Compliance Health-check for Foreign Businesses in China

10 April 2015

Sven-Michael Werner

Compliance requirements for businesses in China

Both foreign and domestic, are becoming more complex every year so that companies need to spend an increasing amount of time to understand and respond to such requirements. Moreover, there is a clear focus of governmental authorities to enforce such requirements on a broader basis. Over the last two years, we have seen a number of cases where foreign-invested companies became the subject of administrative investigations in China and by Chinese authorities enforcing local law. Most of these concluded with hefty fines being accepted by those investigated companies.

Therefore, given the importance of continued access to the Chinese market for many international companies, a high degree of legal compliance became top priority for foreign investors. Bird & Bird in China can help companies meeting such compliance requirements by pro-actively identifying the legal rules applying to its China operations, checking current compliance arrangements and making recommendations for changes. We have many years of experience advising clients in China in this regard, both for internal auditing purposes as well as in M&A transactions for the acquisition of local Chinese businesses.

Scope

We have tailor-made for the China market a Compliance Health-Check putting a spotlight on those legal areas which currently are developing particularly fast and pose a challenge to remain ahead of, and should therefore be on the radar screen of foreign businesses.

While the exact scope of each Health Check differs from case to case, the following areas are of concern for most businesses:

1. General Regulatory
  • All regulatory licences, approvals and registrations for the actually carried out business
  • Compliance with investment restrictions in restricted or prohibited industry sectors
2. Competition Law
  • Participation in trade associations and other organizations
  • Cooperation agreements/strategic alliances/JVs with competitors
  • Informal contacts with competitors (type of contact, reasons for contact)
  • Restrictions imposed on customers
3. Bribery Prevention
  • Internal rules and procedures
  • Relationships with governmental and quasi-governmental agencies and officers
  • Responsibilities and powers of compliance officer, government relations officer and similar functions
  • Applicability of extraterritorial legislation, such as the U.S. Foreign Corrupt Practices Act or the UK Anti-Bribery Law
4. Employment
  • Employment contracts
  • Contribution of social insurance and housing fund
  • Working hour system
  • Company union
  • Labour disputes/strike
  • Labour protection
  • Internal Employee Handbook
  • Labour Dispatch Arrangements
5. Data protection
  • Internal rules and policies relating to protection of personal information
  • Procedures relating to the use and handling of personal information
  • Personal information policies for clients/customers, including consent forms
  • Agreement with third parties (e.g. service providers, data processors) on use or transfer of personal information
  • Policies and procedures for processing of employee personal information
Procedure

A comprehensive analysis of the legal requirements for the current or planned business is followed by a review of respective China related documentation, ideally supported by interviews with relevant members of staff involved in the China operations. We would deliver a detailed report setting out requirements, findings and recommendations in a reader-friendly format which may serve as the basis for further discussions and subsequent remedial measures.

Authors

Image of Sven-Michael Werner

Sven-Michael Werner

Partner
China and Hong Kong

Call me on: +86 21 2312 1288