Laws and Regulations Update in June 2016

1. Notice of the State Council on Issuing the Transitional Plan on Adjusting the Distribution of the Value-Added Tax Revenue between the Central Government and the Local Governments after the Comprehensive Promotion of the Pilot Program of Replacing Business Tax with Value-Added Tax

This Notice was issued by the State Council on 30th April 2016, stating that the transitional plan described therein would come into effect on 1st May 2016 and the transitional period would be two to three years. According to this Notice, the repayment base for the central government and the payment base for the local governments should be assessed on the base of the year 2014, and the total income from payments for the value added tax would be shared by the central government and the local governments, of which 50% belongs to the central government and the rest 50% would be allocated to and shared by the local governments of the areas of the taxpayers.

(Official Website of the PRC Government:

2. Announcement of the State Administration of Taxation on Publishing the Administrative Measures on Exempting Persons Involved in Cross-Border Read More...

Laws and Regulations Update in May 2016

1. The Supreme People’s Court Issues Official Reply Concerning the Disposition of Seized Property by the First Seizing Court and the Enforcement Court for a priority Claim

On 12th April 2016, the Supreme People’s Court issued an official reply to the request by the Higher People’s Court of Fujian Province for clarifying some issues concerning the disposition of seized property by the first seizing court and the enforcement court for a priority claim. This Judicial Interpretation came into effect on 14th April 2016.

As approved by the Supreme People’s Court, in the process of enforcement, the court first seizing, impounding, or freezing (hereinafter collectively referred to as “seizing”) any property of a debtor shall be responsible for the disposition of the seized property. However, where a claim which has entered the enforcement procedure of another court enjoys any security interest at a higher level in the order of payment or enjoys any priority in satisfaction out of the seized property (such a claim is hereinafter referred to as a “priority claim”), if it has been more than 60 days since the date of the first seizure and the first seizing court has not released any announcement of auction or entered any other sales procedure in respect of the seized property, the enforcement court for the priority claim may request that the seized property be transferred to it for enforcement.

Sourced from the official website of the Supreme

In What Ways Can Startups Obtain Competitive Advantages from Intellectual Property?

(By You Yunting) Large number of business opportunities have arisen from the rapid development of wireless and mobile technologies. As a result, new startups appear one after another, scrambling for these opportunities. However, the faster a market grows, the fiercer competition it involves. The process of Entrepreneurship is a race with other outstanding entrepreneurs, in which they use reasonable efforts to gain competitive advantages and win their rivals. If properly used, intellectual property rights can be very helpful in creating advantages. Here, let’s talk about what advantages can startups create by using intellectual property.

  1. Patent advantages

As defined by the Patent Law of the People’s Republic of China (“PRC”), patents include invention, utility model and design patents. Invention and utility model patents are for protecting technologies and design patents for products’ appearance. Personally, software startups usually do not need to file or only need to file a limited number of patent applications, while intelligent hardware developers need to file patent applications much more often.

The performance of most software providers relies on user experience and corporate execution. The scarcity of time is the biggest problem Read More...

Laws and Regulations Update in March 2016

1 The Ministry of Land and Resources Issues the Detailed Implementation of the Interim Regulations on Real Estate Registration

On 1st January 2016, the Ministry of Land and Resources issued and made effective the Detailed Implementation of the Interim Regulations on Real Estate Registration.

(For more details, please consult with your lawyer.)

Sourced from the official website of the Ministry of Land Resources of the P.R.C.:

2 The State Administration of Taxation to Simplify and Combine the Procedures Relating to the Filing of Tax Returns and the Payment of Taxes

On 1st February 2016, the State Administration of Taxation made the Announcement on Simplifying and Combining the Procedures Relating to the Filing of Tax Returns and the Payment of Taxes, to be effective since 1st April 2016.

(For more details, please consult with your lawyer.)

Sourced from the official website of the State Administration of Taxation of the P.R.C.:


What Should Startup Entrepreneurs Know to Negotiate with Outside Investors and Handle Equity issues?

(By You Yunting) The other day I had a conversation with a lawyer of a foreign law firm. That lawyer, who specializes in handling legal affairs of VIE financing on behalf of the investment side, told me that many startups would sign investment agreements proposed by investors directly without any argument. To be honest, I can hardly understand nor agree with this kind of practice. I think investors may actually feel ambivalence in face of such situation, too. On one hand, they can get more control over the invested business as well as other extra benefits. With probably unfair terms being included in an investment agreement, investors may be happy to have a favorable position in the relationships with startups. On the other hand, the investors are expecting to gain lucrative profits, so they may doubt whether the startups will be able to win fierce competitions of the market as they behaved so obediently when making investment agreements. This article talks about common points of financing negotiation between startups and investors as well as startups’ internal equity allocation issues.

Keys for startups to know about how to deal with investors

Investments for startups can be classified into foreign and domestic ones. Startups had better appoint lawyers to review legal documents for them wherever possible. A VIE agreement in English covers at least a hundred pages so that even a person Read More...

Directors’ Liability in China

(By Yu ZhiyuanDirectors’ liability in China is an attractive matter to foreigners who act or intend to act as directors in China. Today, we would like to introduce directors’ liability in China to the below questions.


1. What are the key areas of liability that directors in China need to be aware of?

Directors shall abide by laws, administrative regulations and articles of association of the company and shall have the fiduciary and diligent duties to the company.

Directors may not abuse their authorities by accepting bribes or generating other illegal income, and may not convert company property.

The directors:

(1) may not misappropriate company funds;

(2) may not deposit company assets into an account in his own name or in any other individual’s name;

(3) may not loan company funds to other people or give company assets as security for the debt of any other individual without the approval of the shareholders meeting, general meeting of shareholders or the board of directors in violation of the articles of association;

(4) may not execute any contract or engage in any transaction with the company in violation of the articles of association or without the approval of the shareholders meeting or the general meeting of shareholders;

(5) may not use the favorable conditions and conveniences to seek the business opportunities that shall belong to the Read More...

China Laws and Regulations Update in December 2015

1 The State Council Issues Policy, Emphasizing Combating Fake Goods Sales and Copyright Infringements on Internet                 

On 7th November, 2015, the General Office of the State Council issued the Opinions on Intensifying the Regulation of intellectual property Infringement and Counterfeiting in the Internet Domain (the “Opinions”) with the aim to strengthen regulation of infringement and counterfeiting behaviors in the internet domain and promote sound growth of the e-commerce industry. The Opinions pointed out main activities the government authorities will fight against, including online sale of counterfeited and inferior products and internet copyright infringement.

(For more details, please consult with your lawyer.)

Sourced from the official website of the Government of the P.R.C.:

2 China Securities Regulatory Commission Issue Drafts of New Editions of Supervision Regulations for Public Comment     

On 6th November, 2015, China Securities Regulatory Commission (“CSRC”) issued notice requesting public comment on the Administrative Measures for Initial Public Offerings and Listing (Consultation Read More...

China Laws and Regulations Update in November 2015

1 The Central Government Pushes to Introduce Negative List System for Market Access across the Country

On 19th October 2015, the State Council issued the Opinions on Implementing Negative List System for Market Access (“Opinions”), pushing to introduce the system nationwide. As set forth by the Opinions, pilot negative list system for market access will be launched in certain selected districts from 1st December 2015 to 31st December 2017, and a nationally uniform negative list system for market access and corresponding policies are expected to be implemented as of 2018, under which except for those listed on the negative list, all kinds of entities have equitable access to markets and businesses under applicable laws.

(For more details, please consult with your lawyer.)

Sourced from the official website of the Government of the P.R.C.:

2 The State Food and Drug Administration Issues New Regulations on Food Industry Licensing 

On 30th September 2015, the

Case Analysis: Legal Risks in Franchise Business

(By Yu Zhiyuan) I recently represented a client who was finally the winning party to a typical franchise dispute case, from which we can learn most legal risks possibly facing franchisors and franchisees during their performance of franchise business as well as operational standards and risk control measures for businesses in the brand chain industry.

  1. Case Facts  

In this case, the franchiser, owner of a well-known early childhood education brand, entered into a franchise agreement with each franchisee to perform franchise activities as a chain store dealing in the franchiser’s brand. As mutually agreed, in addition to one-off franchise fees and deposits, each franchisee should pay royalty fees in advance before each royalty year begins, and if there is any overdue payment of royalty fees, penalties.

Later as disputes arose from the franchiser’s failure to provide continuous guiding support under the franchise agreement, a number of franchisees refused to pay royalty fees. Then the franchiser filed a lawsuit, for which the franchisees appointed me to represent them together.

  1. Lawyer’s opinions

The facts of this case seem simple, but indicate a lot of useful information. First up, the Read More...

China Laws and Regulations Update in September 2015

  1. The State Council Issues Policies on the Promotion of Imports and Exports On 22nd July 2015, the General Office of the State Council of the P.R.C. issued the Policies on the Promotion of Imports and Exports.

(For more details, please refer to your lawyer.)

Sourced from the official website of the National Government of the P.R.C.:

  1. The Supreme People’s Court Issues New Judicial Interpretation, Conditionally Recognizing the Validity of Private Lending Between Enterprises

On 6th August 2015, the Supreme People’s Court issued the judicial interpretation on Private Lending, which will take into effect on 1st September 2015.

The new judicial interpretation specifies the conditions of the effectiveness of private lending agreements and notably validates private lending between private enterprises which meets the requirements thereof.

(For more details, please refer to your lawyer.)

Sourced from the official website of the Supreme People’s Court:


China Laws and Regulations Update in August 2015

  1. The People’s Bank of China and the Other Nine Authorities Jointly Issue Policies on Boosting the Internet Finance Industry            

On 18th July 2015, the People’s Bank of China, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Finance, the State Administration for Industry and Commerce, the Legislative Affairs Office, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission and the State Internet Information Office jointly issued the Policies on Boosting the Internet Finance Industry (“Policies”).

Such Policies provide a range of instructions on supporting and encouraging internet finance activities and specify duties of administration and control over major internet finance activities such as payment over the internet, network lending, equity crowd-funding, sale of funds via the internet, internet insurance, internet trust, doing and closing transactions through the internet.

Sourced from the official website of the National Government of the P.R.C.:

  1. The Supreme People’s Court Issues the Decision on the Dispute of Arbitration Jurisdiction between China International Economic and Read More...

Litigation in China–A Long and Rocky Road

(By Dr. Wenbao Qiao) For foreign companies doing business in China, dispute and litigation may sometimes be inevitable. Once a dispute cannot be resolved out of court, there is a long and rocky road to the final success, with several important points to be considered for planning and handling of litigation in China:

Documents and Evidence

The first step of each procedure is to collect and prepare all necessary documents and evidence. According to Chinese law, documents and evidence from another country (such as excerpts from the commercial register or powers of attorney) have to be first notarized in their country of origin and then certified by the Chinese Embassy or Consulate in the respective country. Only notarized and certified documents and evidence will be accepted by Chinese courts. While preparing the documents and evidence, attention should be paid to the timeline required for the notarization and certification. There are several important statutory deadlines shown below. Failure to meet these deadlines can lead to the loss of a case. Notarization and certification in Germany usually takes two to three weeks, which in turn may play a critical role for the time schedule of trial preparation.

One practical suggestion for the preparation of power of attorney is to issue it as so called “special power of attorney”. Such special powers include, for Read More...

What Legal Risks Involved in Event Marketing in China?

Wang FengDing (By You Yunting) Mr. Wang Feng (in the Left Picture), the husband of the well-known international film star, Ms. Zhang Ziyi, is a famous singer in China, whose image has immense commercial value. Amateur singer Ding (in the Right Picture) became famous because of imitating Wang Feng in an imitation talented show. Except the similar appearance, he dressed up himself as Wang Feng did, sang the songs created by Wang Feng and even claimed to have his face changed in order to achieve a more vivid effect. As is reported that Wang Feng filed a lawsuit for infringing his rights of name and portrait against Ding who was suspected of profit-making publicity by using the name and photos of Wang Feng in Weibo. Wang Feng claimed to stop the infringement immediately and pay compensation for the infringement incurred.

Viewed from the brief introduction, it is hard to Read More...

Why Uber China Takes Legal Risks to Mega Millionaire Marketing Promotion?

uber(By You Yunting) Recently, Uber Shanghai carries out a marketing activity called Call for one hundred million by one button of Uber cooperated with 1qiaobao, an App owned by PINGAN INSURANCE GRP. According to the Uber’s official Weibo, users can use the Uber App to call the securicar provided by both Uber and 1qianbao, and anyone who is the winner of the caller can obtain all the financing earnings of one hundred million yuan, which is about ten thousand yuan. I think this activity has huge legal risks, therefore hereunder are the risks and its reason.

What’re the legal risks of Uber’s promotion?

The Anti-Unfair Competition Law requires that business operator shall not engage in sales with prizes in the form of lucky draws where the amount for the highest prize exceeds RMB 5,000, which means ten-thousand- yuan-prize of this activity has the risk of breaching the law. Although Uber will not charge the consumers during this activity, providing service is also applied to the article 13 of Read More...

What Startups Need to Know to Protect Their IPR in China

 (By You Yunting) I was once asked by a journalist what the foundation of intellectual property  courts and the ratification of the Opinions on Quicker Development of the Globally Influential Scientific and Technological Innovation Center matter to small and medium-sized startups, and replied the outcome of those two events were the same, both of which ultimately aimed to enhance the awareness of intellectual property throughout our society and guide small and medium-sized enterprises to establish a competition barrier and a management philosopher on how to avoid infringing others’ intellectual property rights. As governmental authorities define and set official instructions and policies, each startup should take full use of its intellectual property during daily operation, trying to become positioned to succeed, just like a well-known Chinese aphorism says that even the pig can fly when the typhoon comes. Combined with my experiences, this article mainly deals with the issue of how small and medium-sized startups seek intellectual property protection both internally and externally.

  1. How to file intellectual property application with external departments?

Intellectual property is essentially intangible assets. Specific actions should be taken to ensure your businesses have all rights to such intangible assets, in connection with filing patent and trademark Read More...