Dishonest Practices Database Explained
What: Conducting research and due diligence about the legitimacy, veracity, and authenticity of any Chinese company remains paramount when contemplating a potential business relationship. The Dishonest Practices Database, administered through the Chinese National Enterprise Credit Information Publicity System, is a vital resource to cross-check a Chinese company’s business practices.
Why: Understanding the many resources available to you to ensure the Chinese company with which you are contemplating a business relationship is a valid and legitimate enterprise will provide you with a foundation – and peace of mind – that your efforts will yield a positive and sustainable business relationship.
As we’ve discussed in numerous articles, conducting thorough research, verification exercises, and due diligence work remains paramount when considering entering a business relationship with a Chinese company. While many transactions and negotiations proceed smoothly without complications and result in successful associations, some fall prey to dishonest practices and illegal proceedings that can derail or destroy a potential partnership with a Chinese company.
One important resource for small- and medium-sized businesses contemplating entering a business relationship with a Chinese company is the Dishonest Enterprise Database, administered and made public through the government-run National Enterprise Credit Information Publicity System. Launched in March 2014 by the State Administration of Industry and Commerce (SAIC), the digital resource provides free information about companies to the general public. In particular, its aim is to improve transparency and increase corporate credibility.
A corollary to, but different from abnormal business operations, the dishonest practices database lists companies identified that have violated one or more administrative laws and regulations. While policing of these companies that are found having committed one or more dishonest practices still remains less than uniform across the vast Chinese business network, those companies or enterprises that are reported face a series of consequences. These include a prohibition of the legal representative or person-in-charge of the offending company from becoming a legal representative or person-in-charge of any other company for a period of three years, and a ban from government projects, including government procurement and land transfer.
Questions? We can help. At Nuna Network we offer a variety of valuable guides, tips, and other practical information to help you navigate the sometimes complex landscape with Chinese businesses. We remain the partner of choice for small- and medium-sized businesses seeking guidance in researching, developing, and launching relationships with companies in China.
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