December 2011/January 2012
Not falling short: The rise of short selling in China
Earlier this year, some Chinese companies listed in the US found their stock prices plunging as a result of short sellers’ actions. Meanwhile, short selling has landed in China on its futures exchange and is being induced by the government to develop and improve its capital markets
Open gate for cross-border Rmb FDI flows
More new rules have been published that clarify the cross-border flow of Renminbi and they signal that China has formally opened the channel for cross-border and nation-wide Renminbi foreign direct investment
From China to Wall Street and back
After this summer’s backlash against Chinese companies listed in the US, many are considering going private to avoid further negative publicity, decreased valuations and the increased risk of litigation
IP reshapes e-commerce strategies
New developments in e-commerce regulation bring the issue of intellectual property infringement and the liability of e-commerce operators to light. A landmark case in China removed the defence of the “Safe Harbor Principle” for the first time, and should serve as an admonition to online platforms
Protecting the consumer
China’s consumer code is due for an update. A number of innovations to the current law are being discussed for an upcoming draft, including the right of revocation, data protection and class actions
Prior art defence in patent litigation: A legal quagmire?
The prior art defence strategy has become increasingly important and popular for alleged infringers in patent cases. However, its framework suffers from uncertainty and some technical defects
Laying down the bankruptcy law
The implementation of China’s bankruptcy law has been mired by the inconsistent standards and interpretations of various courts. A new set of measures offers more guidance and clarity, especially in pinpointing bankruptcy causes and who assumes the burden of proof
China question: How do I initiate litigation for a breach of contract?
Two dispute resolution specialists offer their insights on how to handle bringing a Chinese manufacturer to court and how to avoid a similar situation in the future.
November 2011
Restoring confidence: Strengthening the regulatory system for PRC firms listing overseas
Recently Chinese companies listed overseas have been experiencing a credibility and credit crisis after revelations of accounting fraud. One solution is to improve the formation of a regulatory system
Get the facts on fraud prevention and detection
In the wake of the fraud scandals of Chinese companies listed in the US, CLP spoke to Kroll managing director and leader of its Greater China Financial Investigations practice, Colum Bancroft to learn more about how companies can mitigate the risk of falling victim to fraudulent activities.
Fortifying the antitrust framework
Mofcom brings an improved regulatory system with its first guideline for antitrust reviews of concentrations. Foreign investors should take note of the public interest aspect the new rules consider when assessing competitive effects
Web search war: Renren v. Baidu
When an online pharmacy brokering platform accused internet search giant Baidu of tampering with its search results ranking in 2009, it was a case that made headlines and tested the fledgling Anti-monopoly Law. In the wake of the final decision, a provincial high court, for the first time, issued a detailed discussion on three key elements of abuse of market dominance disputes
Looking outward: Q&A with State Grid
CLP caught up with State Grid's Chief Legal Officer, Ling Li to discuss her legal team’s function and gain insight on doing outbound transactions
October 2011
A celebration of excellence
The China Law & Practice awards 2011 concluded a year of groundbreaking deals that demonstrated China’s burgeoning confidence and legal sophistication. Baker & McKenzie and Fangda Partners took home the top awards of the night, while many others were recognised for their achievements of legal distinction in the past 12 months
VIE structures under closer examination
Mofcom’s new security review measures heightens scrutiny of variable interest entity (VIE) structures operating in areas of PRC national concern
Funds: Heading in the right direction
The revised sale of securities investment funds measures introduce more competition by loosening qualification restrictions and allowing new entrants flexibility in compensation structures for value-added services
Channels ready for cross-border Rmb flows?
Over the past few years, China has been creating channels to allow a two-way cross-border flow of Renminbi (Rmb) funds to internationalise its currency. As the legal framework for this is still nascent, investors need to be cautious of practical hurdles and uncertainties
The new ICC rules: What is next for the Mainland arbitration community?
The ICC’s newly-launched arbitration rules provide guidance for the Chinese and address complex arbitrations
Trademark Law draft amendments: A snapshot
China recently released proposed Trademark Law amendments. Although they represent helpful steps forward to strengthen trade mark protection, areas remain that require further consideration
Tax basics for FIEs
Tax specialists offer their insights for potential inbound investors on fundamental tax rules they need to be aware of
September 2011
Crossroads: Anti-monopoly and IP rights
A dynamic area of discussion in the Chinese legal community is the overlap between intellectual property (IP) rights and anti-monopoly rules. Though it remains a grey area of varying opinions without clear legal guidance, IP rights owners need to be aware of developments and protect their interests through careful structuring and strategy
Tianjin pinches its PE rules
As one of China’s preeminent fund formation hub cities, Tianjin is regarded by many industry participants as an influential barometer for other jurisdictions’ private equity-related regulation. The city recently released new measures that enforce stricter supervision on a wide spectrum of fund formation, administrative and operation matters
Rocky road for foreign-invested holding companies
An internal notice from the foreign exchange regulator creates more difficulties for foreign-invested holding companies wanting to reinvest their dividends in China
Antitrust allies
A recent agreement signed between Chinese and US competition agencies aims to bring effective and consistent enforcement, which will bring greater consumer benefits and legal certainty for businesses. However, coordinated enforcement activities are not likely to occur any time soon
Filing patent licensing contracts
New measures set out procedures for registration authority, documentation requirements and the timeframe for the recordation of patent licences in China. Foreign patentees should take note of several administrative points the rules outline
Striving for banking system stability
New measures from China’s banking regulator aim to prevent financial institutions from becoming over-leveraged, and they provide a clear framework on accountability and detailed guidance rules on disclosure
Cooperating with PRC staffing firms
Labour agents and staffing firms play a dynamic function in China’s employment space, however many foreign companies continue to misunderstand the relationship. Understanding the importance of selecting the right partner for your labour needs and knowing how to navigate negotiations are key
Trust companies take the next step
New guidelines from China’s banking authority open up stock index futures trading to trust companies. However, strict restrictions and stringent qualification criteria have drawn mixed reactions from trust players
Dodging service invention disputes
Recent lawsuits involving remuneration claims by inventors who felt slighted by their employers have highlighted an issue companies should take note of
Challenges and success: A Q&A with Foxconn Technology
Helming a team of over 100 lawyers, General Counsel of Foxconn Technology Group (China’s largest private employer), Sterry Fang shares about his department’s structure and its commitment to developing and implementing a “well-being” programme for its employees
July/August 2011
Rooting out corruption
The new UK Bribery Act signals the start of a new era of enforcement for Chinese organisations on the world stage. If they haven’t done so already, PRC companies must review their existing anti-corruption policies and procedures, and assess their business risks to ensure they put in place appropriate measures to deter and deal with any corrupt acts
Permission denied: The curious case of exit restrictions in Chinese commercial litigation
PRC litigation can be risky for the unwary investor and one challenge is presented by China’s exit restriction regime. Foreigners associated with a company involved in a dispute can be prevented from leaving China if certain conditions are met
Searching for a seller
In patent infringement cases with multiple infringers, courts have been applying inconsistent standards in establishing jurisdiction. The Supreme People’s Court may need to step in to provide clear guidance to plaintiffs and defendants alike
An open book market
New regulations finally allow FIEs to engage in the master distribution of Chinese publications and expand the scope of foreign investor participation by lowering entry thresholds and eliminating term of operation restrictions
Safe registration of China round-trip investments
New rules simplify foreign currency registration of round-trip investments and fundraising, while increasing the pressure and urgency on investors to rectify previous non-registration. Safe increases its focus and coordination while Mofcom uncertainties remain
Hiring foreigners
Two employment specialists offer their insights on issues worth consideration when hiring expatriate staff.
June 2011
IP report: Another year wiser
The Supreme People’s Court recently released its annual IP report, clarifying how the law should be interpreted in various disputes and setting a standard for local courts to follow
QFIIs trading on stock index futures
A new law opens up participation in the stock derivative market to qualified foreign institutional investors. However, as landmark as this rule may be, it remains fairly restrictive as regulators cautiously develop the market and seek to manage risks
Turning a blind eye to internationally-awarded interim measures
Foreign investors should consider opting to resolve disputes through Chinese domestic arbitration commissions as there is little chance that PRC courts will recognise or enforce internationally-awarded interim measures
New rules impacting the structuring and trading of loans
Recent regulations introduced by China banking regulators impact how commercial loans are structured and traded. Among other things, interest-only loans are now restricted and certain consent rights are mandated for loan transfers
Legal risks of the VIE Structure
The Variable Equity Interest Structure has become a popular option for domestic companies wishing to list on overseas foreign exchanges. However, the structure is quite risky legally
Recent transfer pricing developments
The tax authority continues to ramp up its manpower for transfer pricing-related audits
Taking equity in an FIE
Two M&A specialists present their views on issues to consider when making an equity acquisition in a foreign-invested enterprise.
Backdoor listings to face tighter scrutiny
Securities regulator raises performance thresholds
May 2011
12th Five-year Plan is off to a good start
China’s 12th Five-year Plan brings about opportunities and challenges as its economy and social development face significant transitions. Foreign investment remains a principal issue on the government’s agenda, as evidenced by the recent release of the draft amendments to the foreign investment guidance catalogue
Careful steps in the bancassurance market
New regulations from banking and insurance authorities aim to better monitor the burgeoning bancassurance market. Foreign insurance companies can expect a long-term and robust relationship with regulators if they cooperate, and are advised to develop suitable products for Chinese customers and lend their experience to the market
Guidelines on market access
The draft of the new foreign investment industrial guidance catalogue is finally here. High-end manufacturing, environmentally-friendly and new energy-related industries shape the list of strategic emerging areas that the Chinese government is encouraging foreign investment in
Tackling foreign bribery
A new one sentence supplement to China’s criminal law ramps up the government’s anti-bribery campaign, extending its reach to punishing Chinese citizens or entities who attempt to bribe government officials outside China. But, several key terms lack definition and enforcement remains a challenge
Handling an anti-dumping investigation
Three trade specialists share their insights on what steps to take if the Chinese government initiates an anti-dumping investigation on your exports
April 2011
Clarity for company disputes
Recently released judicial interpretations from the Supreme People’s Court of China further clarify a number of uncertainties often faced by Chinese companies (including foreign-invested enterprises), their shareholders and creditors in common disputes related to establishment, capital contribution and shareholder rights
Conflict management
With a comprehensive mediation regime now established by the government, foreign parties should be aware of how judicial mediation is part of the litigation procedure and that judges can play a dual role over the course of a case
Protection measures
The State Council recently promulgated a new initiative to establish a security review system on domestic M&A activities conducted by foreign parties. This new process officialises an attempt to safeguard key Chinese companies, but will add time and cost burdens to select potential overseas investors
Restructuring first for outbound Chinese M&A
When a PRC industrial company purchased a European chemicals producer, it utilised an advanced acquisition strategy that included a complex debt restructuring. It also had to convince Chinese regulators the strategy was workable
Stopping IP infringement
Two specialists detail what options are available to you when combatting infringers and the first steps you should take
March 2011
PE in China: Growth spurt
The release of several recent private equity-related regulations indicates the government’s encouragement for increased foreign participation in this space. Shanghai’s new Pilot Measures provide several new fund structures for offshore investors, but in order to advance the PE market regulators need to provide more guidance to address other challenges like fund-raising, partnership asset transfers, exits and taxes
Criminal IP cases: New ground rules
A recent opinion clarifies issues of jurisdiction, evidence, and definition in criminal cases involving intellectual property. However, the new rules can only be effective if authorities maintain and enhance their enforcement efforts
Risky business in permanent establishments
A recent notice provides clarity on what activities of a Permanent Establishment are subject to taxation. This should prompt foreign businesses to re-evaluate their set-up structure
Handling foreign investment disputes
Last year, the PRC Supreme People’s Court adopted a consistent approach to conflicts involving the establishment and modification of foreign-invested enterprises. However, uncertainties remain on various issues of remedies and dormant shareholders
Managing the auction process
Buying a state-owned enterprise can be a challenging ordeal for a foreign acquirer. To navigate the auction process successfully, a bidder must understand how it is structured and devise a strategy
Withholding tax on consulting services
Instead of easing difficulties, recent tax reforms have increased the tax liabilities and burdens of enterprises providing consulting services
Sourcing in China
Two specialists provide advice on what issues to be aware of and what precautions to take when considering sourcing from the PRC.
Form a proper view of new security review rules
New regulation provides details on review procedure
February 2011
The antitrust enforcers’ New Year resolutions
Businesses in China should brace for more work as a new set of antitrust rules increases compliance burdens
Uneasy options - AML enforcement through judicial or administration system?
When seeking enforcement of China’s Anti-monopoly law, complainants face a tough choice: wade through the judicial system or rely on the investigations of the administrative authority? Each has its pros and cons
Trend-setter Shanghai
A new set of rules heralds easier access to Chinese investments for overseas private equity funds
New roads open for PE – but still a bumpy ride
Doors are opening up for private equity (PE) investors, with Shanghai launching a new programme recently that addresses foreign exchange concerns and allows qualified foreign-invested funds to enter the market. However, for PE players, fundamental challenges remain
To be or not to be (a foreign rep office)
New regulations offer clarity on the administration of foreign representative offices; however, this investment vehicle may no longer be an optimal arrangement for some overseas companies wishing to enter the Chinese market
Tips for franchising in China
Two specialists provide advice on what issues to be aware of and what precautions to take when considering franchising in the PRC.
The storm before the calm