“ the business network for international trade”. castlet ltd setting up a business in china by...
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““The Business Network The Business Network for International Trade”for International Trade”
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Castlet Ltd
Setting Up A Business In China
By Bryan Carr
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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.
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History
• 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.
• Company founded in 1974.
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GROWTH OF COAL FIRED POWER STATIONS IN CHINA
• 19492MW
• 198065MW
• 2003285MW
• 2010438MW
• 2020660MW
• Before 2004 emission limit 200mg/m³
• After 2004 emission limit 50mg/m³
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• 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).
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Shanghai Electric Group
Shanghai Enterprise Development
Shanghai Petrol Chemical Company
Shanghai Resistor
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Shanghai ResistorMinhang District
• Employed 340 people.• 4,700m² manufacturing/office
space.• Output capability 400 power
supplies/annum.• Present output 100 per annum.• Average wage £75/month.
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MINHANG DISTRICT
• 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.
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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
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MUST AGREE
• Employ minimum of 70 people for minimum of 3 years.
• Wage structure for different classes of staff• To pay:
– Medical insurance– Pensions– Unemployment insurance– Housing fund– Total 62% add on costs
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ASSET VALUATION
• Impartial Asset valuation.
• Public announcement of sale, asset value and registered capital.
• 20 working days to register interest for qualified bidders.
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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.
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• 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.
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• 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.
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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.
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• Mother company agreed only to sell certain assets.
• Legal agreement and warranty to ensure Castlet only responsible for events after signing.
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DOCUMENTS REQUIRED TO SET UP A WOFE
• 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
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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.
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““The Business Network The Business Network for International Trade”for International Trade”