China Business Law Lawyers & Attorneys : Sheppard Mullin Law Firm : Direct Investment, Dispute Resolution, Intellectual Property, Antitrust, Venture Capital

To anyone who cares about Chinese law and economics, Aug. 1, 2008 is second to none a great day. In addition to the effectiveness of the Anti-Monopoly Law, another attractive and controversial topic is that China will raise export tax rebate from 11% to 13% for textiles and clothing with some Nova mats excluded. Such a new policy started from the that day, which also meant some products of chemical industry will also be not involved in the abovementioned tax rebate change as jointly stated by the State Administration of Taxation (SAT) and the Ministry of Finance (MOF). Following this statement, some large export-orientated companies claimed that they would raise their profit expectation a lot.

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In recent years, shareholder's equity as capital contribution to other companies is considered as a new type of investment and favored by many investors.  In June 2007,  Administration for Industry and Commerce of Zhejiang Province announced Measures on Administration of the Registration of Equity Contribution to Other Companies (for trial), which started the implementation of equity contribution in China.  Subsequently, Administration for Industry and Commerce of Shanghai Municipal also formulated Measures on Registration of Equity to Other Companies (for trial) in accordance with related laws and regulations, such as Company Law and Regulations on Company Registration.  This article seeks to introduce equity contribution on the following issues:

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Do we really need to hire a lawyer?

Information transferring in this world is easier and faster than ever, people can be acquired with a stranger through Facebook or even by typing some words in Google. As a businessman, one can identify the other party to a contract by the profile of Alibaba.com or so, visit their website directly if provided, contact them via mail or telephone, and even, call on to see whether they are credible. In one word, the world is getting increasingly smaller.

Therefore, some clients may consider it unnecessary to hire an attorney, instead, they try their due diligence themselves. However, difficulties appear in various aspects such as language, culture, time pressure, few experience, etc. Below, a real case of our client will lead you to get known the importance of due diligence.

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Shanghai Administration of Industry & Commerce (SAIC) declared on Aug 6 that Equity-Invested Companies will be permitted. That means, domestic natural persons and legal persons are granted the right to register such a company, making the cooperation much easier between excellent medium & small enterprises and civilian capitals. Further, when there is only one individual investor, registered capital of the company should be 5 million RMB, while 1 billion for an enterprise.

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After a 5-year Chinese court battle, Ferrero SPA (“Ferrero”), an Italian chocolate maker, recently won a fight to stop infringement of its intellectual property rights against Montresor (Zhangjiagang) Food Co. Ltd. (“Montresor”) and Montresor’s distributor, Zhengyuan Distribution Co., Ltd (“Zhengyuan”) in China’s Supreme People’s Court (SPC).  This is the first known case where Chinese Courts applies the Anti-Unfair Competition Law to protect well-known foreign merchandise.

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Privacy right refers to natural person’s right to enjoy personal information and secret undisclosed to others and the public, which is one type of personality rights which also include the rights of name, portraiture, body, and freedom.

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The overnight success of the video-sharing site YouTube has resulted in many similar sites in China.  Since YouTube never targeted the Chinese market and China has the No.2 Internet user base of the world, many of the wannabe YouTube sites, such as 56.com and tudou.com, enjoyed great success in the past three years.  Such success was also not unnoticed by venture capitals, who, wanting to capitalize and replicate the payout of the YouTube sale to Google, poured millions of dollars into those sites.  Even as late as November of 2007, video site www.pplive.com raised another round of finance for approximately USD 20,000,000.  The competition among the video-sharing sites in China are also quite fierce, in order to attract visitors, many of those sites allow upload and re-broadcast of copyrighted materials, which has caused great headache for the major movie and television studios.  Finding a lack of regulatory body and rules governing on-line video broadcast, those studios typically had to rely on filing lawsuits against site operator based upon intellectual property infringement, a process that is costly and time consuming.

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On June 28, 2008, the Basic Rules for Corporate Internal Control (“Rules”) were jointly issued by the Ministry of Finance, the National Audit Office, the China Securities Regulatory Commission, the China Banking Regulatory Commission and the China Insurance Regulatory Commission. The Rules will take full effect on July 1, 2009 and initially affect only listed companies.

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The Provisions on the Takeover of Domestic Enterprises by Foreign Investor (“Old Rule”) and the according pre-merger filing system have been adopted for around five years, and according to the statistics, the pre-merger files have exceeded 500 cases.  However, as the new Anti-monopoly Law (“AML”) is approaching its effective date on August 1^st, the pre-merger filing under the Old Rule is coming to its end, and MOFCOM is preparing its new Rule on Notification of Concentration by Undertakings (“New Rule”) to accompany the AML.  According to the resources, the final figures of the new thresholds will soon be settled down.

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