By establishing a project company, the debt risk and operational risk of project financing can be mostly limited to the project company. Because the project company has independent subject qualification, if the project is insolvent due to poor development and management, the project company can declare bankruptcy liquidation according to law, which will not affect other projects or the whole company, so as to control the financial risk within a certain range.
2. Avoid qualification risks.
The establishment of a project company can also effectively isolate the qualification risk from the parent company. Real estate development enterprises implement enterprise qualification grade management and annual inspection system. Enterprises that do not meet the original qualification conditions or have bad business practices shall be downgraded or cancelled by the original qualification examination and approval department. Therefore, if the project is directly developed in the name of the parent company, once there is a problem in the development and operation of one of the projects, it may affect the qualification level of the parent company. But if you set up a project company to develop real estate projects, you can avoid this risk.
3. It is convenient to attract investors or transfer land.
It is easy to attract other investors by establishing a project company. In the equity operation, if new investors join the project, there is no need to re-divide the project assets, as long as the project company issues new shares or transfers the shares of the original project company. Similarly, when transferring land or projects, only the equity of the project company needs to be transferred, thus avoiding procedures such as land bidding, auction and hanging.