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Volume 2, issue 1 |
February 5, 2015 |
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| The Hong Kong Privacy Commissioner for Personal Data recently announced the first prison sentence for a violation of the Personal Data (Privacy) Ordinance (Chapter 486) (the “PDPO”). |
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| On 1 December 2014, the Amended Workplace Safety Law issued by the National People’s Congress (“NPC”) of the People’s Republic of China (“PRC”) became effective. This revision builds on the basic principles set out in the 2002 Workplace Safety Law and unveils tougher rules and harsher penalties for workplace accidents. |
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| Following up our previous Special Alert on the opening up of China’s healthcare sector to foreign investors, two major US groups appear to have taken the lead by planning to establish 100% foreign-owned hospitals in China. Massachusetts General Hospital of Boston announced its plans to build MGH Hospital China and Columbia Pacific Management announced that it will invest up to $200 million for two hospitals in China. |
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| In December 2014, the Chinese State Council’s General Office issued the Action Plan for Deepening the Implementation of National IP Strategies (Guo Ban Fa (2014) No. 64), which outlines the major targets and action items for promoting the country’s intellectual property capabilities between 2015 to 2020. This article tracks the notable legal developments in 2014 to see where China currently stands in this important area. |
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| On January 19, 2015, the PRC Ministry of Commerce unveiled the draft Foreign Investment Law for public comments until February 17, 2015. This article highlights how the draft law proposes to overhaul the Chinese foreign investment regime. |
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| The Hong Kong Privacy Commissioner for Personal Data recently announced the first prison sentence for a violation of the Personal Data (Privacy) Ordinance (Chapter 486) (the “PDPO”). Under the PDPO, making a false statement to the Commissioner is subject to a maximum fine of HK$10,000 and a 6-month jail sentence. The Commissioner charged an insurance agent with making false statements during its investigation of a PDPO complaint from an insurance policyholder. The policyholder claimed that in 2012, she provided information to the insurance agent while he was at one insurance company. The agent subsequently moved to a new company and used the information to issue a policy in the name of his new company, without disclosing this change. Accordingly, she said that the insurance agent misled her and obtained her personal information by false means. A police investigation further revealed that the agent submitted insurance documents to the new insurance company that were not signed by the policyholder. Because the Commissioner found that the insurance agent gave false statements during its investigation of the complaint, the case was referred to the Tuen Mun Magistrates’ Court for criminal enforcement under the PDPO. The Court sentenced the insurance agent to 4 weeks in prison. |
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On 1 December 2014, the Amended Workplace Safety Law issued by the National People’s Congress ("NPC") of the People’s Republic of China ("PRC") became effective. This revision builds on the basic principles set out in the 2002 Workplace Safety Law and unveils tougher rules and harsher penalties for workplace accidents.
The Amended Workplace Safety Law sets forth: (1) comprehensive rules that employers in China must follow to guard against accidents in the workplace; (2) a requirement that employers develop a "responsibility system" - delegating responsibilities for safety to specific internal safety units; (3) significantly increased fines for work-related accidents and for any non-compliance; and (4) liability for "responsible persons."
It is significant that the amendment has been issued by the NPC as this shows the focus of the PRC government at the highest level on safety issues for workers. The new law is also very likely a response to the apparently growing number of serious and much publicized work-place accidents and incidents which have occurred in the last year across China, resulting in significant numbers of injuries and deaths. |
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| The key feature of the Amended Workplace Safety Law is that it re-emphasizes and makes clearer the obligations and responsibilities of employers in China to provide a safe and healthy working environment for employees by establishing a comprehensive workplace health and safety program and developing a clear "responsibility system". The purpose of the "responsibility system" is to organize and delegate responsibilities as they relate to workplace health and safety. |
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| These responsibilities are delegated to the organization’s "safety unit". The safety unit, which comprises of "leading members of production and business units", is required to: |
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- formulate rules and implement a work safety plan;
- establish and test an accident response protocol;
- ensure that existing facilities and any new facilities comply with the Amended Workplace Safety Law; and
- supervise and inspect work safety at the respective business and production units.
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| In addition, the amended law sets out higher penalties and fines for failure to follow and meet these requirements. |
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As well as developing a "responsibility system" and implementing a work safety plan, employers must provide all necessary safety equipment, including goggles, hard hats and protective or other clothing, and ensure that all employees receive proper education and training on health and safety standards in the workplace.
Finally, employers are required to allocate funds specifically for work safety issues. In the case of insufficient funds being provided to meet requirement, managers and decision-makers can be held accountable and liable. Our understanding of this provision is that it is designed to show that lack of funding (or adequate budgeting for this purpose) is not an excuse for an unsafe workplace or ineffective safety program. The funds set aside could cover any aspect of work safety, including checking, modifying or replacing existing equipment and facilities, and buying protective equipment or clothing. The fact that responsible individuals may be held personally liable for accidents that arise significantly ups the stakes and means that individuals cannot necessarily shield themselves behind the company. |
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| The Amended Workplace Safety Law reiterates various other PRC laws and regulations and provides employees with various rights relating to workplace health and safety. For example, it specifies that all labor contracts must clearly identify and cover work safety issues, including references to measures to prevent occupational hazards and details of any statutorily required insurance program relating to industrial injuries. In addition, employees have a right to: |
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- prior notification of any dangerous conditions in their workplace;
- notification of preventive or precautionary measures relating to dangerous conditions;
- regular medical examinations at the employer’s expense (for those in dangerous occupations or exposed to hazardous substances);
- refuse to carry out what they believe to be an unsafe procedure; and
- relief from the labor authorities in the event of a violation of the Amended Workplace Safety Law.
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The Amended Workplace Safety Law provides significantly higher fines for employers (and adds that employers may also be exposed to criminal liability) in relation to non-compliance and workplace accidents. "Responsible persons" may also have personal liability in the form of fines for workplace accidents that occur under their supervision.
Workplace accidents and the related penalties are broken into four categories based on severity. Little guidance is offered on the precise mechanism as to how to determine which category a workplace accident will fall into, but it is our understanding that the factors considered will probably include the number fatalities and serious injuries, as well as the damage and economic loss caused. |
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| The table below sets out the categories and the range of the revised fines: |
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| Category |
Previous Fine |
New Fine |
| General Accident |
RMB 100,000 – RMB 200,000 |
RMB 200,000 – RMB 500,000 |
| Relatively Serious Accident |
RMB 200,000 – RMB 500,000 |
RMB 500,000 – RMB 1,000,000 |
| Serious Accident |
RMB 500,000 – RMB 2,000,000 |
RMB 1,000,000 – RMB 5,000,000 |
| Serious Accident |
RMB 2,000,000 – RMB 5,000,000 |
RMB 5,000,000 – RMB 10,000,000 or
RMB 10,000,000 – RMB 20,000,000 |
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In addition to the fines above, the person or persons who are primarily responsible for “control over work safety” of a company or business unit (the “responsible persons”) can be liable to fines and penalties for workplace accidents. There is no clear definition of responsible persons, but it is our understanding that this would include designated managers, supervisors and safety officers overseeing the part of a business in which non-compliance or an accident occurs. In addition, it could include very senior management staff such as the general manager or the legal representative.
Responsible persons may be dismissed or demoted from their position if an accident occurs. The “responsible person” may also be liable to fines of between 30% and 80% of his/her previous year’s income.
If a “responsible person” is found to have failed to take prompt and appropriate action or to make immediate emergency arrangements in the event of an accident that causes injury or death, then he/she may also be liable to a fine of 60% to 100% of his/her previous year’s income.
The intention seems to be to put pressure on both companies generally, but also specific individuals within those companies to ensure that work safety is a priority and that procedures are correctly implemented and followed. |
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On 4 December 2014, just three days after the Amended Workplace Safety Law became effective, Xiaoshan Daily newspaper reported that a Hangzhou company was fined RMB 30,000 for failure to affix precautionary signs warning employees of a dangerous workplace condition. This seems to demonstrate not only the greater regulatory emphasis on and scrutiny of work safety in practice, but also indicates an expectation that preventative measures must be considered and that fines may be imposed even if no accident actually occurs.
In many ways the Amended Workplace Safety Law simply builds on the existing broad principles of the 2002 Workplace Safety Law. While it still lacks the level of detail required for complete clarity and understanding, companies should take note of the general trend: the regulatory authorities seem to expect more attention to this area and are willing to impose penalties for failure to do so. As such, companies should check and update their safety programs to comply with the new law. This includes having clear procedures and responsibilities, as well as a financial budget for safety-related items.
We also recommend that foreign companies in particular implement comprehensive work-safety training and accident prevention protocols. While PRC law applies equally to both foreign and domestic companies, in practice foreign companies are often held to a higher standard. The cost of providing a safer workplace and proper systems and equipment is likely to be less than fines under the Amended Workplace Safety Law and the impact on reputation that normally accompanies such situations. |
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| Following up our previous Special Alert on the opening up of China’s healthcare sector to foreign investors, two major US groups appear to have taken the lead by planning to establish 100% foreign-owned hospitals in China. Massachusetts General Hospital of Boston announced its plans to build MGH Hospital China and Columbia Pacific Management announced that it will invest up to $200 million for two hospitals in China. |
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| These developments come on the heels of the groundbreaking pilot program issued by the National Health and Family Planning Commission and the Ministry of Commerce in July of this year. The pilot program requires that an overseas investor “[h]ave experience in directly or indirectly engaging in medical and health investment and management” and is able to provide one of the following: |
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- An internationally-advanced hospital management philosophy, management model and service model;
- Medical technology and equipment of international sophistication; or
- Improvements to local insufficiency in medical service capacity, medical technology, funds and medical facilities.”
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If a foreign investor meets one of the above criteria, it should be able to establish a wholly-foreign owned hospital in any one of the designated seven pilot cities and provinces. Typically a foreign investor would first need approvals from the local level health authorities, then from provincial level health authorities, and finally from the provincial level commerce departments.
It is still unclear what the specific steps necessary to establish a hospital are under the pilot program since none of the authorities in the seven pilot cities and provinces have released standards or measures relating to the pilot program. Note, however, that in the absence of specific implementation measures or standards, the Ministry of Health has advised that the current provisions and measures governing the establishment of specialized hospitals will apply.
Nonetheless, we understand that lawmakers in the seven pilot cities and provinces are currently producing their own implementation measures which are subject to final approval by the National Health and Family Planning Commission and the Ministry of Commerce. This will take some time. Until then, and as evidenced by the recent news, foreign investors seem to be moving forward with their investment strategies and preparing preliminary applications for approval. |
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| In December 2014, the Chinese State Council’s General Office issued the Action Plan for Deepening the Implementation of National IP Strategies (Guo Ban Fa (2014) No. 64), which outlines the major targets and action items for promoting the country’s intellectual property capabilities between 2015 to 2020. This article tracks the notable legal developments in 2014 to see where China currently stands in this important area. |
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In March 2014, the State Intellectual Property Office (“SIPO”), the state organ in-charge of coordinating the nationwide protection of IPRs and the administration of patent protection, issued the Draft Regulations on Employees Service Inventions for public comments. These new regulations build on and supplement existing provisions scattered in the PRC Patent Law (2008), the New Plant Varieties Protection Regulations (2013) and other relevant regulations. They follow the principle of “freedom of contract” and allow Chinese companies and employees to agree between themselves the relevant matters (eg who owns a service invention, the amount of remuneration and the means of payment) by means of either a specific agreement, or through a company’s internal rules and policies (after consultation with the employees).
In the absence of express agreements or rules, the statutory remuneration requirements will apply. For example, for every service patent invented, an employee should be paid 200% of the average monthly salary of all employees in the company. That represents a significant increase from the RMB 3,000 amount provided under current regulations. In addition, the draft regulations also provide for a reporting system, through which an employee inventor can report an invention to the company and state whether he considers it to be a service invention. Such report will trigger the company’s obligations to protect the invention and/or reward the inventor. Although the new regulations have yet to be passed by the State Council, companies operating in China - especially those focus on technical innovations – should take them into consideration in planning and setting up their rules and policies for service inventions.
On a related note, the draft revisions to the PRC Patent Law (2008) submitted for approval in 2013 are still waiting for review by the National People’s Congress, which normally will announce its annual schedule of legislative work for the current year around April. |
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The third round of amendments to the PRC Trademark Law started in 2003 and had taken 10 years to complete – the new law finally came into effect in May 2014.
The revised PRC Trademark Law expands the registrable subject matters to include sound. China followed the trend since sound mark has been registrable in many other countries. Meanwhile, the revised law allows multi-class application, so that applicants no longer have to file multiple applications when they apply to register one mark under different classes. Together with the new way of filing – electronic filing – Chinese trademark applications are expected to be more efficient.
What also helps to speed up the registration process is the introduction of statutory time limits, eg 9 months for examination on preliminary approval and 12 months for investigating an opposition application. Time-limits relating to invalidation and cancellation proceedings are also stipulated in the revised Trademark Law.
The opposition procedure has also been streamlined. The parties eligible to file an opposition on relative grounds are limited to the owners of prior rights and interested parties. The previously available appellate procedure has been abolished - if an opponent’s application is rejected, he can only file for invalidation after the disputed mark has been registered (instead of stalling the registration by appealing against the rejection). These changes likely will reduce bad faith opposition, shorten the opposition timeframe and force the opponents to prepare their cases better.
The regime for the protection of “well-known” trademarks has been in place in China since 1996. It recognizes and protects unregistered well-known trademarks, as well as giving cross-class protection to registered well-known trademarks in disputes. Under the revised PRC Trademark Law, any claim for the “well-known” status will be decided on a “case by case” basis under the “passive protection” approach. That means a trademark can only be recognized and protected as a “well-known” mark when a PRC court, TRAB or the PRC Trademark Office handles a trademark dispute and the recognition will only be effective for that particular case in dispute. The relevant provisions also prohibit the trademark owner from including references to a trademark having the “well-known” status on goods, packages or containers of goods, or in advertising, exhibiting or any other business activities. |
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| In June 2014, the draft amendments to the PRC Copyright Law (2010) were published for public comments. The draft amendments introduce a new category of “works of applied art” and consolidated the existing 17 copyrights into 13. Similar to the proposed patent law revisions, enforcement measures is a major area of focus. For instance, the cap of administrative fines will be increased from RMB100,000 to RMB250,000, and a copyright owner will be able to select the basis for determining the amount of damages amongst actual losses, illegal gain of the infringer, reasonable multiples of license fees or an amount below RMB1,000,000. |
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Tencent, one of the biggest internet service providers in China, finally lost its “QQ” trademark in class 12 (“disputed trademark”) for goods covering autos in September 2014 when the Beijing Higher People’s Court upheld the PRC Trademark Review and Adjudication Board (“TRAB”)’s decision to revoke the disputed mark’s registration. TRAB did so upon the application by Chery Automobile Co., Ltd., who asserted that the “QQ” brand was already an established brand for its famous “QQ” car before Tencent applied to register the disputed trademark.
The “QQ” car has certain reputation in the car industry and Tencent, as a famous internet service provider, should have known this fact, the Beijing High Court so ruled. In other words, Tencent was held to have used illicit means to register the disputed trademark with bad faith and infringed Chery’s existing prior rights.
There is also an argument raised by Tencent that its “QQ” mark is a well-known trademark in class 38 for services such as information transmission and computer terminals, and therefore should be protected cross-class. The conflict between cross-class protection for a well-known trademark and an existing prior right can be balanced from the different industries the trademarks are used for. In this case, customers are not likely to confuse Tencent’s “QQ” mark with that of Chery since these two trademarks are used in completely different industries, ie, internet service and cars respectively. Therefore, the cross-class protection for a well-known trademark is not a strong argument for Tencent. |
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| If the above case happened more recently, it could have been adjudicated by a completely new court. China’s legislature approved the establishment of specialized IP courts in Beijing, Shanghai and Guangzhou in August 2014. Subsequently, the Supreme People’s Court issued regulations regarding the appointment of intellectual property judges and the jurisdiction of the IP courts in October 2014. |
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The IP courts have jurisdiction to hear: |
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- first instance civil and administrative cases related to patents, new plant varieties, layout design of integrated circuit, technology secrets and computer software;
- first instance judicial appeals against administrative decisions involving copyrights, trademarks, unfair competition, etc.;
- first instance civil case regarding the recognition of well-known trademarks.
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The IP courts can also hear appeal from civil and administrative IP cases rendered by basic people’s courts. The Guangzhou IP court even has cross-regional jurisdiction to hear cases over the entire Guangdong Province.
Appeals against judgments from the IP courts will be heard by the Higher People’s Courts of their respective, which is evident of the new IP courts status as intermediate courts. These three IP courts are expected to make judicial disposal of IP cases more consistent and the efficient in the relevant regions – previously, 13 intermediate courts in these three regions all have the power to hear first-instance patent cases. The parties may, by written agreement, subscribe to the relevant IP court’s jurisdiction provided the court chosen is connected to the dispute, such as the infringer is registered in or the infringing act is committed within the relevant locality.
Another highlight for the new IP courts is the more stringent eligibility requirements for appointment as judges. Whereas a judge with two years of work experience is eligible for appointment to an ordinary intermediate court, the new courts require their judges to have at least six years of experience in adjudicating IP cases. Furthermore, since the new courts will mainly focus on patent cases which often involve technical knowledge, the Supreme People Court has committed to train technical investigation officers to provide judges with professional technical support.
In keeping with the “China speed”, the Beijing IP court already heard its first case on 16 December 2014. |
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The “safe harbor rule” is an effective tool for Internet Service Providers (“ISPs”) to defend themselves so that, as long as they take appropriate measures in response to complaints by aggrieved IPR owners, they generally are not liable for infringements caused by infringers using their network services. However, if the ISPs fail to take remedial actions promptly, they will have joint and several liabilities for the additional losses resulting from the delay.
The China’s highest court issued the Regulations on Certain Issues Concerning the Application of Law in the Hearing of Cases of Civil Disputes over the Use of Information Networks to Infringe upon Personal Rights and Interests, which came into effect in October 2014, to clarify several practical aspects of the safe harbor rule.
Firstly, they specify the information that IP owners have to lodge for the purposes of notifying ISPs about infringing articles, including the names of IP owners, the information regarding the infringing articles and the reasons. Upon receipt of such notice, the ISPs will have to delete, block or disconnect the subject articles promptly.
The new regulations also list the objective factors to consider for determining whether the ISPs have taken remedial measures “promptly” and whether the ISPs have “knowledge” of the infringement. For instance, an ISP will be more likely to be imputed with “knowledge” if it manually processes a series of TV drama and recommends the TV series on its front page, the infringement is of a more damaging nature and severe extent, or if the infringement creates a more extensive social impact or a more substantial online traffic, etc.
Other than the safe harbor rule, the new regulations cover many other important issues, such as the potential liability for network users when they re-post infringing materials and for defaming business operators. |
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Along with the judicial interpretations noted above, the Supreme People’s Court (“SPC”) released eight “illustrative cases” concerning network infringement of personal rights. The SPC issued such illustrative cases almost every month in 2014, covering criminal cases, consumer protection and trials regarding juveniles, etc. In its Regulations on Case Guidance (2010), the SPC defines “illustrative cases” as decided cases that receive extensive attention from the general public, involve fundamental legal provisions, have illustrative effects, involve difficult/complicated or innovative legal issues, and have been selected and approved by the SPC for publication as such. Although technically these illustrative cases do not constitute a source of law in the Chinese legal system, the People’s courts at all levels are expected to follow them when adjudicating similar cases.
In one of the eight illustrative cases mentioned above, the SPC explained that ISPs should not be presumed to know about an infringement merely because the actual occurrence of an infringement. Therefore, in a similar case a court cannot find an ISP liable only because infringement already occurred on the internet. This also supplements the judicial interpretations on whether an ISP may be fixed with “constructive knowledge” of an infringement. |
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| On January 19, 2015, the PRC Ministry of Commerce unveiled the draft Foreign Investment Law for public comments until February 17, 2015. This article highlights how the draft law proposes to overhaul the Chinese foreign investment regime. |
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Since the country opened up for investment in late 1970’s, China has built up its two-prong legal framework on foreign investment by primarily regulating the forms of legal entities that foreign investors may set up in China, and governing what types of business activities different forms of entities may respective undertake. This is illustrated by the sequential emergence of foreign invested EJVs in 1979, WFOEs in 1986, CJVs in 1988, joint stock companies in 1995 and limited partnerships in 2010, respectively. On the other hand, foreign investments projects are currently classified into “encouraged”, “permitted”, “restricted” and “prohibited” categories, which are subject to different forms of foreign ownership restrictions and approval requirements.
Under the draft law, corporate vehicles available to Chinese nationals will be generally available to foreign investors and the “negative list” approach first adopted by the Shanghai Free Zone in 2013 will be implemented nationwide. That means, unless it falls within the restricted or prohibited list , any foreign investment project will be subject to post-event recordal and regular reporting without obtaining prior approval from Chinese government authorities. |
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The Chine national security review regime, first introduced in 2011, requires a foreign investor to obtain clearance from a joint-ministry panel before acquiring certain sensitive targets. At that time, sensitive targets include those engage in business relating to national defense/security, and agricultural products, energy/resources, infrastructure facilities or transportation services that are important, key technologies and major equipment are subject to such review.
The 11-chapter draft law has one chapter dedicated to refine the security review process. First, the targeted scope of M&A activities are expanded to include any foreign investment that harms or may potentially harm national security will be subject to review. Second, a total of 10 specific items (such as implications on national defense facilities, R&D capabilities, information and network security, etc) and a catch-all clause are listed as factors that will be taken into considerations. Third, the foreign investment authority may order and/or implement appropriate measures to neutralize any harm to national security. Forth, it is proposed that decisions of the review process are immune from review by administrative bodies or courts. Finally, separate regulations will be issued to deal with the review of targets in the financial sector. |
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For most foreign investors, the routine of dealing with Chinese authorities will mainly comprise the compilation of reports and filings as follows:
Event-specific Filings
Under the new regime, a foreign investor will have to file a report before, or within 30 days after, the “implementation of an investment”, which means the date on which registration with the relevant Chinese authority is required or (if no such registration is required) the date of completion. A supplementary report will have to be filed within 30 days after a material change has occurred in respect of a foreign investor, such as its name, registered address, actual controller, principal business or contact person.
Annual and quarterly reports
Similar to the annual filing requirements launched in 2014, a foreign-invested enterprise will have to file an annual report before April 30 every year on relevant matters concerning the foreign investor and the foreign-invested company. Where a foreign investment does not involve the setting up or changes to a foreign-invested company, the foreign investor itself will have to file a short form report about itself and the foreign investment made.
In addition, foreign-invested enterprises with more than 10 subsidiaries, or whose total assets, sales or business revenue exceeds RMB10 billion (about USD1,667 million) will have to submit a quarterly report on the business operations and financial/accounting information. |
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To implement the new compliance-based regulatory framework, the draft law has provisions to both incentivizes compliance and deter non-compliance.
On the positive side, the Chinese foreign investment authority will establish a “credit reports” system to collect and reflect information on the creditworthiness of foreign investors and their investee companies. The system will capture information generated during the establishment and operation of foreign-invested enterprises, as well as information collected by the Chinese authorities during the course of their supervisory duties. The credit information will be available for public searches in accordance with relevant regulations to be enacted.
On the deterrence side, the draft law imposes various monetary fines – ranging between RMB50,000 to RMB1,000,000 or 10% of the investment amount (see Important Terms below) – for non-compliance, or revoke the relevant entry permit (see Important Terms Below). More importantly, criminal liability will be imposed if foreign investors or their investee companies refuse to comply with their reporting/filing obligations or provide false information, which is punishable by fines on the legal entity and detention of not more than 12 months for the responsible management personnel. |
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In a carefully measured move, the Ministry of Commerce has chosen not to adopt or propose a definite position in the draft law in respect of “contractual control arrangements” or commonly known as variable interest entities (or VIEs), pursuant to which foreign investors control – through an extensive contractual framework - the operations and income stream of PRC businesses that are subject to foreign ownership restrictions. That has been an “open secret” which the Chinese government has chosen not to take enforcement actions in most cases, and most internet businesses which have been floated in overseas stock exchanges use this model, including Alibaba which completed its records-breaking IPO on NYSE in 2014. As such, the general consensus is not so much whether the VIE arrangements can continue to exist, but rather how to validate the existence.
The explanatory notes to the draft law highlight three alternatives for vetting VIE arrangements:
Alternative 1:
Foreign-invested enterprises subject to VIE arrangements will declare to the foreign investment authority that they are subject to control by Chinese investors.
Alternative 2:
Foreign-invested enterprises subject to VIE arrangements apply for certification from the foreign investment authority that they are subject to control by Chinese investors.
Alternative 3:
Foreign-invested enterprises subject to VIE arrangements apply for relevant entry permit(s) from the foreign investment authority, which will, jointly with other relevant Chinese authorities, examine the application based on all relevant factors, including whether the entities are subject to control by Chinese investors.
It is contemplated that the existing EJV Law, CJV Law and WFOE Law will be repealed when the draft law enters into effect. To the extent existing EJVs or CJVs will continue to operate for more than 3 years after the new law comes into effect, they will have to comply with the corporate governance structure in accordance with the PRC Company Law. Practically that means EJVs and CJVs’ respective board of directors will become subordinated to a newly added shareholders meeting as the companies top decision-making body. |
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Foreign investors:
Includes juristic and natural persons, and Chinese individuals who have acquired foreign nationality
Foreign investment:
Includes the setting up of domestic enterprises or the acquisition of shares or voting rights thereof, the provision of loans of one year or above, obtaining the grant of franchise to explore natural resources or to build/operate infrastructure facilities, the acquisition of interests in immovable property, or the acquisition of interest in domestic enterprises by way of contractual control or trusts
Entry permit:
A permit issued by the foreign investment authority for investing in an industry listed in the “restricted catalogue for foreign investment”
Industry permit:
An industry-specific permit that is usually granted by other authority-in-charge
Investment amount:
Includes both equity investment and debt investment of one year or above; and investments made within two years on the same subject matter will be aggregated |
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| We hope you enjoyed this newsletter. Watch this space for more updates from our Asia practice. |
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