into compliance and lessen the penalties levied against it. While keeping the Chinese WFOE in good standing, ICS TRUST assisted the company in developing and implementing a new China strategy.

ICS TRUST, based in Hong Kong and China, was able to execute all of the above services for the North American-based client, ensuring the client could continue to focus on their core manufacturing and sales business. ICS TRUST saved the client an enormous amount of time and provided peace of mind to the Board of Directors that this issue was being dealt with professionally and efficiently by an experienced firm.

ICS TRUST's fast and comprehensive remedy action also prevented the firm from being black-listed by Chinese central and provincial authorities for non-compliance. The client was therefore able to keep their China business options open for future expansion.