Category Archives: Establishment

A Case Showing the Legal Effectiveness of Property Transfer Signed on the Behalf of a Spouse

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Case Summary:

(By Zhang Fan) A and B are married. After being married, the couple established a real estate company through joint investment, by which A holds eighty percent of the shares and the owns the remaining twenty percent. C and D wish to purchase all of the company’s shares, to which both A and B agree. Additionally, both participate in the preliminary negotiation with C. Afterwards, however, negotiation was only carried out between A and C, and A signed on behalf of B on the concluded Share Transfer Contract, Shareholders Decision, and the documents prepared for the change of administration. As provided in the Share Transfer Contract, A’s eighty percent share option would be transferred to C, and B’s twenty percent share option would be transferred to D. B did not sign her name on the contract. After the payment by C to A for the share transfer, both parties went to the Administration for Industry and Commerce to register the change. Now the share holding of the company is eighty percent for C and twenty for B (B never took care of the registration transferring ownership to D).

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The Prospect and Challenge of China’s Share Transfer System for Medium and Small Sized Companies (the New Three Board)

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(Yu Zhiyuan) In September 2012, the China Securities Regulatory Commission promulgated the Supervision & Management Measures for Non-Listed Public Companies (the “Measures”), and the Measures came into effect January 1 2013. The Measures could be adopted as a fundamental regulatory rule of the OTC market of the security market in China. On January 31 2013, the overall regulatory rules for the three new boards, the Interim Management Measures for Liability Limited Companies for the Share Option Transfer of Medium and Small Sized Companies in China (the “Interim Measures”) was also published. The system construction of the OTC market has stepped into a substantial phase. Considering the large scale of the OTC market has the ability to exert great influence on the OTC market among multiple countries; it deserves people’s attention concerning its prospects and challenges in the future.

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Conditions for Dormant Investment Compliance in China

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(By Lear Gong) Regulation No.3 on Several Issues Concerning the Application of the Company Law issued by the Supreme People’s Court (“Corporation Interpretation III”), which was promulgated and came into effect on January 27, 2011, contains specific regulation on application of law with respect to dormant investment. Regulation No.1 on Several Issues Concerning the Hearing of Disputes Involving Foreign Invested Companies by Supreme People’s Court (“Foreign Investment Interpretation I”) also contains detailed regulation on dormant investment in companies.

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Should Employer Give Notice to Trade Union before Terminate Employment in China?

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trade union

 (By Albert Chen) The dispute over employment termination is quite common in labor conflicts, and whether the employer shall send a notice to the trade union before the termination is commonly seen in such disputes. What then, are the regulations regarding this aspect in China?

I. What is the function of trade union in China?

The role of the trade union is specified in Article 2 of Trade Union Law of PRC (the “Trade Union Law”):

“Trade unions are mass organizations formed by the working classes of their own free will.

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Analysis on Common Legal Risk of Chinese Company’s Ads

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By You Yunting

The competition in Chinese market is so fierce that the company would strive to make their ads be more outstanding, yet that could also bring them the risks of administrative punishment. In today’s essay, you will see our analysis on the common risk for corporate propaganda.

I. No fulfilling to the promise in propaganda

The most typical case shall be the ads from Beijing Hyundai (note: the link is in Chinese), the joint venture of Hyundai in China. As claimed in the its ads, the chief of the company promised not to reduce the sales price of its vehicle in the coming 2 years, which soon be overthrown by its price adjustment within 120 days after that with the pressure from market competition. On that, we saw the consumer filing a group lawsuit against its break-in of promise. Despite as investigated by the company that, the words of the chief is not quit the same as claimed in the media report, and Hyundai was therefore judged of no liability, the Korean brand faced a devaluing of social reputation in China. In our opinions, the losses of intangible asset of the car maker are much more than the claimed compensation. And that shall mainly lie with the over promise by the company.

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What Financial Support and Tax Preferential Policies can be enjoyed for Patent Application?

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Nowadays, the State and local governments have issued serious financial support and tax preferential policies to encourage innovation of patents.

I. Financial Support Policies

Firstly, from the perspective of the State, the Chinese applicants applying to the State Intellectual Property Office (SIPO) for patents can enjoy the policy of reduction or postponement of the payment of the patent fee. The relevant expenses include the application fee (excluding printing expense and surcharge), substantive examination fee of the invention and 3 years’ annual fees from the year when the patent right is granted. On the other hand, for the Chinese applicants applying for patents overseas, they can obtain the financial support to the extent of certain amount, which includes the official fee of application for foreign patent, retrieval expense paid to patent retrieval organization, service expenses paid to the agency and so forth.

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Guiding Case by China Supreme Court: JV’s Minority Shareholders May Undertake All Company’s Debt

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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.

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Risk and Its Prevention for Dormant Investment in China

By Luo Yanjie

Recently, Shanghai Huangpu People’s Court issued white paper about cases involved Non-State-Invested Units. The white paper disclosed that the dormant investment is ubiquitous in Non-State-Invested Units during the process of their establishment, and that not only makes investors’ rights and interests unguaranteed, but also cause a serious threat to the commercial good-faith. As introduced, some actual investor would not like to establish the company in their own names considering various factors, but registered the company in others’ name. It results lots of disputes. Now we would like to discuss the risk of “dormant investment” and introduce how to reduce the risk as follows:

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The Validity of Foreign Investor’s Share Holding In the Name of Chinese Dormant Citizens

By Luo Yanjie

As reported, 24quan.com, a Chinese daily-deal website, is undergoing a contentious conflict (note: the link is in Chinese) between its operation team and investors. Berjaya Corporation Bhd (Berjaya), the biggest investor of the website and registered in Malaysia, accused the operation team of withholding  RMB 2 million yuan with no authorization, yet the team responded by saying that the investor was unilaterally deducing the share held by the team from 40% to 3%. Currently, the website and the company is under the control of the team, who has dismissed the staffs appointed by the investor, and in retaliation, the investor announce that their funding cease.

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Infringement on Privacy? Comment on Enterprise’s Monitoring of Employee’s Chat

Recently, Techweb, a technology website in China interviewed our lawyer for the company’s monitoring on employee’s chat, and the following is the digest of the interview:

Q: For the monitoring on phone call and online chat of the employees by the company, could you share us you opinion on it from the professional view?

A: For the monitoring on employee’s phone call and chat in working time, there’s no corresponding regulation in law, and we usually reply to our clients for such questions like this:

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Tax Preferential Policy in China’s Animation Industry

It is reported by SECURITIES DAILY (note: the link is in Chinese) that there will be adjustment on tax policy in China animation industry. In recent, China Ministry of Finance and the State Administration of Taxation jointly issued a new policy supporting the animation industry, which introduces the VAT and the preferential business tax. And less tax and taxation of the both VAT and business tax will be made hereby.

I. For the sales of the independently developed animation software by the company of the general tax payer itself, the VAT shall be levied at the rate of 17% first, and the exceeding 3% amount of the actual tax bearing will be refunded. That’s the so called levy-refund policy.

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MCC Released the New Foreign Investment Industry Guide Catalog of 2012 Version


The Ministry of Commerce of China (the “MCC”) has recently revised the Foreign Investment Industry Guidance Catalog (the “Catalog”) recently, which will come into effect on 30th, January, 2012.

The Catalog is the important industry policy on guiding the foreign investment, and before this modification, it has been modified forth in 1997, 2001, 2002, 2004 and 2007 since the promulgation in 1995. And this post is the conclusion on the newly revised Catalog by Bridge IP Law Commentary.

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Introduction on the Regulations concerning the Capital Contribution in IPR or Domain Name in China

Highlight: The contribution of capital in IPR or domain name is permitted by China Company Law, though there regulates the proportion limitation on it. Bridge IP Commentary will introduce you the regulations of the investment in IPR.

Recently, a Company registered in Shanghai made its contribution of the 70% of the total registered capital of the company with domain name, which has been evaluated to be RMB 10 million yuan, and it has been the first company which made its capital contribution in domain name.

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China Begins to Try Out Intellectual Property Pledge System

Highlight：China’s new policy on intellectual property pledge，which will help startup firms in technology or creative industries but increase the risks for the banks.

For more innovation and settlement on fund shortages with startups in the technology and creation industry, the Guidance on Financial Support on Revitalization and Development of Culture Industry was issued on 19th March, 2010, by which the collaboration is established between the government of China and more loans to support with company culture is also demanded.

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