Downsizing or Closing Your Overseas Subsidiary | INS Global

A Guide to Downsizing or Closing Your Overseas Subsidiary

A Guide to Downsizing or Closing Your Overseas Subsidiary

April 29, 2022


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Key Takeaways

  1. There are many potential reasons why a company may choose to end or redirect its efforts in an overseas market
  2. Closing legal entities overseas can be messy, lengthy, and expensive
  3. By partnering with a local Employer or Record services or PEO provider, you can skip many of the more less necessary steps

Sometimes, no matter your best efforts, there comes the point when you may have to consider closing an overseas subsidiary . However, there may still be a viable market you wish to explore in these circumstances. It could also be that downsizing is necessary in order to make your business successful. In these cases, closing your overseas company may not be the end of the story.

A global Employer of Record (EOR) or Professional Employer Organization (PEO) can help you transfer or reposition your employees overseas. This can be a lower-cost, more stable form of employment, allowing you to continue your operations and restructure.


Why Might You Have To Close Your Business? 


There are many potential reasons why a company may choose to end or redirect its efforts in an overseas market, including:

–         Changes to the local economy/economic slowdown

–         A higher likelihood of compliance errors due to changing local regulations

–         Shifts in local policies or official opinions on the market

–         Better opportunities at home or in another market that require you to redistribute resources

–         A lack of interest/lower interest in your goods or services

–         High operation costs due to compliance regulations/salaries/taxes/other overheads

Once you have decided changes must occur, you need to consider the best way to avoid paying any fees or fines. In some countries, shutting down or down sizing a company can be just as, or even more, complicated as opening one.

By making yourself aware of the potential issues related to closing companies in your target market, you can avoid many potential issues. In this way, you can save as many resources as possible and keep yourself open to new opportunities.


What are the Main Challenges of Closing an Overseas Business?


Closing legal entities overseas can be messy, lengthy, and expensive. Before setting up a company overseas, it’s worth thinking about whether it would be better to see other options.

If we take Wholly Foreign-Owned Enterprises (WFOE) in China, for example, setting one up is infamously complex. Still, closing one down presents even more significant difficulties . It can require many steps and could take months of intricate full-time work to complete.

When deciding to close your business overseas, keep in mind the following:


The Loss of Talent


Closing your business overseas may mean losing valued international employees. Each of these could potentially represent hundreds of hours of training or carefully won skills.

It may be valuable to consider how you can continue working with the best of your employees. You can do this by transferring them to a PEO or EOR or as remote Independent Contractors.


Complex Termination Requirements


As mentioned above, closing down a company overseas may require months of work. During this time, your employees cannot move on to new or more profitable tasks. These termination requirements should factor into how you look at setting up operations in your target market.


A Loss of Important Resources or Networks


Operating overseas doesn’t just mean hiring the right employees or carrying out day-to-day functions in your target market. While working in a foreign country, you will naturally develop networks of contacts and resources in that place. Should you decide to close your operations there, it could mean a loss of access to those networks.


Why Transfer Your Business to a Global PEO Instead?


By partnering with a local Employer or Record services or PEO provider, you can skip many of the more costly steps related to both opening and closing a company.

These global employment outsourcing options provide all the HR functions you need to operate internationally. This can mean complex operations like payroll processing, invoicing, employee benefits management, employment taxes organization, and employment contracts compliance assurance.

Instead of the months it can take to open or close a company overseas, a PEO allows an international employer to be flexible quickly. This ability to begin or end operations easily gives a much higher level of long-term protection.

Employing workers overseas through a PEO or EOR can be a way to continue to benefit from your most highly valued workers.

This allows you to maintain a presence in the country, access crucial local networks, and lower costs related to providing HR functions.




How INS Global Can Help You and Your Business


If you wish to transfer or close a company overseas, INS Global can:

–         Provide in-depth local and legal advice on the steps you need to complete

–         Hire any employees you wish to retain via our local PEO

–         Manage all necessary HR functions for your employees in that country on your behalf

–         Allow you to continue your business as before, now with total regulatory compliance assurance and a streamlined and professionally supported partnership


INS Global is an international provider of PEO and EOR services in over 100 countries worldwide. We have more than 15 years of experience helping companies remain efficient, compliant, and ready to chase opportunities.

Our advisors can provide tailored strategies using in-depth local knowledge and resources. INS Global’s network of PEOs ensures complete compliance. This allows your company to safely and efficiently enter new markets in a fraction of the time required otherwise.

Contact us here today to talk to one of our advisors about how your business could benefit.




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