The EU SME Centre has received several inquiries about business partners registered in Hong Kong but listing a mainland Chinese address in contracts. This typically occurs when the factory and actual operations are in mainland China, but the company is registered in Hong Kong for administrative or tax reasons. In these cases, the Chinese partner often provides only a Hong Kong business license, while the contract is stamped with a company chop displaying a similar name but a mainland address.
Such arrangements are legitimate, but may create significant challenges in determining the correct jurisdiction and tracking the actual origin of goods, complicating legal recourse in quality-related disputes. Contracts in these scenarios may be deemed invalid under Chinese jurisdiction and, if not compliant with Hong Kong regulations, may also be void under Hong Kong law. We strongly recommend thoroughly reviewing both the company name and registered address on the first page of the contract, as well as the signatures and company stamps on the final page. It is crucial to verify the authority of the signatories to represent the company.
In one recent case, an EU SME was invited to visit the offices of a prospective buyer in Zhuhai. However, the business license provided belonged to a company registered in Hong Kong SAR. The EU SME rightly questioned this discrepancy and insisted on obtaining the business license of the Zhuhai-based entity to ensure legal clarity. By taking such precautions, companies can better safeguard their interests and avoid legal and operational complications.
The EU SME Centre receives, on a weekly basis, emails from EU SMEs that have been scammed when purchasing goods from China. In the majority of cases, such scams could have been avoided with the above steps. The EU SME Centre can assist in conducting free-of-charge, informal background checks on potential partners. For major transactions and complex deals, it is always recommended to seek professional legal advice from law firms established in mainland China.
