Hong Kong LLC controlled by a Chinese company for legal protection

dissident

Member
The thread title may sound counter-intuitive, but let me explains the details:

Bob is running a profitable SaaS platform that is sightly allegal from the eyes of a large US company, mainly because of disloyal competence.
There is a significant chance that the US company start suing organizations worldwide running businesses like Bob's one because they consider it violates their service terms and market competence.
Worth clarifying that the product is not illegal, it simply does not like to the US company in question because of the way it uses its systems.

Because of potential risks, Bob has been offered from a partner in China + HK to create the following structure in order to trespass the business:

- Company in China controlled by Chinese citizens (might be figurehead).
- Company in HK fully controlled by the Chinese company.
- Because of operating in HK, have access to international payment systems and better e-payments solutions so the business can operate.
- Bob, its partners and the current company will not hold shares in those companies, effectively losing all control.
- Bob will sell all the business to the HK company.
- The main threat is the US company pursuing legal actions.

Apparently, this structure was proposed because it may offer a layer of security since the US company is banned in China and cannot sue companies within the jurisdiction, however they can threaten the HK organization.

Overall, what your opinion about the proposed scenario?
Do you think this structure is providing any solid legal security?
Do you see any red flags? If yes, which ones?

Any further ideas or suggestions are very welcome! Thank you!
 

GiGoGo

I make things happen
Business Angel
It's true that in China they would be protected, but also if the company is not doing anything ilegal it should be also protected in HK.

Having the controling company in China would make you pay a lot of taxes and making you hard to withdraw the money later.
 

James Turner

Trusted Member
Business Angel
Mentor Group
I would suggest that the China connection would offer protection from the US as any US Company will find it very difficult to attack someone in China, but as @GiGoGo says the issue of Chinese taxation and particularly for me the currency control issue if funds actually land in China could be a bigger issue for you in the future. I guess it depends how you structure the company and where funds are ultimately held.
 

Milky Moon

Offshore Research & Development.
Business Angel
I would suggest that the China connection would offer protection from the US as any US Company will find it very difficult to attack someone in China, but as @GiGoGo says the issue of Chinese taxation and particularly for me the currency control issue if funds actually land in China could be a bigger issue for you in the future. I guess it depends how you structure the company and where funds are ultimately held.
You could be a consultant to the HK company and take out a consulting fee in HK dollars (like a dividend, with some sort of perfomance fee). And/or you could license the domainname to the HK company for a addtional fee (when they fuck you, you withdraw the domain so end their profit). Any monies in CN would/should be considered 'lost'.
 

dissident

Member
Thanks for the replies.

I agree about moving money to China would be problematic, but the main idea I guess is to keep the money in the HK side and move it from to the different beneficiaries as external consulting services outside of HK/China, dividends, salary or whatever.
China is just a layer of protection for any potential liabilities, that's all.
 

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