The Operating Risks that You Have to be
Aware of at Anytime
the main body of market economy and their development and growing indicates the
prosperity of economy. However, the phenomenon of credit-breaking still exists
at the market where good and bad ones are mixed up. Some enterprises lacks of
self-protect awareness, knowing little about legal issues when doing business,
which induces the occasional occurrence of operating risk. Details are below:
1. Incomprehensive Inspection on Business Partners will Lead to being Cheated
A few businessmen have the companies registered with forged capital
certification documents when applying for setting up companies, or register with
other people¡¯s capital and then withdraw it after the registration. These are
typical ¡°empty shell¡± companies, which don¡¯t have formal and true account books.
The founder always lands the company¡¯s valid assets under the name of himself or
relatives, and makes the company as the bearer of debt and responsibilities. As
the short of comprehensive and deep learning on the due diligence of business
partners, some enterprises could not retrieve the capital or goods they invests
or provides, which have been occupied, transferred or spent by illegal
companies. Even if put them to the court, the shareholders of these illegal
companies would be spared as it¡¯s difficult to collect the evidence of forged
registration, capital withdrawal and illegal possession of company¡¯s assets.
Therefore, pre-prevention is crucial, enterprises should clearly find out the
opposites¡¯ exact details before cooperating with them.
2. Unclear about Legal Relation and Uncertain about Business Operations
The unclearness of legal relation can lead to inappropriate decision on the
contract¡¯s nature and title, which results in uncertainty of the right,
obligation and responsibility the parties involved should have or hold. In case
one side¡¯s benefits are harmed, it would be hard to seek legal action against
counterpart through contractual stipulations. The reality is that there are a
large amount of ¡°True and False Contracts¡± existing, whose ¡°formal¡± contract
texts is just for show and actually fulfilled in another way. Once dispute
occurs, it¡¯ll bring risks to the enterprise very easily.
3. Signing Contract Optimistically and Lack of Risk Evaluation and Protection
During business operation, enterprises make insufficient consideration
evaluation on operational projects. They do not evaluate the partners¡¯ assets,
performance or reputation, and they do not do necessary research on what ways
and methods can be used once disputes arise, or estimate their effects. No
promises are made to solve disputes or making the solutions disadvantageous when
enterprise signs contract. Most of contracts don¡¯t require the counterpart to
provide any guarantees, or even if the guarantee is provided, it will remain
invalid if it¡¯s not registered according to law.
4. Failed to Collect Accounts Receivable will Lead to Risk or Loss
Enterprises have to know, firstly, if the case exceeds the limitation of
actions, it will not be protected by the court. Secondly, if the debt defaulted
for too long, corporate debtors would lose their ability to pay in case it
plunges in significant economic disputes or declining performance, or even going
5. Inappropriate Litigation Methods will Lead to Losing Case or Non-enforcement
1) Inappropriate accused subject will have the application rejected.
2) The defendant¡¯s property had been transferred or dealt with by him, or closed
down, frozen by other courts as plaintiff didn¡¯t apply property preservation.
The opportunity to get the debt back will be missed.
3) Losing or poor preservation of relevant written materials or other materials
will result in no or insufficient evidence submitted to the court.
4) After winning the case, plaintiff has to apply to the court for execution to
prevent the valid judgment or conciliation from losing the validity of
Principle from Kangaroo Problem
the keepers in the zoo found kangaroos escaped from the cage. They
discussed and all of them thought the low height of the cage was the
reason. So they decided to heighten it from original ten meters to
twenty meters. But the next day they found the kangaroos still outside
of the cage, so they decided again to heighten the cage to thirty
The third day, they found the kangaroos surprisingly outside the cage
once again, and felt nervous. They decided to directly height the cage
to one hundred meters.
A giraffe asked the kangaroos:¡± In your opinion, will these people
heighten your cage again¡±?
¡°It¡¯s hard to say¡±, the kangaroos answered:¡± If they continued
forgetting to close the cage door¡±!
Actually, many people like these zoo men. They are aware of the
problems, but failed to grasp the core and basis of them.