In most cases, termination projects are far more contentious and frequently lead to disputes. The best time to plan for termination is before signing the distribution agreement. Distribution arrangements rarely last forever — especially in China's fast-changing consumer market.
Last year, a European client asked us to conduct a tax due diligence on their subsidiary in Shanghai, to determine whether all taxes had been duly paid. One of the key issues that we uncovered, was that the Chinese entity had been wrongfully claiming VAT exemption on services provided to their HQ.
While concerns remain over geopolitics and economics, we are once again supporting an increasing number of Western companies to establish manufacturing, trading or service subsidiaries in China. One of the key questions for foreign investors that we need to respond to is: where to best locate such a subsidiary?
In a recent case, a potential client asked for our advice. Their Chinese registered trademark had been cancelled because a competitor had filed a non-use cancellation application, and the client’s local trademark agent had failed to notify the client thereof in time.
Chinese labor laws are relatively strict when it comes to unilateral termination by the employer. This is only permitted for one of several grounds listed in the law.
The latest update to the PRC Criminal Law includes provisions to tackle employees have set up a parallel, competing business; and employees who disadvantage their employer when dealing with “friendly” customers or suppliers.
