CEO Breakfast

Topic:

Mastering Business Restructuring & Downsizing in China Cost-effectively through Legal Strategies

通过法律策略低成本高效掌控在中国的业务重组与规模缩减

Speaker:

Ms. Maggie JIA, partner, DaWo Law Firm Shanghai

贾茜律师，上海达沃律师事务所合伙人

Notice:

-VDMA Member Limited.

Target Audience:

Executives (especially legal representatives, CEO's and COO's) of enterprises.

Objective:

In recent years, business restructuring and downsizing have become topics that many FIEs in China have had to start considering or have already implemented. Thanks to the rapid economic growth of the past decades, many FIEs in China have not experienced significant business restructuring or downsizing in the past. When facing this change and challenge currently, it is difficult for the managers of FIEs to remain calm and composed. Moreover, with China's increasing requirements for legality and compliance, FIEs often perceive or encounter unexpected difficulties and costs in this process, which intensifies the pressure brought by the challenges.

近年来，业务重组与规模缩减已成为众多在华外资企业（FIEs）不得不开始考虑或已着手实施的课题。得益于过去几十年的经济快速增长，在华的许多外资企业此前并未经历过重大的业务重组或规模缩减。然而当面对当前的变革与挑战时，外资企业的管理者们很难保持冷静与从容。此外，随着中国对合法合规的要求不断提高，外资企业在商业重组与裁员过程中常常会感到或遭遇意想不到的困难与成本，这进一步加剧了挑战所带来的压力。

The speaker has handled and led tens of restructuring and downsizing projects particularly for FIEs in the past years and has accumulated extensive experiences during the whole process of the project, including setting out project plan with management, consultation with the employees, communication with local authorities, dispute resolution etc. The speaker will offer practical insights and cost-effective strategies to help FIEs navigate the challenges linked to business restructuring and downsizing in China, with a particular focus on managing downsizing (staff redundancy) and avoiding or mitigating compliance risks.

主讲人近年来负责并主导了数十个针对外资企业（FIEs）的重组与裁员项目，在项目全流程中积累了丰富的经验，涵盖与管理层共同制定项目计划、与员工进行沟通协商、与当地政府部门沟通协调以及纠纷解决等各个环节。本次早餐会，主讲人将分享实用的见解和低成本高效益的策略，助力外资企业应对在中国进行业务重组与规模缩减时所面临的挑战，特别聚焦于如何妥善管理裁员（员工冗余）事务以及规避或降低合规风险。

Presentation outline:

1. What are the essential risk factors to take into consideration when planning for a business restructuring involving downsizings?

制定涉及裁员的业务重组时，哪些关键风险因素不可忽视？

When planning for a business restructuring involving layoffs, several key risk factors must be considered to ensure a smooth transition and minimize potential negative impacts. These factors include: i) Operational risks, for example, disruptions to operations and production are almost inevitable during the restructuring process; ii) Legal and compliance risks, any illegal or non-compliant operations are easily exposed during the restructuring, which can become an obstacle to the process or even lead to penalties for the company; iii) Communication risks, poor communication management during restructuring can cause confusion, mistrust, and lead to additional damages.

在规划涉及裁员的商业重组时，必须考虑几个关键风险因素，以确保平稳过渡并尽量减少潜在的负面影响。这些因素包括：一是运营风险，例如在重组期间，对运营和生产的干扰几乎是不可避免的；二是法律和合规风险，在重组过程中，任何非法或不合规的操作很容易被暴露出来，这可能会成为重组进程的障碍，甚至导致公司受到处罚；三是沟通风险，重组期间沟通管理不善可能会引发混乱、不信任，从而造成额外损害。

2. What are the principal legal prescriptions to consider and the inevitable costs to expect?

哪些必须考虑的法律要求和不能避免的成本？

During the process of business restructuring, several key factors must be considered to ensure a smooth transition and minimize potential negative impacts. Firstly, a comprehensive legal due diligence must be conducted to identify any legal and compliance risks. Secondly, full compliance with labor-related laws, regulations, and practices must be ensured, including determining the legitimate causes for changes or terminations of labor contracts, following mandatory procedural requirements, and making full payments of any statutory compensation. Inevitable costs usually include severance pay or compensation for illegal termination, any legal and regulatory fees and penalties caused by non-compliance, as well as the costs incurred by measures taken to ensure a smooth process, etc.

在业务重组过程中，有几项关键因素必须考虑，以确保平稳过渡并尽量减少潜在的负面影响。首先，要进行全面的法律尽职调查，以识别任何法律和合规风险。其次，要确保完全遵守与劳动相关的法律法规和实践，包括确定劳动合同变更或终止的正当理由，遵循强制性的程序要求，以及全额支付任何法定赔偿。不可避免的成本通常包括经济补偿金或违法解除的赔偿金，因不合规而产生的任何法律、监管费用和罚款，以及为确保流程顺利进行所采取措施的产生成本等。

3. How to properly communicate with all stakeholders (employees, local authorities, business partners, etc.) ?

如何妥善与各方利益相关者（员工、地方政府、商业伙伴等）高效沟通？

The key principles for effective communication with all stakeholders, including openness, equality, and respect, will be delved into. In addition, a detailed introduction to some communication mechanisms that must be fully prepared in advance will be provided. For example, establishing consistent communication channels and unified guidelines, creating a regular communication schedule to maintain the right to be informed and the level of engagement of stakeholders; carefully formulating communication plans to share relevant information with different stakeholders; setting realistic feedback times for all relevant parties, etc. Ultimately, efficient, smooth, and productive communication with employees, local governments, business partners, and other parties in complex situations such as business restructuring will be aimed at achieving.

与各方利益相关者进行有效沟通的关键原则，包括公开、平等和尊重，将被深入探讨。同时，还会详细介绍一些必须提前充分准备的沟通机制，例如建立一致的沟通渠道和统一的指导方针，制定定期的沟通时间表，以保持利益相关者的知情权和参与度；精心制定沟通计划，向不同利益相关者分享相关信息；为所有相关方设定切实可行的反馈时间等。最终实现在商业重组等复杂情境下，与员工、地方政府、商业伙伴等各方进行高效、顺畅且富有成效的沟通。

4. What are common compliance risks and proactive strategies to mitigate such risks？

哪些常见的合规风险和降低风险的主动应对策略？

Common compliance risks in practice, such as: i) underpayment of social insurance and housing fund; ii) labor-related work injuries; iii) overtime work; iv) absence of written labor contracts; v) violation of construction, fire protection, and environmental protection regulations, etc., will be thoroughly analyzed. Proactive strategies to minimize risks to the greatest extent will be fully interpreted, such as comprehensively assessing and analyzing the historical evolution and current situation, deeply understanding local laws and practices, and effectively communicating with local government departments, etc.

实践中常见的合规风险，例如：i）社保和公积金缴纳不足；ii）与劳动相关的工伤事故；iii）加班工作；iv）缺少书面劳动合同；v）违反建筑、消防和环保法规等，将被深入剖析。最大限度上降低风险的主动应对策略会被全面解读，例如全面评估与分析历史沿革和当下现状，深入理解当地法规和实践，与当地政府部门进行有效沟通等。

5. Case Study: A foreign-owned business shifts 40% of its production capacity overseas (out of China) and reduces its workforce in China by 50%.

案例解析：某外资企业40%的产能外迁出中国，50%的中国员工被裁减。

Through this real case, further elaboration and detailed explanation will be provided on the key points and principles that should be noted in the planning and execution process of business restructuring and downsizing, as well as the experience of how to flexibly deal with unexpected events. This indicates that by considering these risk factors, legal guidance, communication strategies, and proactive compliance measures, companies can more effectively cope with the complexities of business restructuring and minimize potential negative impacts.

通过这个真实案例，将进一步阐释和详细说明在企业重组与裁员的规划和执行过程中应注意的关键要点和原则，以及如何灵活应对突发事件的经验。这表明通过考虑这些风险因素、法律要求、沟通策略和主动的合规措施，企业能够更有效地应对业务重组的复杂性，并尽量减少潜在的负面影响。

Ms. Xueting Wang 王雪婷

Business Development Manager

Tel.:+86 21 6248 8029 - 706

Email: xueting.wang@chinavdma.org​​​​​

German Mechanical Engineering Service (BJ) Co., Ltd. Shanghai Branch (GMECS)

Ms. Xin Li 李昕

Business Support

Tel.: +86 19901949752

Email: xin.li@chinavdma.org

German Mechanical Engineering Service(BJ) Co., Ltd. Shanghai Branch (GMECS)