Individual and Corporate Risks & Precautions for Foreign Invested Enterprises in China

Individual and Corporate Risks & Precautions for Foreign Invested Enterprises in China
April 2012 – Volume 3, Issue 4

Written by Klaus Koehler
Founder and Chairman of Klako Group


Many small to medium-sized companies come to China with the idea that establishing their entity will be an easy and quick process. However, after going through the establishment process, hiring local employees, whether it is managerial staff or lower levels and during the startup period, foreign investors are finding that in China “everything takes much longer than expected and nothing ever turns out the way one imagines.”

Problems in Foreign Invested Enterprises (FIEs) can vary from outright criminal activity to serious non-compliance issues. Many of these problems are foreseeable but due to a lack of poor management and lack of control from the foreign investors, these issues are frequent and can cause not only monetary punishments but also jail time.

As a result it is important for Foreign Investors to appoint responsible individuals who will pay attention to the investment in China. It is also important for both the investor and the individual to understand the liabilities involved when being appointed for such positions.

When establishing an entity in China, investors must appoint personnel in senior management positions and more importantly they must appoint a Legal Representative – an individual with broad powers and potentially unlimited liability – to operate and manage the entity. It is important to pay careful attention to the selection of people in these positions and to make sure precautionary measures are taken from the beginning of the operation to protect the company.
It is then also important for the people in these positions to understand their legal liability within the company and to place internal control systems for smooth operational purposes.

To read the full article, please click here (PDF file)

Free Consultation with China and Hong Kong Legal & Tax Advisors

The directors of Klako Group will be travelling throughout 2012 to meet with partners and clients and to participate in trade and tax-related events. Should readers or clients of the firm wish to meet our directors face to face during their trips to discuss matters concerning China, Hong Kong and/or Singapore business investments, please contact us at

Appointments will be made on a first come, first serve basis. The visits of our directors provides an excellent opportunity to all our readers to discuss first hand their own investment potential, opportunities and legal/tax updated for China, Hong Kong and Singapore in detail.

Please find here the tentative schedule for 2012:


15-20th: Lighting & Building Trade Fair, Frankfurt
23-27th: Hannover Hardware Trade Fair, Hannover

17th: Presentation with the Canadian Chamber of Commerce


7-11th: IFAT Trade Fair, Munich

United States
1-3rd: Hardware Show, Las Vegas

Thursday, 3rd
Thursday, 10th
Thursday, 17th


18-22nd: Achema Trade Fair, Frankfurt

Thursday, 7th
Thursday, 14th
Thursday, 21st


Thursday, 5th
Thursday, 12th
Thursday, 19th

Contact our Group Headquarters or China Headquarters

Group Headquarter – Hong Kong
Mr. Sven Koehler – Group Managing Director
10A Seapower Ind. Centre
177 Hoi Bun Road,
Kwun Tong, Hong Kong
Tel: +852 2345 7555
Fax: +852 2357 5452

China Headquarter – Shanghai
Ms. Kristina Koehler – Director
1506 Cross Tower
318 Fuzhou Road,
Shanghai 20001, China
Tel: +86 21 6391 3188
Fax: +86 21 6391 2032

About Klako Group

Klako Group is an international management consulting firm established in 1979. Klako Group provides a wide range of market entry consulting, incorporation, tax, audit, accounting and human resource services to organizations interested in entering and expanding throughout China, Hong Kong, Singapore. Klako Group is managed by an international and local team of over 120 certified public accountants, legal and professional consultants who work in our ten offices in China, Hong Kong and Singapore.

Our Services


  • Market Entry Consulting
  • Incorporation
  • Corporate Compliance
  • Accounting & Administration
  • Tax Advisory
  • Audit & Assurance
  • Trade & Supply Chain
  • Recruitment

Contact our offices

North China: Beijing, Dalian, Tianjin
East China: Hangzhou, Shanghai
South China: Guangzhou, Shenzhen
West China: Chengdu
Asia: Hong Kong, Singapore


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