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Introductory to Corporate Credit Investigation in China

Released in:2024-03-22 10:26 Click quantity:75

Corporate Credit Investigation


Corporate credit investigation is a survey conducted specifically on the assets of the company under investigation. Through credit investigation work, we can understand the truth about the investment environment or partners of the investment object, to judge the pros and cons of its credit, and to decide whether to grant credit or cooperate.


Contents of targeted investigation

 ●Investigation and verification of the basic industrial and commercial information of the enterprise

The basic industrial and commercial situation of an enterprise refers to the basic information of the target enterprise inquired from the Industrial and Commercial Bureau, which mainly includes the information of the sponsoring shareholders, the shareholder structure and its historical changes, the name of the capital verification agency, the residence and the main basis of which includes the basic bank account, the competent authority, the relevant government or the superior departmental approvals, housing and land claims, branches, foreign investments, residences and business premises, previous changes in major registration items, former senior executives, corporate asset composition and business overview, articles of association, business licenses and other qualification documents, corporate nature, Whether there is an independent legal person qualification, major financial statements over the years and special circumstances notice, business license revocation and enterprise cancellation, etc. In most cases, the company’s registration content in the industry and commerce department is filled in and submitted by the company staff themselves, and the industry and commerce registration department does not perform detailed verification. Therefore, the information should be analyzed in a specific manner based on specific issues, not credulous, or easily disregard  

any credit clues that may exist. At present, the enterprise information in the computer inquiry system of enterprise business registration is limited, and there are restrictions on the level protection of inquiry authority. There are also problems such as illegible handwriting and missing pages when scanned into image files. It is impossible to obtain more detailed information, so you can consider it when necessary. Check the paper files kept by the Bureau of Industry and Commerce for easy access to more credit clues. For example, after checking the registration of the company's residence or business premises that have changed over the years, you can ask the basic-level person in charge of the rented premises, such as the relevant personnel of the financial department responsible for collecting rent. Since the grass-roots responsible persons deal with the target companies all the year round, they are responsible for collecting rents, handling disputes with the target companies, etc., whether the target companies have delayed payment or refused to pay rent, and whether they are operating well. These grass-roots responsible personnel have detailed first-hand information to rich reference value. Moreover, the current office premises and the address of the legal representative of the company can also be found from the personnel responsible for rent recovery and after-sales service.

Some target units continuously relocate their offices, which are a typical shell company's debt evasion behavior, and the purpose is to try to avoid being chased by creditors. For such enterprises, it is necessary to consider adopting multiple channels to search at the same time, such as through the Internet, directory information desks, industry associations, corporate legal representative ID cards with addresses, and other clues to extend the search. Pay attention to methods when searching, and maintain carefulness and proper imagination. If it belongs to the construction industry, consider the characteristics of the industry to search for the construction site through the environmental protection, construction planning and other departments, and then find the current address of the company. As long as there are appropriate methods and means, useful information can often be obtained for extended surveys and interviews of relevant personnel of the upper-level competent department, shareholders, or former senior executives of the enterprise.


 ●Investigation and verification of the real realizable assets of the enterprise

The core part of the enterprise credit investigation is the investigation and verification of the real realizable assets of the enterprise. The value of real realizable assets and the speed of realization determine the size of the enterprise's solvency. The real realizable assets of the enterprise include the name and nature of the property owner of the land and real estate, whether there are mortgages, seizures or other rights restrictions, whether there are disputes over property rights or litigation, and the conditions of machinery and equipment, vehicles, equity holdings, bonds or Other financial certificates, bills or other financial securities assets, other realizable assets or rights, etc.

During the investigation process, it should be noted that the registration status of the registration department may not be the final and accurate situation, and the mismanagement of some relevant departments may lead to data distortion. For example, the status of mortgages and seizures of land and houses may not be registered, or there may be clerical errors or omissions in the name of the property right unit. There should be upholding the principle of broad scope when inquiring and searching for the name of the property right unit, use the core vocabulary as much as possible to inquire about the ownership and mortgage of all land and real estate under the same enterprise. For enterprises with other names or before and after restructuring, the different names should also be inquired one by one to prevent the actual assets of the company from not being included in the scope of the report and try to avoid omissions. At the same time, use words carefully when issuing investigation reports.

       On-site surveys of land and real estate are also required. Really grasp the status quo of enterprise land and real estate, and clearly distinguish the scope of realizable assets. If the land on which the company owns property rights has been built as a residential building, it is no longer feasible to realize the sale of the occupied land. Doing more on-site surveys and inquiries also help improve the processing efficiency of realizing land and real estate. The investigation of machinery, equipment and vehicles should pay special attention to the possibility of maintaining timely control. For example, if the guarantor mortgages the machinery and equipment, or the court seizes the machinery and equipment, it is still unable to eliminate the possibility that the other party disposes of the machinery and equipment without authorization. The mortgaged machinery and equipment cannot be effectively controlled by the right party, which gives the mortgagee the opportunity to unilaterally dispose of the machinery and equipment at any time. Therefore, the investigation should focus on the actual controllability of machinery and equipment and its appendages. The investigation of the vehicle should focus on reviewing the record in the vehicle management department and the depreciation period of the vehicle. The investigation of the stocks, bonds, financial vouchers, bills, and other realizable assets or rights of the investigating target unit should also insist on reviewing their actual controllable conditions. If they cannot be effectively controlled, they should be truthfully written into the investigation report, and f urther proposed control recommendations.


      ● Verification of corporate credit self-recommendation report

In order to obtain loans, financing, cooperation opportunities or credit ratings, companies often issue or hire a third party to issue a self-recommended report on corporate credit. In general, a complete corporate credit self-recommendation report includes the company’s basic information, development history, corporate subordinate system, management structure, human resources status, business channels, major partners, and audited annual finances in the past three years

Statements and latest quarterly reports, development plans or outlines for the next three years, industry introduction, regional market introduction, company's position in the industry, business performance, honors, capital needs and reasons, capital investment direction and the progress of the ladder , Income estimation, executive resumes, whether there is any restructuring or historical issues, etc.

In the investigation of corporate credit self-recommendation reports, it is important to verify the purpose of financing, the direction of capital investment, the comparison of the expected profit with the average yield of the industry or product, the cash flow capacity, the amount and structure of the loan, whether it is overdue, mortgage status, guarantee status, The status of the lawsuit, the distribution of profits over the years, etc., are verified through conversations.


      ● Other credit investigation work

In addition to the above aspects, in the investigation of corporate creditworthiness, some side investigations can also be used to cooperate in order to fully reflect the complete creditworthiness of the target unit. For example, to examine whether the corporate governance structure is sound and effective, to conduct investigations on upstream and downstream companies or upstream and downstream product chains, conduct investigations on major market competitors, conduct investigations on contract performance, whether there is a special background, and relevant government officials. In addition, it should also investigate whether the target company is in arrears unpaid to its employees, whether there seek employees for raising funds, whether there are malicious controls by major shareholders or accounting confusion. Attention should be paid to identifying information during inspections to avoid interference from false images.



      ●Through the investigation of registration information, related companies, historical background, business conditions and other information, you can understand the legality of the company, the company's scale and the way of trade;


       ●Through the investigation of business status, financial and bank information, and payment records, it is possible to understand the payment function and credit habits of the enterprise;


      ●Through the investigation of public information such as litigation, mortgage and bankruptcy of the subject, the security of the enterprise can be estimated.

Enterprise credit investigation is a complicated and meticulous work that requires a lot of energy and a spirit of exploration. The investigation involves many aspects, the content is cumbersome, and the specific circumstances are diverse, and there are often unexpected changes.

In this case, it is necessary not only to be meticulous and accurate, asset clues are conclusive and credible, but also not to be superstitious on surface data, and to be good at perceiving through the surface clues and then exploring and discovering the true asset status of the investigator, thoroughly analyzing the enterprise Credit level.

When conducting credit investigations on target units in China, time is often extremely limited required by our clientele, and it is also possible to assume legal responsibility for the investigation and investigation reports issued. This makes enterprise credit investigation a very challenging task for our Chinese lawyer

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