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Capital Verification Audit

For Foreign Invested Enterprises (FIEs), upon injecting capital, be it cash, intangible or tangible assets, a capital verification report needs to be delivered to the Administration of Industry and Commerce (AIC) and other official bodies.

Capital Verification Audits occur either in the initial stage of forming a new company, or upon the injection, alteration or shift of capital in an existing company –be it fixed-assets, inventories, cash, intangible or tangible assets. Under Chinese Company Law, a company needs to retain an auditor to provide a certificate verifying the specified amount of capital that has actually been paid into the company. Since the 1980s when China opened its doors to foreign investment, limited liability businesses and enterprises in China were required by law to obtain an accounting firm to issue a report verifying the amount of paid-up capital and its invested form when establishing, These audits are meant to verify that the amount of money a company says has been invested into it is the amount that they actually have. This type of audit legitimizes a company’s claims and alerts other investors that they actually have the money to support their valuation claims.

What happens after a Capital Verification Audit is that the reports filed by accountants are submitted to the business organization registration authorities – Administration of Industry and Commerce (“AIC”), State Administration of Foreign Exchange (“SAFE”), Tax Authority, etc.

This partially fulfils the requirements required to have a business charter granted, which is what allows a business to either begin or continue trading. A business charter is a legal form that states the amount verified by the accountant and must be visible to those who wish to do business with the company. It is typically included in business contracts as a way of confirming that the company is able to actually participate in the deal. The importance of this business charter is that it works, essentially, as a permanent banker’s reference, indicating the ability of the given company to carry out certain scales of trading and whether or not they are able to meet its financial liabilities.

LehmanBrown fully understands the importance of diligently and honestly reporting verifications and take pride in our ability to report the most accurate numbers.  Not only will this aid in the success of future business deals, but it will provide the legitimacy that only a Capital Verification Audit can.

LehmanBrown’s timely and professional services ensure efficiency and quality in helping to coach your financial personnel.

To make an enquiry concerning LehmanBrown Capital Verification Audit Services, please contact enquiries@lehmanbrown.com

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