One Belt One Road: connecting China and European Legal Firms

On November 7, 2017, we were pleased to have a meeting with the managing partner, Dr. Rafal Nawrot, of Russell Bedford Poland discussing strategic tax planning services, corporate compliance, international dispute settlement and litigation procedures in both China and Poland, as well as bilateral agreements as to civil and criminal judicial assistance between the two countries and the avoidance of double taxation. Under One Belt One Road Initiative (BRI), promoted by the Chinese government, there are many international projects and business opportunities emerging throughout central Asia. Many small or medium sized enterprises in Poland seek new opportunities for cooperation with Chinese partners pursuing projects on along the BRI.

Since 2013, president Xi Jinping, initiated the BRI to promote development of a modern network of railways, roads, pipelines and utility grids designed to increase infrastructure and trade integration between China and Central Asia, West Asia, and parts of South Asia. In 2015, Chinese central government issued the action plans for the BRI in order to promote the economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural cooperation throughout the BRI’s continental and maritime branches.

As the BRI continues, our law firm is currently dealing with many clients coming from the countries covered by the BRI, while we also welcome the cooperation with worldwide law firms to better serve client’s around the world.

Published by Crys Zheng on November 15th, 2017 tagged Uncategorized | Comment now »

UCLA Students Arrested in China for Shoplifting – What Happens Next?

Reports are coming out today that three UCLA basketball team members visiting China for a game have been arrested in Hangzhou, for suspected shoplifting. As a USA licensed Attorney (Illinois) and resident legal professional in China for over 30 years I know first hand this matter must be taken seriously. Swift action is required to ensure a timely release for these three students.

I have worked has a legal professional in China over 30 years. I first came to China in 1986 and have lived here continuously since that time. As the first foreign lawyer to work in a Chinese law firm, and as founder of one of the first privately law firms established in China since the start of its period of reform, I have worked first hand on criminal defense cases in China. I have assisted directly in everything from defense of minor public disturbance charges to serious matters involving the potential for the death penalty. In my experience the first 2 to 3 days are crucial in defining the course of a criminal case.

Let me explain briefly the process awaiting the three unfortunate students. First, you must understand that the students will be treated and prosecuted according to the domestic laws and procedures of China. They will be allowed visits from personnel of the USA Consulate in Shanghai, but these diplomatic personnel are unable to provide legal advice, and the USA Embassy or Consulate will typically be unable to intervene, as this is strictly a matter of China’s domestic law enforcement.

In China there is no right to lawyer. There is no right to remain silent. Anything the students stay to authorities can and will be used against them. As they are newly arrested, they will be in custody of the local police. The police will be tasked with interviewing the students, collecting evidence and building a legal case against them based on a suspected violation of law. Once the police feel they have established a sufficient case that a crime has been committed they will transfer the individuals to the office of the Procuratorate. The Procuratorate is similar to the prosecutor’s office in the USA. The Procuratorate will make a judgment as to whether the evidence supplied by the police will likely be enough to support a conviction. If the Procuratorate is satisfied with the evidence, they will refer the matter to the court. If the Procuratorate is not satisfied with the evidence, they may decide to release the individuals from custody, or they send them back to the police for further collection of evidence. In my time in China I have seen the police and the Procuratorate bounce suspects back and forth between their organizations for up to 9 months. During these 9 months, the suspects remain in jail.

In the event the Procuratorate believes there is evidence sufficient for a conviction, and the matter is referred to a court, there is almost a 100% certainty that these students will be convicted and face. Official statistics for the past several years indicate over 99% conviction rate. For the charge of shoplifting these students are facing potentially 3 or more years in a Chinese prison.

In my experience, the fate of those taken into custody by Chinese police is determined within the first 2 to 3 days after the initial arrest. This is when police interview the suspects, often without any lawyer present, and build a case. Intervention of an experienced criminal defense attorney at this stage is critical to secure a fast release or a mitigated sentence.

Published by Jacob Blacklock on November 9th, 2017 tagged Uncategorized | Comment now »

How to Determine the Fair Transfer Price for a Sale of China Company Shares

Our China lawyers have assisted many M&A clients requiring transfers of shares in China companies. When we work on these projects, one of the most common issues our client’s encounter is that it is difficult to accurately determine the value of the shares, this makes it almost impossible to determine a fair market value. It is important to price the shares at a fair value to discourage the tax office coming around later and imposing additional taxes according to that the tax office determines is a “fair” value. To do so, our firm works with the client to determine a reasonable fair value.

There are a few different methods to determine the fair value, depending on the nature of the company, it’s current assets, and expected business opportunity going forward.

The parties may simply negotiate and reach a fair price as agreed and determined by all parties. Such a method fully complies with the principle of contractual freedom, but its usage as a practical matter is limited, not only because of disagreements between the parties, but because of the difficulty in proving to tax authorities at a later date that the price paid is indeed fair. Such a method is most commonly used where the parties have closely associated interests or have a close affiliate relationship with each other.

The parties may also look to the registered capital contribution of the current shareholder as registered with the local administration of industry and commerce. Such price, as being registered specifically, is easy to be confirmed and calculated. As there are many factors such as the market environment and management’s decision may affect on companies operations, parties concerned should note that the real value of the capital may become higher or lower than the amount contributed by the shareholder previously for registration purposes.

The parties may calculate the price based on the company’s net asset value, as per a recent official audit report or asset evaluation report. This is the most commonly used method. It is particularly useful as the asset valuation report provides clear evidence to show the tax office that a fair price (and all attendant taxes) was paid. One flaw of this method is that it only addresses specific recorded financial information related to the the company. It cannot speak as to other operational indexes such as overall cash flow or the non-performing loan ratio of company or the actual operational status of the company.

If you wish to sell your China company but do not have a certain potential buyer in mind, it is possible to pursue a sale by auction. The auction works as you might expect, with potential buyers submitting bids for purchase of the company. Due to the public and competitive nature of the auction, there is a reasonably high chance that the final sales price obtained is a reasonable fair market price.

Whether we recommend our clients to use one of the above options or another is highly dependent on not only the condition of the company, but the client’s goals as to the final sales price, and expected timeline for closing and securing payment.

Published by Crys Zheng on November 8th, 2017 tagged Uncategorized | Comment now »

Visit with tee intellectual property

Lehman, Lee & Xu is pleased to have been visited today by Mr. Tee Lin Yik of tee intellectual property, one of Malaysia’s premier intellectual property firms. Tee Lin Yik, Founder and Executive Director of tee IP is a qualified Intellectual Property Agent and former officer of the Malaysian Intellectual Property Office, who set out to start his own intellectual property firm.

Focused on all areas of intellectual property protection and enforcement, tee IP offers Malaysia Trademark, Patent, Industrial Design, and Copyright registration and enforcement services in Malaysia and elsewhere in Southeast Asia.

The Lehman, Lee & Xu team is excited to learn of the growing intellectual property industry in Malaysia and look forward for more opportunities to meet with like minded intellectual property professionals from around the world, to exchange ideas and experiences.

Published by Jacob Blacklock on November 6th, 2017 tagged Uncategorized | Comment now »

How to Succeed in Business with Chinese? Looking Good, Opportunities for China Business and Professional Service Providers on Horizon

What to expect in Q1 2018, One Belt One Road (in Chinese: 一带一路) Creates Opportunities for Business and Legal Professionals in China and Abroad.

As a senior fellow at the Chinese Academy of Social Sciences “CASS”(中国社会科学院) and legal affairs commentator on China Global Television Network (CGTN) (中国中央电视台), I assisted in media coverage of the 19th National Congress of the Communist Party of China (十九大) held at the Great Hall of the People in Beijing between 18 and 24 October 2017, where 2,280 delegates represented the Party’s estimated 89 million members. My “takeaway” in an attempt to “read between the lines” as to an impact on business coming out of the National Congress is that a rebound in Chinese companies’ overseas mergers and acquisitions is on the horizon. This is come about due to the Party’s unmitigated promotion and reliance upon the Rule of Law within the Party, the continued commitment of the “zero tolerance” as to official corruption, and the continued implementation of the One Belt and Road “OBOR” initiative.

While, cross-border M&As by Chinese companies had slowed during the first half of this year due to regulatory tightening, we are quite confident that despite the short-term financial constraints on doing deals, the underlying drivers for doing deals and business opportunities are real, and collectively businesses and professional services firms such as Lehman, Lee & Xu 雷曼律师是我所 are already starting to see a pickup in M&A activity.

CASS which is described by Foreign Policy magazine as the top think tank in Asia (it is affiliated with China’s State Council)analyzed trends across sectors and markets and predicted that global M&As will rise to $3 trillion in 2018, up from an estimated $2.6 trillion this year. What this means is increased work for professional services firms and increased win-win M&A’s for Chinese and foreign businesses.

That rise will likely come from an expected rebound in overseas M&As by companies from the Chinese mainland and lead by teams primarily in Beijing, Shanghai, Shenzhen and Guangzhou, not as much in Hong Kong SAR where some have reported the outbound legal and professional services sector is actually contracting.

In August, Beijing tightened norms for Chinese outbound direct investment or ODI, following a rapid decline in foreign exchange reserves last year. The government restricted mainland Chinese companies’ ODI in certain sectors, including real estate, hotels, entertainment and sports clubs.

Projects that do not meet the host country’s standards for environmental protection, energy consumption and safety were also included in the list of restricted outbound investment.

Such policies were a foundational correction toward good business practices for newly emerging “red-hot” China based MNC’s which had impacted the previous short term correction. The policy was designed to actually help Chinese companies to implement their outbound investment strategy on a sustainable and long-term basis.

Since 2015 the OBOR initiative has become a dominant driving force behind China’s outbound investment, soft influence and leadership in Asia, in some ways replicating, and certainly drawing comparisons to what the USA’s “Marshall Plan” had done in Europe after World War Two.

Proposed by President Xi Jinping, the OBOR Initiative aims to set up or strengthen economic connectivity among Asia, Europe, Africa and their adjacent seas through massive transport infrastructure and communication links, to boost business, trade, and economic partnerships.

Lehman, Lee & Xu, a Chinese law firm, has noted most Chinese companies are pro-actively developing OBOR projects-mostly infrastructure in the power sector and high-speed railways in some key countries and regions participating in the initiative. But, there is also a trend for these companies to gravitate towards purchase of intellectual property as well as developing their continuing status as a power in the region and throughout the world in both the private and public sectors.

China Ministry of Commerce data show new investments by Chinese companies in 47 economies related to the OBOR Initiative increased by 6 percentage points year-on-year to $6.61 billion in the first half of this year, while China’s non-financial ODI fell almost 46 percent to $48.19 billion.

We were pleased to see the announcement by Qian Keming, China’s Vice-Minister of Commerce, at a news conference in July: “Irrational outbound investment has been effectively curbed.” This has made the new M&A deals based more on longer term goals for betterment of Chinese MNC’s and the government initiatives under the OBOR.

It is our observation based upon experience, an increasing number of Chinese companies are paying closer attention to post-M&A operational risks, to mitigate legal risks and to protect their investments, this may seem obvious to the rest of the world, but this is a “Brave New World” for Chinese MNC’s some of whom are not used to adhering to foreign legal systems.

Published by Edward E. Lehman on November 6th, 2017 tagged Uncategorized | Comment now »

CFDA Aims for Greater Control Over Where Pharmaceutical Drugs are Produced

Our China lawyers frequently work with global pharmaceutical and health food companies, to develop and implement their China manufacturing, distribution systems, intellectual property protection, and other legal issues. An issue these companies encounter often in China is that due to business realities of the company, they find it necessary to relocate or move production of a certain drug, from one location in China to another. This may be a requirement where there has been a Change in the local manufacturer, a corporate restructuring, M&A, assignment or licensing of the underling IP rights, seeking a better deal on local taxes, or simply a temporary move due to renovation or expansion of the primary manufacturing facility.

In China, manufacture of a pharmaceutical product is registered to a particular location, to facilitate inspection of facilities and product tracking. When a move of the manufacturing operation occurs, the change should by law be registered, but often companies forget or neglect to do so. This is partly because the relevant regulations are scattered, and China has not yet implemented a unified regulation on management of the registration process, when the manufacturing of a pharmaceutical product is relocated. The rules currently on the books are spread across different regulations, and in many cases, vary and conflict, while at the same time restricting and impeding timely change of production for these products.

The China Food and Drug Administration (CFDA) appears to be aware of the situation and has made a move toward improvement recently when it set out to draft new unified regulations addressing this issue. The CFDA is currently drafting new Administrative Provisions on Streamlined Approval Formalities for Registration of the Change of Drug Production Sites and the Technical Guidelines for Researches into the Change of Drug Production Sites. Both sets of regulations will be revealed in initial draft form and available for public comment by November 13, of this year.

The CFDA seeks to more closely regulate this area, as a way to reduce potentially harmful effects of a change in production facility for pharmaceutical products which must be manufactured to precise specifications and medical standards, without impurities. Changes to the drug production facility may affect the quality, safety, and effectiveness of the drug produced. In evaluating a production facility, the CFDA looks to the inspection record of the individual facility, the effectiveness of operations within the facility, and the type of drug being produced in that particular facility.

To address these risks, the new draft regulations will classify changes of a pharmaceutical product facility into three levels based on several risk factors. The categories will be:

1. Significant Change: change in production facility is subject to formal review and approval by the CFDA;
2. Moderate Change: change in production facility likely permitted in most cases absent an opposition raised by the CFDA to the application;
3. Minor Change: change in production facility required to be reported to the CFDA, but may be freely implemented by the company.

The draft regulations also require that the pharmaceutical company and/or manufacturing company requesting approval for a change in production facility will be responsible for assessing the necessity and risk of the change in the production site, on the basis of reasoning that these parties have best access to information regarding research, development and production of the drugs at hand, and have the most comprehensive and accurate knowledge of the nature of the drug.

The China lawyers at Lehman, Lee & Xu continue to monitor new developments in the pharmaceutical and medical device industries, to ensure our clients have the latest information on changing laws and regulations in this industry as China seeks to spur innovation while raising production and health standards.

Published by Crys Zheng on October 25th, 2017 tagged Uncategorized | Comment now »

Discuss Qualcomms lawsuit against Apple

Mr Edward Lehman appears on CGTN to discuss Qualcomms lawsuit against Apple

Mr. Edward Lehman was featured as a guest on the China Global Television Networks program this past Monday (Oct 16, 2017). This broadcast was centred on the ongoing legal dispute between Qualcomm and Apple, in which Qualcomm claims that Apple is making use of Qualcomm trademarks without payment. The trademark in question is for a mobile modem that allows phones to connect to a cellular network for calls and data, e.g. 3G and 4G. In this program, Mr. Lehman describes the current situation, comparing Qualcomm to a ‘900-pound gorilla’ looking to get their patents paid for. Questions such as ‘why are these American companies seeking out a solution through Chinese courts?’ and ‘with intellectual property rights being a relatively recent issue in Chinese courts, how is the lawsuit likely to proceed?’ are explored by Mr. Lehman within this program with much more being discussed by the panellists. Fortune.com has stated in an article that Wall Street analysts predict an out of court settlement by apple may reach $8 billion up front plus ongoing royalties. With so much at stake for both companies, this will certainly be an exciting case to follow.

You may watch the full broadcast here.

If you would like more information on Mr. Lehman or would like to seek legal counsel, please visit http://www.lehmanlaw.com/.

Published by Edward E. Lehman on October 18th, 2017 tagged Uncategorized | Comment now »

Confessions of a Cryptocurrency China Lawyer: People’s Bank on future of ICO’s is the sky falling? I think not.

As a China based lawyer (and an occasional business man) who has been advising on cryptocurrency, blockchain, and ICO’s related to all aspects of China business, I was personally pleased by the announcement the People’s Bank of China recently its decision to introduce a halt on ICOs, a move that sent what I believe can only be described as unwarranted hysteria throughout the world (based upon my email inbox at the law firm). As the American poet Robert Frost wrote: “Good fences make good neighbours”. The PBOC pronouncement and the Chinese government now begins to create sensible boundaries to foster a healthy future for cryptocurrency, blockchain and even ICO’s.

I have been an admirer, friend and counsel to the elusive Satoshi Nakamoto since before the beginning in 2009. Blockchain/cryptocurrency is the future, just not everyone knows it yet. Not everyone knows how to regulate it or conduct safe business models yet, the Americans (where I was born) and the Chinese (where I reside) included. All the others who I like to call “fellow-global blockchain-geeks” are running around like decapitated chickens. China regulation I tell them is a GOOD thing, the “sky is not falling”. As a lawyer resident in China for decades, this is just good old fashioned pro-active measures taken by the Chinese to manage the second-largest economy in the world and protect its citizens and its businesses. Many have voiced themselves, both good and bad, parsing out thoughts on this this China decision and its potential consequences. The Chinese government has things in hand, the future is going to be bright, this is all a part of growing pains to eliminate bad actors.

The “naysayers” believe it will impede innovation, making access to funds to launch new ideas to business more difficult this is unfounded. Naive folks and the uninformed have been making what are incorrect assumptions that Chinese businesses will relocate to other markets. As a lawyer I have been opining on the legal issues of blockchain, cryptocurrency since 2009. Now we are working on China legal and regulatory issues related to ICO’s, all the time, with my “boots on the ground” in mainland China dealing in this very specialized area (at the intersection of business, economy, law, policies and regulations). Sure there are implications, and they will be vast, but this is a good thing not a bad thing. This is a Chinese pro-active governmental measure to make things safer, not prohibitive nor restrictive.

With much public input, the People’s Bank of China (PBOC) had made what was appropriate investigations into China based ICO’s whereby it shall punish illegal fundraising-related activities in Renminbi 人民币. As a result of the investigation, and because China wishes to promote itself as a country that abides by the “Rule of Law” it shall also seek to remedy legal violations in already completed ICOs.

The PBOC along with other regulatory and administrative agencies, individuals or organizations that have completed illegal ICO fundraising should make arrangements to return the funds. In mainland China we have “civil law system” (based upon the German Code of 1896) so it is unclear how the money might to be paid back to investors. Implementing these regulations and coordinating agencies and regulators is a bit like turning around a ship, it takes time to get the government and the public to organize, but I am certain it will be performed in a thoughtful way. Unlike “common law” whereby case law can create law, this is a longer and more some would say thoughtful process of implementing laws, policies and regulations. So PBOC needs to be able to work in concert with other agencies to implement their intentions as a practical matter.

What we have seen in our practice dealing with lean-start-ups ICOs, are generally deployed by lean start-ups for fundraising. We have also been part of ICO’s whereby we draft “smart” contracts. Although this is a small fraction of our business as lawyers there is an unprecedented growth over the past year, reportedly raising $1.6 billion globally, with China accounting for around $400 million (through 43 to 65 ICO platforms, depending upon what one defines as China).

Why the PBOC announcement? In my opinion it was because ICO’s are widely seen as a way to sidestep venture capital funds and investment banks. But more importantly, ICOs have undeniably served as a breeding ground for frauds, which often include market manipulation or “pump-and-dump” schemes carried out by publicly companies on different bourses that claim to develop and launch some new technologies. The large amount of money collected so quickly has also attracted cyber criminals.

PBOC understand that ICO’s may disturb financial order and needed to be regulated. What is to be noted is apart from conducting ICOs, digital token financing and trading platforms no longer have the right to do conversions of coins with fiat currencies. Correspondingly, digital tokens cannot be used as currency on the market and banks are forbidden to take part in, or contribute to initial coin offerings’ activities.

As a legal professional in China dealing with these matters, it is my belief China wishes to allow responsible ICOs in China, on approved platforms and in safe formats. This is going to happen, this is not the end, just the end of the beginning in my opinion. A more “Chinese approach” in my opinion is that Chinese authorities will be checking projects individually and learning and developing what will become a safe market. In fact the PBOC, itself continues to explore the viability of issuing their own digital currencies. The Chinese are clever they know this is the future and they will implement a system to better their place in the world as a financial hub, this may be just the opportunity to surpass other traditional financial hubs. Once they have a plan, they will go full steam, I have no doubt.

So what happened? China joined the long list of countries which have made their official statements about ICOs whereby it clarifies matters for everyone in what had been a “grey area”. Same as USA, same as Singapore, what is the big deal? Clarity from PBOC regulators that tokens may be considered as securities and, as such, the sale of these ICO token’s in local currency the Renminbi (人民币) ICO not legal if it does not follow the law of the land. The earth has not moved, this is no different than such places like the USA. This is much ado about nothing for those who take legal advice with the laws, policies and regulations of China. The law/ban is completely misunderstood by my fellow cryptocurrency, blockchain, ICO legal advisers not in mainland China.

Despite the recent past, Chinese people are born merchants at heart. This is a population of 1.3 Billion (heck, the city where I live has 25 million people) with all levels of varying education. The system has changed rapidly and even us so-called experts have a hard time keeping up with the changes and challenges of new technology. The rules are good, they are to provide clarity for all of us resident in what has become the greatest economic transformation in the history of the world.

As a legal professional resident in China for decades, advising on cryptocurrencies, blockchain and then on the flurry (tulip craze) on discussions as to what I refer to as Chinese-cowboy ICO’s no one “in the know” can deny there have been a lot of ICOs recently that were conducted in violation of Chinese laws. It is a very important and positive development that the Chinese government are better defining through the transparency of the legal system for the ICO “market players” as we call them here know with certainty and unambiguity the “rules of the China game”, and what regulations companies and individuals need to obey. This is not bad, this is a good thing. Legitimate organizations and ICO’s which are not raising funds in RMB are unaffected. Good news does not “sell” as there has been so much progress with financial businesses and models within the Shanghai Free Trade Zone. My best advice is to be well informed, get professional advice and proceed fearlessly. The Chinese government is controlling growth and its citizens. This should be lauded not feared. This miscommunication that all ICOs are illegal, is a good headline but it is misinformed and fails to follow up on the details and the nuance. Of course, in China tokens could still be sold to public as long as their sale complies with the relevant Chinese laws, policies and regulations. China includes, Hong Kong SAR, Macau SAR, and Taiwan. These over pronouncements by folks not informed and not resident in China working with the details of these matters is just plain silly. The PBOC declarations will just help to reshape the ICO market, it will not destroy it. The future is bright in my opinion. Get advice and keep it steady. Do not panic.

Published by Edward E. Lehman on October 9th, 2017 tagged Uncategorized | Comment now »

China Drug Registrations to be Centralized in Beijing

One thing our China lawyers are often asked to assist with is product registration with China authorities to allow import and sale of pharmaceutical products in China. Often these foreign pharmaceutical companies manufacture their drugs in other countries so these must be properly registered before sales within China. Recent regulatory changes reflect the government’s efforts to centralize pharmaceutical product approvals.

The system used to require a clinical study and report to be completed and included in application documents submitted to a local approval authority for approval of the drug. Then, the local reviewing authority would perform an examination and make a whether to approve the drug registration.

Earlier this year the China Food and Drug Administration published a draft regulation revising application and review procedures for approval of new pharmaceutical products. According to the new regulation, starting December 01 2017, all applications for new drug approvals shall be submitted to the China Food and Drug Administration in Beijing.

If the current draft regulation is approved, all applications for approval of pharmaceutical products for import and sale into China will be handled from the new review office in Beijing. This review office is actually not far from the firm’s location in Beijing. As application document will need to be properly prepared and submitted in Chinese, foreign companies are recommended to utilize a local agent skilled in pharmaceutical product registrations to coordinate this process with the China Food and Drug Administration.

Published by Crys Zheng on September 19th, 2017 tagged Uncategorized | Comment now »

Is your China Joint Venture Prepared for a Shareholder Lawsuit?

In our previous blog post, we reviewed new rules set by recent guidance from the People’s Supreme Court designed to resolve and avoid irregularities in corporate decision making process. In this post, we will discuss rules put forth by the court detailing the protection of a shareholders’ legal right to know, or to be provided with important company documentation.

There are only 3 articles addressing a shareholder’s right to know within the Company Law. Yet, as a practical matter, disputes between shareholders, and particularly where a minority shareholder seeks greater access to company documentation or decision making, is a key area of dispute encountered by our China lawyers.

The new rules in the Provisions firstly provide that the plaintiff initiating a the lawsuit in order to enforce the right to know, or to gain access to certain documentation of the company should hold a position as the shareholder of the company at the time when the lawsuit is filed. A former shareholder whose interests were damaged while serving as a shareholder of the company, may also have a claim over certain documents which were generated during the period when it held the position as the shareholder. If neither of these conditions is met, then a claim seeking access to such corporate information will be rejected by the court.

Secondly, the Provisions specify that the right to know is legally conferred on shareholders, but may be voided where the company many prove that the shareholder claiming to enforce the right to know has any “unjustified purpose”, such purpose might be to sell the company’s information to a third party. The Supreme Court does list several specific situations which would qualify as an “unjustified purpose” in an effort to avoid further controversy on that point.

The company may not refuse the shareholder’s request to review or copy certain company’s documentation, and may not avoid such shareholder right by entering into contract with any shareholder or incorporating a restriction into the company bylaws.

Thirdly, the new Provisions indicates that Directors and senior management of the company bear personal civil liability to compensate any losses suffered by any shareholder due to incomplete production or storage of certain documents.

As China lawyers, we recommend companies to prepare, review and preserve company documents, including the Article of Association, Minutes of meeting of Shareholders, Resolutions of Board of Directors, Resolutions of Supervisors, Financial Reports, Accounting Books, Name List of Shareholders and the Company Bond Receipts in a proper manner to cope with any future requests raised by shareholders.

It is also important for minority shareholders, particularly in Joint Ventures to keep in mind these legal rights. As Shareholder disputes are the primary cause of Joint Venture failure, knowing your rights and carefully enforcing your rights, is essential for majority and minority shareholders alike.

Published by Crys Zheng on September 5th, 2017 tagged Uncategorized | Comment now »