The V&T Legal Newsflash (Newsflash) is hosted and contributed by the International Practice Committee of the V&T Law Firm. The purpose of the Newsflash is, on a timely fashion, to continuously provide our international clients with highlights of the most recent laws and regulations. The Newsflash will timely introduce and closely track the international laws, which relate to cross-border transactions, international investments and financing, and other hot international legal issues. The Newsflash will be updated on a two-month basis.
China Has Tighten Its Policy to Stop Tech Giants’ Monopolistic Behaviors
The Chinese State Administration for Market Regulation (“SAMR”, 国家市场管理总局）released new Anti-monopoly Guidelines on Feb 7th, 2021, to deal with increasing internet-related monopolistic behaviors (“Guidelines”, 《国务院反垄断委员会关于平台经济领域的反垄断指南》). The Guidelines mainly target internet platforms, tightening existing restrictions faced by the country’s tech giants. The Guidelines bar companies from a range of behaviors, including price-fixing, forcing merchants to choose between the country’s top internet players, which is a long-time practice in the market, and using data and algorithms to manipulate the market. Considering the previous antitrust investigation into Alibaba Group following the dramatic suspension of the $37 billion initial public offering plan of its payment affiliate, Ant Group, apparently in recent months, China has started to tighten the scrutiny of its tech giants, reversing a once laissez-faire approach.
Please refer to the following link for the full text of the Guideline in Chinese:
Chinese Version: http://gkml.samr.gov.cn/nsjg/fldj/202102/t20210207_325967.html
Shanghai SASAC Informed State-Owned Enterprises to Handle Foreign-Related Cases with Caution
On Feb 18th, 2021, Shanghai State-owned Assets Supervision and Administration Commission（上海国资委） issued the “Implementation Plan on Promoting the Construction of State-owned Enterprises under the Rule of Law and Strengthening the Management of Legal Cases (2020-2022)” (“Plan”, 《关于推进法治国企建设加强法律案件管理的实施方案（2020-2022年）》), which clearly stated that foreign-related cases should be handled with caution. The Plan pointed out that the state-owned enterprises should establish a control-framework before, during, and after the event to manage legal risk. The state-owned enterprises should strengthen the management of foreign-related arbitration and litigation cases, preventing the potential counterparty from using “abuse of national sovereignty” as a defense. Enterprises should establish both domestic and foreign legal reviews when dealing with major foreign-related cases. Enterprises should also actively cultivate a team of foreign-related legal personnel if possible.
Please refer to the following link for the full text of the Plan in Chinese:
The Newly Issued EU-China Comprehensive Agreement on Investment (CAI) Will Create a Better Investment Environment for European Investors.
On Dec 30th, 2020, EU and China concluded in principle the negotiations for a Comprehensive Agreement on Investment (“CAI”, 《中欧全面投资协定》), which is an important milestone for both parties. China has committed to a greater level of market access for EU investors than ever before, including manufacturing, which is the most important sector for EU investment in China. China is also making commitments for EU investments in various services sectors, such as cloud services, financial services, private health-care, etc. The CAI also states commitments to ensure fair treatment for EU companies so they can compete on a better level playing field in China, including in terms of disciplines for state-owned enterprises, transparency of subsidies, and rules against the forced transfer of technologies. For the first time, China has also agreed to ambitious provisions on sustainable development, including commitments on forced labor and the ratification of the relevant ILO fundamental Conventions. On Jan 22nd, 2021, the major part of CAI is released, and the remaining annexes to the agreement will be published at the end of February or early March. The finalization of the CAI will create huge benefits for EU investors.
Please refer to the following link for the full text of the CAI in English:
Business Name Registration in China to Become Easier
On January 19th, 2021, a State Council decree “Enterprise Name Registration Regulation” (“Regulation”, 《企业名称登记管理规定》) signed by Premier Li Keqiang（李克强总理） and released by the State Administration of Market Regulation (“SAMR”, 国家市场管理总局), will take effect on March 1st, 2021. The Regulation states that the business name registration process in China will be digitized and based on a system of independent declaration, which means registering a business name has now been made easier than before. By then, having a registered name is no longer a precondition for applying for business registration. Applicants can now submit their business name to an online system for immediate use. The regulation will therefore afford enterprises more autonomy and flexibility, and at the same time offer more transparency and uniformity across the region using a centralized digital database.
Please refer to the following link for the full text of the decree in Chinese:
The Newly Issued China Export Control Law Further Regulates Buyers Involved in M&A Transactions
On December 1st, 2020, China’s Export Control Law (“Law”,《中华人民共和国出口管制法》) came into effect, which can be considered as the combination of the previous Customs Law, Criminal Law and the Foreign Trade Law. It is a framework that restricts exports of military and dual-use products as well as technology for national security and public policy reasons. Chinese regulators can prohibit exports and transfers of products, technology and services base on product features or end uses. Exports will need to seek licenses for export transactions not covered by published control lists. Technologies that China has restricted include aerospace bearing, unmanned aerial vehicle, and laser technology. Comparing to the similar regulations in the US and the EU, the Law remains vague and has so far proven to challenging for parties involved in M&A transactions. However, since many countries already have similar measures, the Law should not be treated as a surprise but as a positive step, providing a framework to buyers involved in M&A transactions and formalizing criteria and processes.
Please refer to the following link for the full text of the law in Chinese and English:
Chinese Version: http://www.npc.gov.cn/npc/c30834/202010/cf4e0455f6424a38b5aecf8001712c43.shtml
English Version: http://www.lawinfochina.com/display.aspx?lib=law&id=34024&EncodingName=big5
All Private Company Incorporated in Shenzhen Can Establish Dual-class Share Structure
Starting from March 1st, 2021, the new “Certain Regulations on Commercial Registration in the Shenzhen Special Economic Zone” (“New Regulation”,《深圳经济特区商事登记若干规定》) allows all types of companies incorporated in Shenzhen to have a dual-class share structure. The dual-class share structure can not only protect the control right of the company founders but also keep the company from a potential hostile takeover. Before the New Regulation, the “Shenzhen Special Economic Zone Regulations on Science and Technology Innovation”(“Regulation”，《深圳经济特区科技创新条例》), which has taken effect on November 1st, 2020, only allows all technology companies that incorporated in Shenzhen to set up dual-class share structure. Although the Regulation is vague about the criteria of being a “technology company”, it is still a crucial milestone for China to innovate its market. In the past, although the PRC Company Law did not prohibit a dual-class share structure in their articles of association, in practice, it was barely practical to implement the dual-class share structure. Explicitly allowing the dual-class share structure is an indication of Shenzhen’s further embracement of international standards since this structure is widely accepted in advanced capital markets, such as the US. The New Regulation will set a great example for the rest of the whole country to learn from if it is implemented smoothly.
Please refer to the following link for the full text of the New Regulation in Chinese:
Editor: Lyon Dong
Associate Editor: Cyrus Cao，Qing LI