Company Verification Tips
- Always send money to business account instead of a personal account
Unlike other countries, China introduces strict regulations on company formation, so if we can verify a company is real, then it is relatively safe to trade with them. Every company in China should have a business account or company account if they are real and legit. A company account is the most important indicator to judge whether a company is real or not.
- Website disclose very important information
Dump a supplier if they don't have a website or email! Come on, we live in the 21st century, we shouldn't trade with a company who we doubt is doing business and live in a cave.
So when we are given the website URL of a supplier, it is important to check the information the website disclose, you should try to check the following:
a. Do they give a detailed address or they don't give an address at all? Is their address located in a residential area? Do they give an address in City A, but have the telephone No. in City B?
Don't do business with a "company" that won't disclose their address on their website, it is first not professional, but most importantly, very risky to trade with. I have been advising my customers to stay away with the supplier that doesn't want to disclose their address.
An office in commercial building is required to format a company, it is a big minus to have one's office located in a residential area, briefly, if an address goes like this: Room 403, No.8 Building Harbin city, it should be a residential area, if the address goes like this: Room 403, Zhongrong International Building Harbin city, then it is a commercial building. The difference is the commercial building should have a name, while residential building normally has a Number for the building.
This morning I checked a "company", they claimed they are a company, they don’t have a company name on the website, their address is in Wuhan City, but Telephone Number is in Beijing. When I called their Beijing number, I was told that they are the wrong number. We could see that even for scammers, there are 2 types: professional scammer and loser scammer.
b. Check if they have about us page, be extremely cautious to do business with those who even don't have an about us page to introduce themselves.
c. Search their website url+scam, see what you get
d. Google gives high ranking to the website that has last for years, I also give credit to websites and companies that have established for many years. Briefly, you can tell that by checking how many searching results related to that website and company, the more the better, which suggests that they are active in business for a period of time.
e. For a trade company or manufacturer, a website with both the Chinese version and the English version seems more professional, that also means they have been doing business in the domestic market. Interestingly, I have found that most scammer website only has an English version. but the business that only serves overseas customers should be excluded.
- Visit the local Administration for Industry and Commerce(AIC) website
The most secure way to verify a China-based company is to visit the local administration of industry and commerce, check the company registration information of the said company from local AIC with the information listed on their business license to see if they are the same.
You can find the following company information at local AIC: date of incorporation, address, legal representative, registered capital, contact information, business scope, business type, a business term, annual inspection performance, etc.
- How to verify Hongkong Offshore Company
I guess many of you have come across Hongkong-based companies that have an address and contact info in mainland China only(mostly in Shenzhen or somewhere else in Guangdong Province), they are a Hongkong-base offshore company.
The reason for people in southern China to set up companies in Hongkong mainly are: 1) Hongkong is tax heaven so many companies set up companies in Hongkong to avoid tax; 2) Hongkong have loose company registration regulation compared with mainland China so it is easy for many individuals to set up a shell company there. The cost of setting up an offshore company in Hongkong is around RMB10000.
The danger for dealing with an offshore/shell company in Hongkong is that they don’t have a physical presence there in Hongkong, in that case, if any dispute arises from the transaction, you will have nobody/entity to make remedy against in Hongkong, meanwhile, you are also not protected in mainland China as you are dealing with a company in Hongkong.
So how can I tell if a Hongkong-based company is an offshore company or a real Hongkong company? Here are some clues:
1) Call their telephone number in Hongkong to see if anyone answer it(be aware that the phone might be transferred to some place in China by a virtual office service provider in Hongkong);
2) Visit their address in Hongkong if you can, that is always the best way to tell the shell company, make sure you visit them secretly as a virtual office service provider also provides a temporary office for those shell company.
3) Mostly they have a company account(which is positive as I mentioned in other company verification articles), but they open an account in a small foreign bank. State-run banks like Bank of China, Commercial and Industrial Bank of China, China Construction Bank, Agricultural Bank of China are very strict in the opening company account. In mainland China, a company account in state-run banks is way safer if you are going to pursue your rights in mainland China.
4) Check the company name with The Cyber Search Centre of the Integrated Companies Registry Information System at https://www.icris.cr.gov.hk/csci/