(By You Yunting) Abstract: The Foreign Investment Law (Draft for Comments) has shifted the standard of a company based upon the actual controller, instead of the shareholder of the company, and regulated that the domestic company must not engage in any industries where operation by foreign investors is prohibited. In case the Draft becomes law, it will cut off the survival basis of VIE structure, so that the VIE company controlled by foreign investors cannot be operated, that the overseas listed company controlled through the VIE structure by Chinese will lose its survival basis of oversea listing, and that the startup companies of VIE structure controlled by Chinese will be forced to abandon the VIE structure.
Comments on a Shareholder’s Qualification Case Arising out of Technology Investments
(Steven Wang) Recently, the author has represented parties in a shareholder’s lawsuit, with the dispute centering on IPR investment. The court has already heard the case. The property value involved in the lawsuit totaled as high as RMB 300 million Yuan, and the laws applied in its hearing involved IPR law, contract law, and corporate law. The focus of the dispute referred to the patent, exclusive technology, contribution, revocation of shareholder qualification and the application of law when a number of conflicts arise among these different areas of the law. These conflicts have caused a lot of discussion regarding these legal conflicts, and several conclusions have been reached regarding issues presented in the case.
Analysis on the HF Fund’s lawsuits against Gansu Shiheng and Hong Kong Dia
(By Bai Lituan & Zhang Qianlin) In December 2012, HF Fund Management Co., Ltd. (the “HFF”) filed a lawsuit against Gansu Shiheng Nonferrous Metals Co., Ltd (the “GSNM”), and after being heard by the Supreme People’s Court, the Court stated that the valuation adjustment Mechanism (VAM) would be considered partially valid. This particular case has been seen ups and downs, and now that it has finally been heard, we would like to share our opinions on it within a framework of legal analysis, and hope that it will help clarify any issues presented in the case and thus help to reduce the risks investors typically face.
By You Yunting
By judicial practices in China, in case the Sino-foreign invested company, which however is operated under the management of Chinese shareholder, is trapped in the insolvency, the foreign investors could be judged to take all the debt of the company, not subject to the total amount of its investment, when Chinese partner chooses to disappear or refuse to clear the debt. And in recent, as per the latest 3rd guiding cases by China Supreme People’s Court, by a decision indicated in it, the non controlling shareholder shall be liable to the joint liability to the non-settled debt of the company, that obviously aggravates the burden of the company shareholder. Then, what is the fair way to avoid such risks? We put forward our answer to it in today’s post.
A three-year lasting dispute between shareholders of a property management company (the “Company”) was finally settled in recent, with the infringing shareholder judged to compensate the Company. Commencing from 15th October 2008, the case was adjudicated on 20th January 2012 at last after the arbitration of 3 years and 3 months, and with its complex plotting, the dispute could be a lesson to the shareholders of Chine enterprises.
In 2008, after years of operation, the Company has come into a stable and fast development, and its major shareholder Zhang, also the legal representative and chief director of the Company planned to introduce the strategic investment to expand the scale of the company. In June of that year, Shi, who once studied abroad and got in touch with Zhang on the beginning of the same year, purchased 23% of the company share on the approval by other shareholders, and took the post of deputy general manager in the company afterwards, which led to the separation of the Company power that Zhang took charge of the clients exploration and relationship while Shi was responsible for inner management. On 29th August, the new Legal Director appointed by Shi adjusted the Articles of the Association, and by the new regulations the supervisor has the right to dismiss the legal representative and director of the Company. And that lay the powder hose to the future conflict in the Company.
The post of today is the second part of the latest laws and regulations promulgated in last month in China.
5. The Implementation of the Registration and Management System of Insiders of Listed Companies
On 25th October, 2011, the China Securities Regulatory Commission issued the Regulations Concerning the Establishment of the Registration and Administration System of the Insiders of Listed Companies (hereinafter the Regulations), having been implemented on 25th November, 2011. According to the Regulations, if the initiator of the major matters rising insider information that are sensitive to the price of shares is a listed company, such listed company shall, according to the Regulations, fill the record of the insiders and do well with the confidential management of the inside information; however, if the initiator described above is an other party except for a listed company, such as a shareholder and actual controller of a listed company, its affiliate, etc., an acquirer, the relative party of a major asset reconstruction transaction, and other parties initiates the matters involving the listed company and influencing the price of the shares of the listed company, the parties specified shall separately do well with their registrations of insiders according to the Article 8 of the Regulations, moreover shall submit the record of insiders to the listed company when required, as well as support and cooperate the listed company do well with registration of insiders.