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China Law And China Risks: The Company We Do Not Keep
Are you comfortable leaving your future to chance?
As the co-head of my firm’s China law group I get bcc’ed on a lot of emails. In cleaning out my emails today I came across an email conversation between two of our China lawyers from a long time ago that is too telling not to post about.
The situation is a small company that formed a WFOE in China many years ago. The company then started operating in China illegally by among other things, doing something very different from its scope and by not paying its taxes. It got caught and the Chinese government (big surprise!) is now insisting that it pay all sorts of back taxes, plus penalties, plus interest. It also is making noises about going after some of the owners criminally or just via deportation. One of the company owners (who lives in China) contacted us to try to remedy its problems. In particular he was concerned that this problem will mean that he personally will be criminally charged and get deported from China and never be able to return — a very valid fear. In fact, his bigger fear should be that he will not be allowed to leave China unless and until all back taxes are paid, but we will save that issue for another blog post.
One of our China lawyers in the U.S. communicated with this person a few times and at the same time discussed this person’s problems via emails with another of our lawyers in China. To summarize, we told this person that we would need at $15,000 in our bank trust account to get started on his legal work because there were so many complicated and issues involved (ranging from corporate to tax to criminal to deportation, among others) and because of the urgency and the personal risk. We would then charge by the hour against this $15,000.
His response was to ask whether we could instead simply bill “an hour or so” to review the relevant documents and his situation and then tell him what to do. One of our lawyers responded with a very simple explanation of how that would neither make sense nor be possible. We never heard from him again.
I write this post to illustrate a particular kind of person we sometimes encounter (but virtually never represent) and to get help in better understanding this sort of person. This kind of person just keeps taking risks until caught and then is more than willing to continue taking risks even after getting caught. As lawyers with a lifetime of being inculcated in risk management and avoidance, we simply do not understand these people. At all. I mean I just don’t get it. If you do, please explain. Seriously.
The post China Law And China Risks: The Company We Do Not Keep appeared first on China Law Blog.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: http://www.chinalawblog.com/2015/05/china-law-and-china-risks-the-company-we-do-not-keep.html
