The Effect of GDPR on Chinese Businesses

(By Lisa Li)The EU General Data Protection Regulation (“GDPR”) affects a broad range of people outside the EU. Certain Chinese businesses are very likely to be bound by GDPR. This article briefly discusses how GDPR affects Chinese businesses and what Chinese businesses should do to comply with GDPR.

1.The Application of GDPR to Chinese Businesses

This is a matter of applicability. GDPR applies to the following people.

(a) People established in the EU who control or process data and process personal data while doing business regardless of where these data are processed.

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Comments on Important Clauses in the Legal Interpretation (II) of Construction Work Contracts (First Part)

(By Shi Weidong)On 4 January 2019 the Supreme Court of China promulgated the Legal Interpretation (II) of Issues Concerning the Application of Laws Relating to Construction Work Contract Disputes (“Interpretation II”) .

The promulgation of the Interpretation II marks the first time in the past fourteen years that the supreme court gives a detailed explanation of laws relating to construction work contracts since the Legal Interpretation (I) of Issues Concerning the Application of Laws Relating to Construction Work Contract Disputes (“Interpretation I”) was carried out on 1 January 2005.

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Responsibilities of “Old” Company Founders for Capital Contributions

(By Tian Shanshan) The Chinese Company Law and legal interpretations thereof provide that founders are responsible for paying in full their capital contributions. However, should founders of a company be responsible for paying in full their capital contributions if the company was established before the Company Law 2005 took effect, the first law setting forth responsibilities of a company’s founders for paying in full their capital contributions? Another issue in this case is how to define the founder’s responsibilities and protect the creditors’ interests. Legal authorities didn’t deal with this issue in the same way.

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Comments on the Preliminary Process for Filing Infringement Action Against False Statements in the Registration-Based Case Filing System

(By Li Xiang)Article Six of the Regulations of the Supreme People’s Court on Hearing Civil Compensation Cases Arising from False Statements in Securities Markets (“Regulations”) states that “courts should accept and hear litigation cases brought by investors claiming damages for themselves arising from a false statement on the basis of decision made by an administrative authority or a criminal court”. According to this, administrative or criminal punishment is the preliminary process for filing a civil compensation case arising from a false statement.

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Application of Laws on Non-Competition Clauses (Part II)

(By Lisa Li) The following is Part II of the topic on application of laws on non-competition clauses from perspective of Chinese employment law.

1.Termination of non-competition agreement

Article 4 of the Judicial Interpretation IV stipulates that if there are non-competition obligations and compensations agreed in the employment contract or confidentiality agreement, the employer’s failure to pay the compensations for three months will entitle the employee to request terminating the non-competition agreement. In accordance with the wording of these provisions, the employee has the right to request terminating the non-competition agreement, however the non-competition agreement shall not end automatically. However, local practice varies from place to place; even the same court rendered different judgments for similar cases according to the search conducted by the author.

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Application of Laws on Non-Competition Clauses (Part I)

(By Lisa Li) In accordance with relevant laws of People’s Republic of China (“PRC), judicial interpretation by PRC Supreme People’s Court, judicial interpretation by local Superior People’s Courts and local regulations and based on the author’s research into and analysis of over two dozens of litigation cases from Shanghai and Beijing etc, the author elaborates on the application of laws on non-competition clauses from the perspective of Chinese employment law practice. The following is Part I of this topic on application of laws on non-competition clauses.[1]

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Key Points on Early Dissolution and Liquidation of WFOEs

(By Lisa Li)In accordance with the PRC Company Law (hereinafter referred to as the “Company Law”), the Regulations of PRC on Administration of Company Registration (hereinafter referred to as “Company Registration Administration Regulations”) as well as the Law of PRC on Foreign Invested Enterprises (hereinafter referred to as “Foreign Invested Enterprises Law”) etc and based on the author’s prior experience in handling cases of early dissolution and liquidation of companies, we summarized key points and practical experience regarding the early dissolution and liquidation process of wholly foreign invested companies, including foreign invested enterprises owned by one sole foreign investor and those jointly owned by foreign investors (hereinafter collectively referred to as the “WFOE”) prior to expiration of the registered operation term.

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A Brief Overview on the Foreigner’s Work Permit in China

(By Lisa Li) As of April 2017, the Circular on Fully Implementing the Work Permit System for Foreigners to Work in China jointly issued by the State Administration of Foreign Expert Affairs, the Ministry of Human Resources and Social Security, the Ministry of Foreign Affairs and the Ministry of Public Security (the “Circular”) has been implemented in China to integrate previous foreigner’s employment permit and foreign expert work permit as the foreigner’s work permit, aiming to simplify the foreigner’s work permit application procedures and to facilitate the introduction of foreign talents. In accordance with the relevant laws, regulations and policies regarding the foreigner’s work permit and from our recent experience, we summarized the following main points and some best practices regarding the foreigner’s work permit in order to provide a brief overview on the foreigner’s work permit system in China.

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Beijing IPR Court First Supports Time-Based Billing for Attorney Fees in IPR Cases

(By Wang Ting)Recently the court has approved of the attorney fee up to 1 million RMB in an IPR case, and it is the first time that the court has applied time-based billing to calculate such attorney fee. Meanwhile in this case, the court has also confirmed the principles of determining the attorney fee on three items. Today, we are going to go through this case and discuss about the reasons why the court has fully approved of the attorney fee this time.

Case Introduction

Plaintiff: Beijing Watchdata Technologies Co., Ltd (the “Watchdata”)

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Does MOC’s Prohibition on Item Sweepstakes Decrease the Profits for Game Companies in China?

(By You Yunting) Recently, the Ministry of Culture has issued the Notice of Ministry of Culture on Regulating Online Game Operation and Strengthening Interim and Ex Post Supervision (Referred to as “Notice”), which will be put into effect as of May, 2017. The Notice contains lots of specific policies, including the restrictive policy on providing virtual props and value-added services of an online game by sweepstakes (Referred to as “Item Sweepstakes”), which are the significant sources of profits for game companies. In this article, we’ll discuss whether this policy would affect the incomes of these game companies or not.

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How to Determine Joint Liabilities of shareholder for IPR Infringement in China?

(By Wang Ting and You Yunting)The limited liability of the shareholders means that the liability of the shareholder to the company are limited to its capital contribution, and the independent personality of corporation means that the Company shall fulfill its external liabilities by all of its properties. Therefore, the shareholders usually do not take personal responsibility in IPR infringement cases even when the long-term business of the company is infringement of the intellectual property rights (“IPR”) in most cases. However, today we will introduce a recent case, in which the shareholders were determined to take such joint liabilities for the IPR infringements.

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Does Engaging Employee liable for Non-Competition Constitute Infringement in China?

(By Yue Mengyan) An employee violates non-competition clause in his previous labor contract with his former employer, and works for a new employer, which has a competitive relationship with his former one. Could the former employer claim the new employer to be liable for such infringement, in addition to the employee’s liability for breach of contract? Pursuant to relevant laws and regulations in China, we will introduce a case and make our analysis in the following.

Case Introduction:

Appellant (defendant of first instance): Liu Guoqing

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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.

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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.

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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.

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