Leo – ��߲��

IBLJ Awards: Call for nominations

Leo — Mon, 16 Jan 2023 01:00:29 +0000

India Business Law Journal is requesting nominations for the 2023 Indian Law Firm Awards, the results of which will be announced in April.

to make your nominations now.?

The deadline for making nominations is 28 February 2023.

We are requesting nominations from in-house counsel and corporate executives in India and around the world who are familiar with the services provided by Indian law firms. India-focused legal professionals at law firms outside the country are also welcome to make nominations.

Lawyers currently associated with Indian law firms are not permitted to make nominations. However, they have been invited to make submissions in support of their firms�� candidacy for awards (for more details of this please email?IBLJ@law.asia).?

Thank you for your support. We look forward to receiving your nominations.

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Make your nominations now for the Philippines Law Firm Awards

Leo — Wed, 12 Oct 2022 07:37:46 +0000

Asia Business Law Journal is delighted to announce the fifth annual Philippines Law Firm Awards, the winners of which will be announced in December 2022.

We are now requesting nominations from in-house counsel in the Philippines and around the world �C as well as lawyers at international law firms �C who have first-hand experience of the services provided by law firms in the Philippines.

Please? to nominate the law firms that you think deserve to be recognised.

The deadline for making nominations is 18 November 2022.

Please use the social media links (above and below) to share this page with your colleagues and associates who may also like to make nominations. If you have any questions about the Philippines Law Firm Awards please contact our research manager, Miran Lim, at mlim@law.asia.

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Zhihu homecoming raises HKD834m

Leo — Fri, 22 Apr 2022 08:29:08 +0000

Q&A platform Zhihu raised HKD834 million (USD106.3 million) in a homecoming IPO on HKEX in a deal that saw Skadden advising the issuer on Hong Kong and US law, Han Kun Law Offices on China law and Maples Group as Cayman Islands counsel.

Joint sponsors and underwriters including Credit Suisse, JP Morgan, CICC and CMB International Capital, were advised on Hong Kong and US law by Clifford Chance while Jingtian & Gongcheng advised on PRC law.

Zhihu made its Hong Kong IPO by way of WVR (weighted voting rights) on 22 April pricing the 26 million shares on offer at HKD32.06 each �C more than 38% lower than the maximum IPO price of HKD51.8. The public response in Hong Kong was lukewarm with a 100% winning rate of a lot, whereas the international placing was more than 3.37 times oversubscribed.

The total 26 million shares issued were cashed out by early venture investors, lowering the ratio of venture funds, tech giant Tencent retains a 12.8% stake.

Zhihu shares had traded on the NYSE over the past year but it decided on a homecoming by dual primary listing for the future with inclusion in the Southbound Stock Connect list to reach mainland China investors. Stocks in the two bourses, however, cannot be circulated across the markets, making for differences in price performance.

According to the company��s 2021 ?report, average monthly active users stood at 95.9 million, representing a growth of 40% from 2020. Revenue reached RMB2.9 billion (USD459 million), a year-on-year increase of 119%. The adjusted net loss was 1.2 times higher to RMB750 million.

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Claiming share repurchase and cash compensation in VAM

Leo — Wed, 26 Jan 2022 01:07:11 +0000

The Minutes of the National Courts�� Civil and Commercial Trial Work Conference made a detailed analysis on the effectiveness of VAM (valuation adjustment mechanism), which can be summarised as follows: (1) if the investor bets against the shareholder or actual controller of the target company, the VAM should be deemed valid; (2) if the investor bets against the target company, it should be deemed valid. If the investor requires the target company to repurchase its shares, it should be examined whether the target company has completed capital reduction; if the investor requires cash compensation from the target company, it should be examined whether the target company has any profits.

However, the minutes failed to clarify whether share repurchase and cash compensation can be claimed and supported at the same time, or ways to judge whether the claimed amount is too high.

For and against

The arguments supporting the simultaneous claims mainly include:
The conditions and period for share repurchase and cash compensation are different, and the respective terms do not contradict or contravene. In Shandong Hongli Anywhere Environmental Technology Group v Tianjin Pukaitianji Equity Investment Fund Partnership (2019), the Supreme People��s Court noted that the condition for cash compensation was the failure of the net profit of the target company to reach ?in 2012, and the condition for share repurchase was the failure of the target company to be listed in China��s A share market before 31 December 2014.

As the two claims were conditional on terms occurring at different times, when the condition for cash compensation was met, the condition for share repurchase was not. Additionally, the conditions for the two claims were entirely different, one based on a commitment of performance, while the other was on listing status. Therefore, cash compensation and share repurchase in this case were not contradictory.

Parties to VAM did not agree on choosing one or the other. In Citic Capital v Xie Lixin (2020), the Higher People��s Court of Beijing held that cash compensation and share repurchase were provided for under separate terms in the supplementary agreement in question. In the absence of any stipulated standards of applicability or any conflicts, both claims should be supported simultaneously.

The arguments against the simultaneous claim mainly include:
Overlapping, as the trigger of cash compensation inevitably also leads to share repurchase. In Shenzhen Qianhai Shengshi Mengjin Investment v Kashi Xinghe Venture Capital, et al (2017), the Beijing No.1 Intermediate People��s Court held that a conflict exists in that when an investor requires shareholders for cash compensation, it would itself remain a shareholder; but when requiring a share repurchase, it would lose the status of being a shareholder.

If the commitment of listing cannot be fulfilled, it is likely that the performance of the company has also suffered, indicating that the legal consequences of share repurchase caused by the failure of the target company to be listed by the appointed time already incorporated the consequences of cash compensation caused by underperformance, creating an overlap between the two. For these reasons, the investor��s request for separate cash compensation constitutes duplicate calculation.

Xie Yang
Senior partner
Zhilin Law Firm

Parties to the VAM have agreed to choose only one out of the two, or that overlapping benefits should be deducted when another is claimed.

In Wang Canshou v Hubei Hongrui Smart Industry Equity Investment Fund Partnership (2021), the higher court of Beijing held that the supplementary agreement in question stipulated that if the investor chose to exercise the repurchase right, all dividends or compensation previously received by the investor from the target company would be offset against the repurchase price. Therefore, the investor can only claim either cash compensation or share repurchase.

Amount adjustment

Tian Cheng
Associate
Zhilin Law Firm

In Shanghai Pukai Tianji & Pukai Tianxiang v Shandong Hongli Heat-pump Energy (2019), the SPC held that after consolidating the amount of cash compensation and the annual dividends previously received and apportioning them equally to the return on investment for each year, from the time of investment to the triggering of the share repurchase, the return on investment was not considered too high when taking annual investment income into consideration.

After a rough calculation based on the SPC��s opinion, the return on investment and the standard interest rate on investment costs in this case add up to about 20% per year. In Zhengxiang Baiqi Yihao Mining v Ping An Bank (Beijing branch) (2019), the higher court of Beijing supported cash compensation for interest losses, in addition to share repurchase, return on investment and cash compensation simultaneously.

In a certain sense, a VAM is like an option. Investors take on higher risks in the hope for higher rewards, while resorting to cash compensation, share repurchase and other means to protect their interests. However, for the rights of cash compensation and share repurchase to be supported simultaneously, when signing the agreement, one should clearly distinguish the two in terms of conditions and exercise time, expressly set out that the two rights can be exercised simultaneously, and that benefits already received will not be deducted when the other right is claimed, in order to improve the chances of being simultaneously supported by the court.

As for how to simultaneously claim the two rights without the amount being identified as too high by the court, based on cases retrieved and analysed by the author, most courts adjust the excessive return on investment, in many cases to 24% of the annual interest rate. Since the new judicial interpretation on private lending designated four times the loan prime rate as the interest rate cap, it cannot be ruled out that courts may lower the total return on investment with reference to that limit.

When a VAM is signed, in order to protect the upper limit of investor interest, the author suggests that the interest rate of cash compensation and share repurchase costs should not be excessively high. Instead, reference can be made to 24% of the annual interest rate or four times the LPR. If the interest rate ends up being too high, courts may lower such rates in an effort to balance the interests of both parties.

Xie Yang is a senior partner and Tian Cheng is an associate at Zhilin Law Firm

Rooms 2001-2007, 20th Floor, Tower C

Global Trade Center, 36 North Third Ring Road East

Beijing 100013, China

Tel: +86 10 6409 7197

Fax: +86 10 8400 4936

E-mail: yang.xie@zhilinlaw.com

cheng.tian@zhilinlaw.com

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PIPL impact on labour management and compliance

Leo — Tue, 25 Jan 2022 01:07:05 +0000

Employers�� collection and use of employee personal information pervades the entire process of recruitment, employment and departure. With the implementation of the Personal Information Protection Law (PIPL) on 1 November 2021, an employer that mishandles personal information will face such risks as administrative penalties and infringement disputes, which, in serious cases, may even constitute a criminal offence. So how best to handle personal information in the course of labour management in light of the PIPL?

Typical scenarios

Every step of an employer��s day-to-day labour management may involve the collection and use of personal information. Some typical instances include the following:

- The employer requests an applicant to fill out a personal information form containing educational background, work experience, marital status and family background.
- When an employee applies for sick leave, the employer will typically require the employee to provide his or her medical records or even a record of prescriptions, in addition to the sick leave form.
- An employer monitors the employees�� work computers and email system, as well as stored or transmitted data in the internal network.
- In a non-competition investigation, the employer may engage investigators to track and take photographs of the employee to obtain evidence of their joining a competitor.

PIPL impact

Tracy Liu
Partner
Jingtian & Gongcheng

PIPL, as a standalone law that regulates the protection of personal information, specifies numerous matters concerning the protection of personal information, mainly including the respective rules for processing personal information and sensitive personal information, the provision of personal information to parties outside China and legal liability for violations.

The processing of personal information is the core of the PIPL, key to which being the ��inform and consent�� rule. In other words, the processing of personal information is conditional on fully informing the individual and securing their consent to do so.

However, article 13 of the law reserves for employers certain exceptions to the ��consent�� requirement. Specifically, an employer may process personal information without the individual��s consent if the same is essential for entering into and performing a contract to which the individual is a party, or to effecting human resources management pursuant to its lawful labour rules and regulations or a collective contract executed in accordance with the law. However, it remains unclear how ��essential for performing a contract�� and ��essential for effecting human resources management�� are defined.

In terms of legal liability, the PIPL establishes the rule for shifting the burden of proof for the bearing of civil liability and provides that, in the event of a violation of the law, the executive of the enterprise directly responsible and other directly responsible persons could face fines and a ban on serving as a director, supervisor, senior executive or personal information protection executive of a relevant enterprise for a certain period of time. Furthermore, an offending employer may face credit discipline, with its illegal act recorded in its credit file and made public.

Compliance recommendations

To this end, employers are advised to abide by the following when handling employees�� personal information:

Larry Lian
Counsel
Jingtian & Gongcheng

Personal informed consent form. An employer should sort out and classify the personal information it needs to process in the course of labour management, produce lists based on the types of personal information, attach them to the informed consent form for the collection of information and, on the basis of ensuring that the employee is fully informed of the purpose, manner and scope of the processing of personal information, require them to sign the form. For sensitive personal information for which an employee��s separate consent is required, employers should mark this conspicuously and require the employee to check off each item in confirmation and place their signature by each item.

Rules and regulations for processing personal information. The employer can specify the content and scope of personal information, the purpose of use and the rules for the processing in its existing rules and regulations, or formulate a separate policy that specifically addresses the protection of employee personal information. They should then publicise the relevant systems and policies, using this as the legal basis for future processing of personal information.

An employer may consider taking the following specific measures for the protection of personal information:

- Classify personal information for management. The employer can list all types of employee personal information it needs to process at each stage of labour management and for each type of employee. On this basis, it can then mark the two categories of special information, namely private information and sensitive personal information, contained in the personal information and strictly manage them in accordance with the PIPL.
- Sort out the private employee information that could be involved at each stage of the labour management process, pre-emptively formulate sound policies and compliance guidelines in accordance with legal requirements and take necessary measures for each scenario. For example, if the employer is to install surveillance equipment on its office premises, it should inform employees of the installation and use of the equipment as early as possible, and clearly mark the office areas where the surveillance equipment is installed.
- Establish sound information and data protection rules and systems and specify each responsible functional department (e.g., human resources, information technology and compliance departments). Monitor and ensure compliance of the collection, accessing, use of personal information by way of day-to-day supervision and regular reviews.
- Strengthen management and employee training to reinforce their awareness of the importance of confidentiality. An employer should require, in confidentiality agreements, its employees to perform stringent non-disclosure obligations in respect of their colleagues�� personal information, as well as any personal information to which they have access in the course of their work.

Tracy Liu is a partner and Larry Lian is a counsel at Jingtian & Gongcheng

Jingtian & Gongcheng

45/F, K. Wah Centre

1010 Huai Hai M. Road
Shanghai 200031, China

Tel: +86 21 2613 6125

E-mail: tracy.liu@jingtian.com

larry.lian@jingtian.com

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Capital markets regulation in Hong Kong: SPAC listing regime

Leo — Mon, 24 Jan 2022 04:29:39 +0000

China

Hong Kong

HONG KONG

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Special purpose acquisition companies (SPACs), as a viable listing alternative, have gained great popularity among large financial institutions and investors in the US over the past few years. The structure has attracted many Asian issuers to the US for fundraising. As one of the world��s most important financial markets, it is logical for Hong Kong to adopt a similar regime to attract financial institutions, investors and investment, and strengthen its position as Asia��s financial hub.

The Stock Exchange of Hong Kong (SEHK) has not attempted to merely replicate the US SPAC regime, but is establishing a regime tailored to the particular risks and requirements of Hong Kong capital markets. In particular, the SEHK has placed greater emphasis on having a high-quality regime with high-quality promoters and de-SPAC targets, aiming to create a regulatory system that can better protect the investors.

HK v US SPAC Regime

Sherlyn Lau
Partner and Deputy Head of China
Corporate and Finance Group at Sidley Austin
Tel: +852 2901 3804
Email: sherlyn.lau@sidley.com

Unlike the US SPAC regime, the SEHK intends to strike the right balance between delivering appropriate investor protections and market quality, and promoting market opportunity. This vision is to be achieved by imposing higher standards for SPAC offerings and de-SPAC transactions, and higher qualification requirements for SPAC promoters.

For example, the SEHK has imposed rigorous fundraising and distribution requirements, including minimum offering proceeds of HKD1 billion (USD128 million), distribution to at least 75 professional investors of which at least 20 must be ��institutional�� professional investors, and at least 75% of SPAC’s securities distributed to these institutional professional investors. Trading of SPAC securities will also be limited to ��professionals only��. SPACs will be required to ring-fence 100% of SPAC offering proceeds and, on a redemption event, refund investors their pro-rata share of the full amount plus accrued interest, effectively creating an almost risk-free investment scenario for SPAC investors.

Raymond Oh
Partner and Deputy Head of China
Corporate and Finance Group at Sidley Austin
Tel: +852 2901 3825
+65 6230 3965
Email: roh@sidley.com

This 100% ring-fencing requirement means that the SPAC promoters have to bear all the expenses and costs related to the SPAC��s offering, and continuing operations before the de-SPAC transaction, with the exception that part of such expenses and costs can be settled with interests or other income earned on monies held in the escrow account. SPACs will also be required to offer investors redemption opportunities under several circumstances.

In addition, the SEHK has set stringent requirements on the suitability of SPAC promoters, including at least one SPAC promoter holding specific types of Securities and Futures Commission (SFC) licences, and owning at least 10% of SPAC promoter shares. Unlike the US SPAC regime, the SEHK has imposed a limit on SPAC promoter shares (no more than 20% of the total shares plus 10% earn-out upon the successor company meeting certain financial targets), and a dilution cap of 50% on all warrants (including SPAC warrants and promoter warrants). The 10% earn-out mechanism is unique for the Hong Kong market, which is aimed to incentivise the promoters to seek quality de-SPAC targets.

Generally, the US SPAC regime, which is less stringent than the Hong Kong SPAC regime, would allow the market players to have more flexibility to adopt innovative arrangements. For example, in the US SPAC market, the promoters may have the ability to extend the deadlines for completing a de-SPAC transaction several times, where underwriters may require promoters to deposit additional funds into the trust account for such extensions.

Differences between proposed HK regime and US regime

Key Requirements	SEHK	US Exchanges
Investor suitability	Restricted to only professional investors	Retail investors can participate in a SPAC IPO
Shareholder distribution	A minimum of 75 professional investors of which 30 must be institutional professional investors A SPAC must distribute at least 75% of each of SPAC shares and SPAC warrants to institutional professional investors	No such restriction. General NYSE/Nasdaq rules shall apply
Minimum issue price	A minimum issue price of HKD10 (USD1.28) per share	Nasdaq: Minimum bid of USD4 per share unless other requirements are met, then the minimum bid may be USD2 or USD3 per share. NYSE: Minimum bid of USD4 per share However, SPACs listed in the US typically have a unit issue price of USD10
Minimum market capitalisation	HKD1 billion (USD128 million)	General NYSE/Nasdaq rules shall apply. Nasdaq Global Market: USD75 million. Nasdaq Capital Market: USD50 million. NYSE: USD100 million
SPAC promoters	At least one SPAC promoter, which is an SFC-licensed firm (with type 6 [advising on corporate finance] and/or type 9 [asset management] licences) shall hold at least 10% of the promoter shares	No specific qualification or license requirement
Dilution cap	Promoter shares: 20% of the total number of shares + additional 10% subject to successor company meeting certain financial targets Promoter warrants: (1) if exercised, 10% of the total number of shares; and (2) each warrant to purchase up to 1/3 ordinary shares	No such cap. US SPAC promoters typically own 20% of the total number of shares
Requirement of successor company	Must meet all new listing requirements	Meet full initial listing requirements of Nasdaq and NYSE
Independent third-party investment	Mandatory independent PIPE investment for completing a de-SPAC transaction	No such requirement
Redemption rights	Public shareholders can redeem all or part of their shares prior to a general meeting approving: (1) a de-SPAC transaction; (2) a material change in any SPAC promoter holding 50% or more of the promoter shares or any single largest SPAC promoter; and (3) any extension to the deadlines for the announcement or completion of de-SPAC transactions	Public shareholders voting against a business combination must have the redemption right, while SPACs listed in the US typically grant redemption rights to all public shareholders, irrespective of their voting against or for a de-SPAC transaction

Main hurdles in HK de-SPAC

Consistent with the SEHK��s intention to have a high-quality regime, the final Hong Kong SPAC rules impose higher standards on de-SPAC targets.

Meng Ding
Partner at Sidley Austin
Tel: +852 2509 7858
Email: meng.ding@sidley.com

First, de-SPAC targets must have a fair market value equivalent to at least 80% of funds raised by the SPAC, which is a minimum of HKD800 million. Second, the SEHK will treat any de-SPAC transaction as a deemed new listing application where the successor company must meet all listing requirements. Third, private investment in public equity (PIPE) from institutional investors is required for any de-SPAC transaction.

The portion of the simultaneous PIPE transaction varies depending on the negotiated value of the de-SPAC targets, from 25% down to 7.5%. Lower portion may also be accepted by the SEHK on a case-by-case basis if the negotiated value exceeds HKD10 billion. In addition, the SEHK imposes certain requirements on the qualification and investment amount of the PIPE investors. The requirement for this substantial PIPE transaction may cause at least some timing uncertainty, pending SPAC promoters�� ability to search for capable PIPE investors at a suitable price. This PIPE investment requirement can protect public shareholders, as PIPE investors are generally experienced global financial institutions, which may have a collection of M&A tools to ensure the reasonableness and fairness of the de-SPAC target��s valuation.

SIDLEY AUSTIN
39/F, Two International Finance Centre
Central, Hong Kong
Tel: +852 2509 7888

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Online dispute resolution proceedings of UNCITRAL

Leo — Mon, 24 Jan 2022 01:35:57 +0000

Online dispute resolution (ODR) proceedings refers to the use of a wide range of technical methods to provide online support for, or replace traditional dispute resolution. ODR proceedings share the same basic characteristics with those of alternative dispute resolution (ADR), but aim to resolve disputes in a simpler, more efficient manner.

Nancy Nan
Partner
AnJie Broad Law Firm

Understanding the ODR proceedings of the United Nations Commission on International Trade Law (UNCITRAL ODR), and learning from its experience, can be significant in promoting China��s systemic reform of dispute resolution and solving issues arising from the increase in cases but lack of sufficient personnel to handle them. Additionally, it can be conducive to the improvement of litigation efficiency, rate of verdict acceptance and litigation settlement, and judicial enforcement rate.

Q: Which cases can be applied to UNCITRAL ODR proceedings?

A: The UNCITRAL ODR proceedings are applicable to disputes caused by cross-border, low-dispute-amount e-commerce transactions between business-to-business (B2B) and business-to-customer (B2C), which are usually disputes over cross-border sales or service contracts with small settlement amounts and signed through electronic communications.

Q: What are the elements contained in a UNCITRAL ODR proceeding?

A: It includes the ODR proceeding administrator, ODR platform, neutral and dispute parties, with technical notes on the ODR to provide guidance for these potential participants.

Q: Who are the subjects of UNCITRAL ODR proceedings?

The claimant �C the party who initiates an ODR proceeding �C and the respondent �C the party against whom the notice of action is directed.

An ODR proceeding requires a system for generating, sending, receiving, storing, exchanging or otherwise processing communications. In this article, we shall call it an “ODR platform”.

An ODR platform is administered and coordinated by an entity that within this article shall be referred to as an “ODR administrator”. The ODR administrator may be separate from or forming part of the ODR platform.

Communication that may take place during the course of ODR proceedings is defined as “any communication (including statement, declaration, demand, notice, response, submission, notification or request) made by means of information generated, sent, received or stored by electronic, magnetic, optical or similar means”.

It is preferable that all communications in ODR proceedings take place via the ODR platform. Consequently, both the parties to the dispute, and the ODR platform itself, should have a designated “electronic address”.

Q: What principles do the UNCITRAL ODR proceedings follow?

A: An ODR proceeding ought to be simple, fast and efficient, in order to be able to be used in a ��real world setting��, including that it should not impose costs, delays and burdens that are disproportionate to the economic value.

The ODR proceedings follow the following principles:

Transparency

It is recommended to disclose any contractual relationship between the ODR administrator and a particular vendor, so that users of the service are informed of potential conflicts of interest.

The ODR administrator can publish anonymised data or statistics on outcomes in ODR proceedings, in order to enable parties to assess its overall record.

All relevant information should be available on the ODR administrator��s website in a user-friendly and accessible manner.

Independence

It is desirable for the ODR administrator to adopt a code of ethics for its neutrals, in order to guide neutrals as to conflicts of interest and other rules of conduct.

It is useful for the ODR administrator to adopt policies for dealing with identification and handling conflicts of interest.

Expertise

The ODR administrator may wish to implement comprehensive policies for governing selection and training of neutrals.

An internal oversight/quality assurance process may help the ODR administrator to ensure that a neutral��s decisions conform with the standards it has set for itself. The ODR administrator should take appropriate confidentiality measures.

The ODR proceedings should be based on the explicit and informed consent of the parties.

Q: What are the stages of a UNCITRAL ODR proceeding?

A: The process of an ODR proceeding may consist of the following three stages:

Negotiation

An ODR proceeding begins when a claimant submits a claim notice through the ODR platform to the ODR administrator. The ODR administrator then informs the respondent of the existence and content of the claim. The first stage of proceedings �C a technology-enabled negotiation �C commences, in which the claimant and respondent negotiate directly with one another through the ODR platform.

Facilitated settlement

If the negotiation process fails (i.e. does not result in a settlement of the claim), the process may move to the second stage of ��facilitated settlement��. In this stage of ODR proceedings, the ODR administrator appoints a neutral who communicates with the parties in an attempt to reach a settlement.

Final stage

If facilitated settlement fails, a third and final stage of an ODR proceeding may commence, in which case the ODR administrator may inform the parties of the nature of such a stage or provide the parties with possible procedural options for them to choose from.

Nancy Nan is a partner at AnJie Broad Law Firm

19/F Tower D1, Liangmaqiao Diplomatic Office Building
19 Dongfang East Road

Chaoyang District
Beijing 100600, China

Tel: +86 10 8567 5988

Fax: +86 10 8567 5999

E-mail: nanxing@anjielaw.com

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The A-List 2021

Leo — Mon, 24 Jan 2022 00:00:29 +0000

Discover our other?annual awards Award

After unprecedented market feedback and extensive editorial research, China Business Law Journal presents this year��s elite lawyers in the Chinese legal market. Kevin Cheng reports

This year has seen the obstinate pandemic largely under control in China but sporadically rearing its head, as well as the rapid intensification of the regulatory environment following a series of seismic legal shake-ups, creating a backdrop against which businesses are settling into irrevocably altered roles and facing unfamiliar challenges. For these reasons and more, external legal expertise from both domestic and international law firms is even more highly valued.

For the sixth year in a row,?China Business Law Journal?has reached out to legal practitioners, in-house counsel and corporate management, inviting nominations of private practice lawyers that, in their opinion, deserve recognition for their contribution and excellence over the past 18 months.

The response was on a scale that went beyond all expectations. The 200 elite lawyers in the A-List comprise 100 practitioners of Chinese law and 100 international lawyers committed to China-related businesses, and were selected after meticulous research from more than 2,000 nominations from across the globe.

STARRY SKIES

When asked to recommend lawyers who have lent their unique expertise and helped their client companies navigate through critical times, corporate counsel were fulsome in their praise.

Chen Wei, a Beijing-based partner at JunHe, received compliments from Huang Yeping, an executive director at Morgan Stanley, for his speciality in complex project structuring and delivery.

Chen was also described as ��a great lawyer in the telecom sector and M&A-related sectors�� and ��a leading attorney in internet data centre (IDC) businesses�� by Frank Fan, the operating director at I Squared Capital, a private equity firm focusing on global infrastructure investments headquartered in Miami.

Hu Jin, the president of Harbin Gloria Group, controlling shareholder of Shenzhen-listed Harbin Gloria Pharmaceutical, was impressed by the legal services provided by Jin Chengfeng, a Beijing-based partner at TianTong Law Firm, during the company��s strenuous bankruptcy and reorganisation.

��Jin is a highly professional and dedicated lawyer, one of the best that I��ve had the pleasure to work with,�� says Hu.

Joy Jiang, a senior legal manager of Xiaomi Mobile Software, considers Hu Gaochong, a partner at the Beijing head office of Zhonglun W&D Law Firm, a ��trustworthy partner�� and ��an exceptional specialist in dispute resolution��.

��In lawsuits, Hu Gaochong can acutely identify the weak links of the adverse party and exploit them to his advantage, which often yields remarkable results,�� says Jiang.

Hu Gaochong was further praised by Diao Yunyun, the legal director of Tencent, for his extensive experience in labour disputes, and by Gu Yajing, the legal director of BNP Paribas, for strong legal analytical ability.

With his expertise in overseas listing, Liu Zhenguo, managing director at the Shenzhen office of DeHeng Law Offices, managed to impress Jiang Keyang, board secretary and chief financial officer of Ming Yuan Cloud Group, a digital solution provider on the real estate value chain. ��From setting up the overall overseas structure to streamlining our corporate history, Liu was instrumental in the company��s IPO in Hong Kong,�� says Jiang.

Zhang Tianyu, compliance manager at the London branch of China Merchants Bank, identified Paul Li, a partner at the London office of Zhong Lun Law Firm, as a highly qualified English Law lawyer with significant experience in the banking and financial sectors. Li is their long-term legal counsel in drafting, commenting on and negotiating syndicated and bilateral loans.

This has been a historical year for China��s legal practitioners for numerous reasons, beginning with the implementation of the nation��s first Civil Code, and followed by the step-by-step maturation of its comprehensive data regulation, with the Data Security Law taking effect in September and the Personal Information Protection Law two months later.

The upheavals in China��s legal landscape undoubtedly posed challenges to legal practitioners all around, but they also represented opportunities for the well-prepared. Li Chunyi, a partner at the Beijing head office of Zhongzi Law Office, proved to be one of them. ��Proficient and responsive, Li Chunyi excels at locating the correct and feasible solution in complex situations,�� says Wang Na, a legal manager at Beijing��s Capital Airport Holding, who also told us that Li hosted a number of Civil Code-themed training sessions for their subsidiaries.

On the frontier of data protection, Ramon Huang, a Shanghai-based senior partner at Hui Ye Law Firm, emerged as a trustworthy long-term solution provider on personal information security and data compliance for CloudWalk Technology, a Chinese developer of facial recognition software, according to Tao Fuwu, the general manager of its legal department.

Hannto Technology, an intelligent office hardware manufacturer and supplier in Shanghai, chose Yang Xun, a local partner at Llinks Law Office, to provide its legal counsel. ��With profound insight in intellectual property protection and data security, Yang is able to stay on top of legal and economic developments,�� says Lee Ying, chief of staff of Hannto. ��He is always precise, timely and practical with his advice, safeguarding our company interests to the largest possible extent.��

Ramon Huang also provides regular legal counsel on personal information security and data compliance for CloudWalk Technology, a Chinese developer of facial recognition software, according to Tao Fuwu, the general manager of CloudWalk Technology’s legal department.

Intellectual property protection is another legal area that saw massive shifts in China during the year, for which Guan Rui, legal general manager at New Oriental Education and Technology, turns to Guo Chunfei, a senior partner at the Beijing office of Tiantai Law Firm. ��Guo is extensively experienced in intellectual property, able to provide specialised and effective legal services,�� says Guan.

Emil Zhang, director of the European IPR department of Huawei Technologies, gave high marks to Gao Xiang, a Shanghai-based partner at AllBright Law Offices, for his insights in intellectual property and key technologies. ��Gao strategises from the client��s perspective, which often leads to him directing the client��s objectives to a satisfying conclusion.��

With mergers & acquisition, litigation and capital markets continuing to lead in practice areas in which the most A-List lawyers demonstrate the value of their services, legal counsel in more specialised or even niche areas can be extremely valuable but relatively hard to come by.

��Not only a seasoned and certified expert on maritime and shipping, Loh has rich experience in the wider field of international trade,�� says Wang Zhenming, general counsel of China International United Petroleum & Chemicals (Unipec), of Loh Wai Yue, partner and chief representative of the Beijing office of Ince & Co. ��He targets clients�� needs with utter precision, is quick to come up with solutions, and exhibits maturity and professional merit in complex multi-jurisdictional disputes.��

In terms of the fast-growing life science industry, Zhou Zhenyang, deputy legal director of Roche Diagnostics (Shanghai) commends Katherine Wang, a Shanghai-based partner at Ropes & Gray, for her know-how in NMPA (National Medical Products Administration), HGRAC (Human Genetics Resources Administration of China) and healthcare data regulation, as well as her client-centric ethic.

Victor Gallo, general counsel at PlayAGS, was able to secure the expertise of Gao Jun, a partner at the Shanghai office of Zhong Lun Law Firm who, in addition to his corporate legal knowledge, was well-versed and up-to-date in China��s gambling laws. PlayAGS is a casino game and system developer, manufacturer and supplier headquartered in Las Vegas, Nevada.

In the cases of some lawyers, their path to excellence can be difficult to imitate. Victor Liu, senior director and senior legal counsel at NBA China, nominated Zou Wen, the founding partner of GEN Law Firm, believing that Zou��s unique experience as a former judge granted her intimate familiarity with the litigation process.

BEYOND LAWYERING

Intuitively, we attribute an in-depth understanding of legal provisions, the ability to stay one step ahead of industry shifts and turns, and wide-ranging practising experience as the top qualities embodied by an elite lawyer. But these are by no means the only aptitudes enabling lawyers to stand out.

��Zhang displays the highest level of professionalism, with strong ethics and a duty of care to the client that exceeds usual industry standards,�� observes Nicholas Erekose Sim, the CEO of Fiduciary Securities (Hong Kong), who goes on to describe Chris Zhang, senior partner at Jincheng Tongda & Neal Law Firm to be ��very driven, and despite a high level of success, works long hours every day and responds quickly and to the point��.

Assiduousness is a virtue to many companies in need of external legal services due to the potential workload involved, as was the case with Shanghai Film (Group) Corporation, which enlisted the help of Michael Liu, a senior partner at Dentons, for organising and streamlining their massive film and TV library.

��Liu has helped us organise over 1,500 films and TV products in the span of six months, which was a massive amount of work, unheard of in our company��s history,�� says Peng Yong, the legal director. In addition, Liu prepared a detailed report with recommendations on future day-to-day copyright operations and security.

Michael Liu��s willingness to go the extra mile is a reminder of a lawyer��s fundamental role as problem solver.

Besides appreciating the legal analytical skills of Anthony McKenzie, Singapore-based managing partner and head of corporate at Carey Olsen, Alan Cheung, the general counsel of a family office, praises him for being able to ��offer advice that not only weighs in on the pros and cons of some tricky issues but is commercially executable, even when it is not asked of him��.

Proficiency in communications, or people skills, is an area sometimes taken for granted but should never be underestimated in a lawyer��s work, especially when involving cross-jurisdiction disputes, where everything from linguistic and cultural barriers to politics threatens to get in the way.

Ermanno Vitali enjoys a close working relationship with D��Andrea & Partners in his capacity as the CEO of FAAM China, praising Carlo D��Andrea, founder and managing partner of the international firm, as a ��leading Italian lawyer�� that ��assists many Italian multinationals in their business in China��.

His commendation extends to Matteo Zhi, senior partner at D��Andrea based in Shanghai. ��Matteo is one of the few Chinese lawyers who have studied in Italy and could work with the client directly in the Italian language,�� says Vitali. ��His deep knowledge in inter-cultural understanding always helps in important negotiations of cross-border transactions.��

The value of lawyers�� abilities to bring people together in spite of cultural and jurisdictional gaps has not gone unnoticed. Aaron Shao, the head of legal (Greater China) of Abbott, a US-headquartered multinational medical device and healthcare company, conveyed to us his high opinion on Tiana Zhang, a Shanghai-based litigation partner at Kirkland & Ellis.

��Tiana has an intimate understanding of law and culture in both the US and China, as well as extensive investigation and litigation experience in both jurisdictions,�� he says. ��She is perfectly positioned to work on matters that have potential cross-border legal implications.��

In inter-jurisdictional dealings, lawyers must be able to not only extend their expertise to a different set of rules and regulations, but also be able to switch their mindset at a moment��s notice. Rossana Chu, managing partner at LC Lawyers, is described as well-versed in both regards.

��Her understanding of Chinese institutions and culture, and the complexity involved, is unrivalled,�� says Philip Ng, managing director and head of legal and compliance of CMB International.

Daphne Tse, CFO and company secretary of Greenheart Group, a Hong Kong-based multinational forestry company, echoes those sentiments. ��[Chu’s] experience and knowledge give us a sense of confidence that a true professional is always standing shoulder to shoulder with us to safeguard our company’s interests.��

Professionalism, in the sense of both know-how and dedication, can work wonders in maintaining lawyer-client relationships. Wang Ran, head of China debt capital markets department at UBS, credits Renee Xiong, a partner at Sidley Austin’s Hong Kong office, as one of their most trustworthy long-term partners for her experience in the Asian capital market and her well-recognised professionalism.

A managing director of a top Asian research institution was likewise impressed by the attentiveness to detail of Bill Wu, managing partner at Hairuo & Partners in Shanghai. ��Wu is highly empathetic,�� he says. ��He conveys both legal sense and sensibilities.��

As the global economy continues to face uncertainties along numerous fronts, reliable and insightful legal counsel able to steer companies safely through the mist in a constructive, deliberate manner can exceed the face value of such services.

Alec Orudjev, general counsel of FT Global Capital, puts his trust and confidence in Justin Chen, founder and managing partner at PacGate Law Group, whom Orudjev describes as having a superb, highly effective and reassuring approach to client matters.

��In these volatile economic times and challenging global regulatory environment, Chen is one of a few outstanding legal professionals I feel comfortable turning to for advice and guidance on many complex, multi-faceted and time-sensitive matters,�� says Orudjev.

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Is ��policy restriction�� a justification for idle trademarks?

Leo — Fri, 21 Jan 2022 01:51:32 +0000

Article 49 of the Trademark Law provides that, ��where a registered trademark serving as the generic name of the designated goods stays unused for three consecutive years, any organisation or individual may apply to the Trademark Office for its cancellation��.

The purpose of the cancellation is to encourage and urge trademark owners to put their registered trademarks to active use, and prevent idleness or hoarding of registered trademarks, to help stimulate trademark resources and ensure healthy and orderly operation of the trademark system.

Sun Qinghua
Partner
Sanyou Intellectual Property Agency

In practice, application for cancellation of any unused trademarks registered for three years has become an important go-to option to eliminate existing obstacles in trademark applications. Many idle trademarks have thus been cancelled. However, there are also many scenarios where trademark owners have failed to use their registered trademark during the designated period through no fault of their own.

Article 67 of the Implementing Regulations of the Trademark Law provided the following four justifiable reasons as described in article 49 of the Trademark Law: (1) force majeure; (2) government policy restrictions; (3) bankruptcy liquidation; and (4) other justifiable reasons not attributable to the trademark registrant.

Article 20 of the Opinions of the Supreme People��s Court on Several Issues Concerning the Trial of Administrative Cases involving Trademark Authorisation and Confirmation, issued in 2010, provides that if a trademark owner fails to use, or ceases to use, the registered trademark due to the above-mentioned reasons, or ��if a trademark owner has the intention to use the trademark and has made necessary preparations to use the trademark, but fails to do so due to any other external reasons, the idleness is deemed justifiable��.

In the above-mentioned circumstances, the trademark registrant may provide relevant evidence to the China Trademark Office to defend the trademark idleness based on justifiable reasons. In this article, the author uses the following cases to analyse ��policy restriction�� as justification for trademark idleness within the designated period.

Marumiya re-examination

The respondent (trademark owner), Marumiya Food Industry, argued that on 11 March 2011, the great earthquake in Japan caused serious nuclear leakage from the Fukushima Daiichi Nuclear Power Plant, which caused material impact to the safety of Japanese aquatic products, agricultural products, dairy products and other foodstuffs. The trademark had not been used due to policy restrictions.

The applicant argued during the cross-examination that the Announcement on Prohibition of Imports of Certain Japanese Food and Agricultural Products (announcement No. 35 of 2011) and the Announcement on Further Strengthening Inspection and Quarantine Supervision of Food and Agricultural Products from Japan (announcement No. 44 of 2011) were not justifiable reasons for the trademark under review not being used during the specified period.

Moreover, it has been nearly 10 years since the issuance of those announcements, which means the respondent has had sufficient time and opportunities to produce goods that meet the inspection and quarantine requirements in Japan and import them into China, or set up factories to produce such products directly in China, or license the trademark to Chinese companies, or otherwise use the trademark. Therefore, the trademark was not used when it could have been used.

The re-examination opinion states that the justification of the respondent for not using the trademark in question does not fall under any justifiable reasons stipulated in article 67 of the Implementing Regulations of the Trademark Law, and the registration of the trademark shall be cancelled.

SKY re-examination

The respondent (trademark owner), Sky International, argued that it is one of the leading providers of digital pay-TV channels that, together with its subsidiaries, mainly operate pay-TV broadcasting, broadband and telephone services in the UK and Ireland. The respondent cannot use the trademark designated as class 38 ��television broadcasting service�� in the Chinese market due to policy restrictions by the central government, which falls under justifiable reason stipulated in the Trademark Law.

The re-examination opinion states that the Regulations on the Administration of Radio and Television, the Catalogue for the Guidance of Foreign Investment Industries and other such regulations clearly provide that ��China prohibits establishment of radio stations and television stations in the form of wholly foreign-owned enterprises or Sino-foreign joint ventures��, and restrict foreign investment in industries including ��telecommunication services��. Therefore, the respondent��s reason for non-use was not supported, and the trademark would be stricken from the 38th category of service.

��Policy restriction�� is commonly adopted by trademark owners to explain why their registered trademarks have not been used. However, as noted from the above-mentioned cases, the Trademark Office is extremely cautious in giving it credence.

In the Marumiya case, while the respondent��s defence seems justified and reasonable judging from the evidence provided by the respondent. However, the specified period was nearly 10 years after the earthquake in Japan, granting it sufficient time and opportunity to overcome the relevant restrictions, or otherwise use its registered trademark in China. Thus, the trademark very well could have been used.

In the SKY case, the respondent claimed that China��s Regulations on the Administration of Radio and Television prevented it from using the trademark. However, these regulations have undergone three revisions in the past 10 years, and have consistently been clear regarding the prohibition of foreign investment into China��s radio and television industry. Operating in the relevant field, the respondent should be aware of such policies and regulations, as well as the impossibility of using its registered trademark in China. Thus, its defence was not supported.

From the above-mentioned cases, we can gather that the existence of certain policy restrictions does not necessarily support the legitimacy of non-use of trademarks. Rather, it in large part depends on whether the trademark owner has taken the initiative and exerted reasonable efforts to use its registered trademark, while being subject to policy restrictions and other justifiable reasons not attributable to the trademark owner.

Therefore, before resorting to ��policy restriction�� as a justification, trademark owners should carefully examine whether their industry has indeed been restricted by policies, and confirm that they have made every effort to use the registered trademarks.

Sun Qinghua is a partner and trademark attorney at Sanyou Intellectual Property Agency

Sanyou Intellectual Property Agency
16/F, Block A, Corporate Square
No.35 Jinrong Street, Beijing 100033, China
Tel: +86 10 8809 1921 / 8809 1922
Fax: +86 10 8809 1920
Email: sanyou@sanyouip.com

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Key points for leasing companies joining bankruptcies as creditors

Leo — Thu, 20 Jan 2022 03:30:57 +0000

Operating and financial leases are becoming more and more common, and the number of cases where leasing companies participate in bankruptcy reorganisations as creditors has also increased. What are key points the lessor should pay attention to when facing the lessee��s entry into bankruptcy reorganisation?

The lease deposit and the bank letter of credit or letter of guarantee provided by the lessee. In most leasing businesses, the lessor will require the lessee to pay a cash deposit, or provide a bank standby letter of credit or letter of guarantee of the same amount. When there is a sign that the lessee is entering bankruptcy reorganisation, the lessor first needs to consider whether to apply the cash deposit and draw down the letter of credit or letter of guarantee from the bank. As different legal rules apply for application of a cash security deposit and the application of a letter of credit or letter of guarantee, the lessor should consider the following:

- If the lessor deducts and applies the cash deposit, its legal basis will be the lease contract and the offset right in bankruptcy stipulated in the Enterprise Bankruptcy Law. Since the administrator is entitled to choose whether to continue to perform the lease contract after the lessee enters bankruptcy procedure, and the Enterprise Bankruptcy Law has certain restrictions on the exercise of the offset right, it is advisable for the lessor to complete the deduction before the bankruptcy reorganisation procedure starts.
- If the lessor cashes the bank standby letter of credit or letter of guarantee to deduct any outstanding payment, its legal basis will be relevant provisions on standby letters of credit and enforcement of third-party guarantees. As long as the letter of credit or letter of guarantee is still valid, the bankruptcy reorganisation of the lessee will not directly affect its validity. However, if the letter of credit or letter of guarantee may expire during the bankruptcy reorganisation, considering that it is difficult for the lessee to obtain additional credit from banks during bankruptcy reorganisation, the lessor should complete the cashing in and deduction before the expiry at the latest.

Wang Shu
Partner
Han Kun Law Offices

Continued performance of operating lease contracts and common-benefit debts. After the lessee enters bankruptcy reorganisation, the lessor of the operating lease is often very concerned about whether the operating lease contract will be continued, and whether the lessee can continue to pay rent during the reorganisation. According to the Enterprise Bankruptcy Law, the lessee��s administrator can choose whether to continue to perform the operating lease contract within two months after the reorganisation procedure starts (or within 30 days of the lessor��s demand). An operating lease contract that is not continued will be terminated, and the lessor shall retrieve the leased property and declare the arrears of rent and other damages arising from the early termination of the lease. When deciding whether an operating lease contract will continue to be performed, the lessee, the administrator, and the bankruptcy court will often consider factors such as the value of the leased property to the lessee and the rent level of the lease contract. If the operating lease contract is confirmed to be continued, the rent under the lease contract should be paid during the bankruptcy reorganisation as part of the common debt.

Zhu Jun
Partner
Han Kun Law Offices

Filing of lease claims. Normally, the claims filed by the lessor with the administrator include the pre-bankruptcy debts (including rents owed and accumulated penalty interests on rents) as of the date when the bankruptcy reorganisation petition is accepted by the court, and the damages arising from the termination of the lease contract pursuant to article 18 of the Enterprise Bankruptcy Law.

When the lessor prepares various kinds of claim filing documents, it is very important to sort out the evidence of its claims. The lessor needs to count the lease arrears and losses, summarise and sort out the provisions and the method used to calculate damages in the case of the lessee��s bankruptcy as stipulated in the contract, collect and sort out the evidence of expenses and losses, and ensure the claim amount has sufficient basis and evidence.

Overseas lessors further need to arrange in advance the certificates of incorporation and authorisation documents. such documents need to be notarised by the notary office in the country where the lessor is located and legalised? by the Chinese embassy or consulate in that country. After the lessor files claims and receives the administrator��s confirmation of the claims, it should check whether the confirmed result is consistent with the filed information. If there is any inconsistency, it needs to raise an objection with the administrator within the period notified by the administrator, or file a lawsuit to the court for confirmation of the claims.

Claim filing for special lease structures. In practice, the leasing company will also develop certain special structures according to the needs of the lessee. The most common ones are joint leases and sub-leases.

Under the joint lease structure, the lessor needs to determine whether it can file all claims against each lessee based on the obligations of each lessee under the joint lease agreement.

For the sub-lease structure made through a special purpose company, normally it is the sub-lessee who actually possesses and operates the leased property and the lessor relies on the sub-lessee��s credit. Therefore, if the sub-lessee goes bankrupt but the intermediate special purpose company is not bankrupt under this lease structure, the lessor needs to determine whether it can directly file claims against the sub-lessee with the administrator based on the lease documents. In this regard, the lessor can focus on the following factors: whether the lease document stipulates the lessor��s direct recourse against the sub-lessee; whether the lessee has transferred its rights under the sub-lease agreement to the lessor; and whether the lessee neglects to file its claims against the sub-lessee thus endangering the realisation of the lessor��s claims.

Changes in lease conditions. In practice, for the lease contract which continues to be performed, the lessee may request to negotiate with the lessor to change and restructure the lease conditions (including the lease term and rent). In this regard, the lessor shall pay special attention to the effective time of the lease conditions after the change, and the restoration of previous lease conditions when the restructuring fails, and reserve the rights to make a supplementary filing of claims for all losses in such a failure.

Wang Shu is a partner at Han Kun Law Offices. She can be contacted on +86 10 8525 5526 or by email at shu.wang@hankunlaw.com

Zhu Jun is a partner at Han Kun Law Offices. He can be contacted on +86 10 8525 4690 or by email at jun.zhu@hankunlaw.com

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