Category Archives: Corporation

How to Pay the Non-compete Compensation in China?

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By Luo Yanjie

Restriction of business strife is the restriction clauses agreed in labor contract, IPR contract or confidential agreement between the employer and the employee with confidentiality obligation, which restricts the latter being engaged in the units manufacturing similar products, operating the similar business or competing with the original employer, neither shall the bond employee manufacture the products or operate the business competing with the employer.

Considering the professional division of social labor, the restriction on the future engagement of the employee in the familiar industry will of no question badly damage their interests. Therefore, we see the provision in the Labor Contract Law that the original employer shall pay employee the compensation for the non-compete during the agreed period. Yet what shall be more attentive to the employer is the payment of the compensation shall follow the legal regulation, otherwise the agreement on the non-compete shall be invalid. In this essay, you will see our opinions on it:

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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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Bonded Import: What Drives Goods “One-Day-Trip” to Hong Kong?

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It’s said early in 1990’s, that the container truck drivers shuffling between mainland China and Hong Kong were in excess of 10 thousand. Their main duty is to transport the mainland manufactured components and parts to Hong Kong, yet with no dispatch in the terminal, they would immediately turn around and head back to the mainland for part assembly. That was called “goods one-day-trip to Hong Kong” by Ms. Wu Yi, the deputy Premier of China at that time.

So, what drives such trips which cost however much? First, to transport mainland manufactured components to Hong Kong could make Chinese factories enjoy the tax refund as introduced in the last issue; second, for the assembling in China, any components thereby imported is under a bond, which means no tariffs shall be first paid for that import. After the export of the assembled articles, such tariffs shall then be paid. In conclusion, with this processing trade mode, less raw material or components would be occupied and the company could run the business under a no tax status; the advantage hereby produced is outrageous. Then, what tariffs may be paid during the process?

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Why to Protect Legal Benefits of Units in Labor Disputes?

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By You Yunting

Recently, following a disputed labor case I have noticed an inadequate protection of the unit by the existing laws and regulations, and such inadequacy has made an unfaithful employee gain immoral advances from such inadequacy in the case, and on the other hand, hundreds of innocent labors may suffer losses from this. So, we would like to put the case in discussion now:

A senior employee asked for sick leave of 1 year (it was found afterwards that the hospital has never prescribed medicine after the issuance of the medical certificate, yet the hospital also refuses to admit involvement in the false sick leave), contrary to this the employer later found that the employee was actually running her own company then entrusted lawyers to investigate it. After the check of the registered information of the suspected company, the employee was proven to be the general manager. Meanwhile, the lawyer also contacted the employee in the name of business contact through the contact telephone number on the home page of the company, which further confirmed the employee’s service with the company. The call was notarized.

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Proview Was Charged by Its Lawyer for Fee Payment Failure

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By You Yunting

According to a news report (note: the link is in Chinese), the iPad battle in China has ended in reconciliation with Apple’s payment of 60 million dollars to Proview by the agreement. However it seems that Proview will soon be trapped in another dispute afterwards and related to the battle, its agents of Grandall Law Firm (the “Grandall”) filed a lawsuit to the local court on the 23rd of July, demanding the professional fee of 2.4 million dollars.

As introduced by the attorneys from Grandall, their entrustment by Shenzhen Proview was on a contingent fee, by which it could gain 4% of the total conciliation expenses or the compensation (namely 2.4 million dollars by the final settlement agreement). Also all the litigation fee or expenditures paid for custom record in the trademark battle was firstly paid by Grandall. However, after the end of the dispute, Proview refused to cash the fees into Grandall’s account as agreed and has even collected the money paid by Apple at the end of June.

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Is It Necessary To Differentiate Virtual Currency and Game Coin in Game Designing?

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With the rising of the mobile internet, more imported games have entered into the boosting online game market in China; however, the country has many limitations on the game, concerning the gambling, virtual currency and other aspects. Once the games developed overseas could not meet the legal standard, they will get no license from the General Administration of Press and Publication of PRC (GAPP) and Ministry of Culture(MOC) for the game operation in the country. To bring the international game developers a closer and clearer look into the current law system on game in China, we will post several articles for the introduction to the laws and regulations concerned.

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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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Different Local Regulations on Compensations and the Effect of Non-competition Agreement

The system of noncompetition is regulated in China Labor Contract Law, “If　a　Employee　has　a　confidentiality　obligation,　the　Employer　may　agree　with　the　Employee　on　competition　restriction　provisions　in　the　employment　contract　or　confidentiality　agreement,　and　stipulate　that　the　Employer　shall　pay　financial　compensation　to　the　Employee　on　a　monthly　basis　during　the　term　of　the　competition　restriction　after　the　termination　or　ending　of　the　employment　contract.” By the article, a financial compensation is demanded for the conclusion of non-competition agreement, while no legal regulation on the effect of such articles when no compensation is paid. Therefore, on the issue, the adjudication or decision made by local courts or labor arbitration committee in China varies much, and today’s post is our analysis on it.

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Does Combination of Youku and Tudou breach China Anti-monopoly law?

Reportedly(the report is in Chinese), the two Chinese leading video websites, Youku.com Inc. (NYESE: YOUKU) (“Youku”) and Tudou Holdings Ltd. (NASDAQ: TUDOU) (“Tudou”) jointly announced today that on 11th March, 2012, they have signed a definitive agreement for the combination of Tudou and Youku in a 100% stock for stock transaction, which has been approved by each party’s board of director but still waiting for the shareholders’ approval, and is planned to be completed in the third quarter of 2012.I think, it shall be noted that some anti-monopoly issues may be arisen from the combination of the two Chinese biggest video websites, which possibly resulting adverse impacts on the rights and interests of consumers and fair competition.

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