There is a restaurant in Hong Kong, which once had more than 20 branches, had several branches in the New Territories, was forced to liquidate and close down. But why can other branches continue to operate? Is it a scam? Are there any risks in continuing to do business with them?
Let me first explain why one branch is liquidated while other branches can still continue to operate. The reason is simple. Each branch is operated by an independent limited company, rather than one company opening several branches. legally, each limited company is an independent legal person. When problems occur, it will not affect other companies with the same directors or shareholders. So strictly speaking, it is not a "branch". This kind of arrangement is also a very common arrangement in modern business. Its function is to establish a firewall. When a fire breaks out in one place, other places will be protected from involvement. Advantages: Risk isolation; Disadvantages: Each company has operating expenses every year, so the cost increases. However, the annual cost of each independent limited company can be as low as 10,000 to 20,000 dollars, and the relative risk of loss can be said to be negligible.
On the other hand, are there any risks in continuing to trade with counterparties whose "branches" have been liquidated? As a consumer, there is certainly no risk in paying for one meal. But as a supplier, you need to make it clear whether you are supplying an independent "branch" or the head office. An independent "branch" can be liquidated at any time, but the head office is of course more protected. Therefore, when making a deal, you must conduct due diligence with the other party and know the other party’s details.
Our company is a business services company that provides multiple services. It is handled by accountants. We have rich experience in providing customers with various appropriate structures or assisting in due diligence to reduce risks. If you have any inquiries, please feel free to contact our company.
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