Scope: Mainland China asset investments; asset-specific restrictions apply
The seller offers a warehouse, machinery and a valuable operating site as one package. The price is attractive. But the machinery may be financed, the site leased and the advertised use dependent on a permit held by another company.
China asset investment due diligence asks what rights are actually being sold and whether they support your investment plan. The commercial description is only a starting point.
Identify each asset and its owner
Create an asset schedule with identifiers, location, ownership records and condition. Distinguish equipment, real estate-related rights, contractual rights and intellectual property. They do not share a single transfer procedure.
Verify the seller’s title and authority. Physical possession is not conclusive proof of ownership, and an affiliate’s asset is not automatically available for the seller to transfer.
Examine restrictions and competing rights
Ask about mortgages, pledges, leases, seizures and disputes. Review available registry information and supporting documents through lawful channels. China’s Civil Code provides the general framework for property rights, but the relevant asset and transaction require specific analysis. Official Civil Code.
For premises and land-related interests, understand the actual right involved, its term and permitted use. Do not equate an overseas concept of freehold ownership with every China property arrangement.
Check whether the asset can serve your purpose
Consider licenses, environmental issues, utilities, access and necessary third-party agreements. A transfer of physical assets may not transfer an operating permit or a customer contract.
Foreign-investor eligibility and industry restrictions should be checked for the proposed activity. Technical, valuation and environmental reviews may be needed alongside legal due diligence.
Turn the findings into purchase conditions
Require appropriate evidence, releases and consents before payment or completion. Decide how discrepancies in the asset schedule will be handled and what happens if an essential right cannot transfer.
Evaluating a China asset investment? Contact Jinyuan Law Firm with the asset list, intended use and seller details. Request a due diligence scope covering title, restrictions, structure and the steps required for a legally workable transfer.
General information only. Advice depends on the facts and applicable jurisdiction. Contact does not by itself create a lawyer-client relationship. Local-law advice may be needed outside mainland China.
