“Compliance” is a fashionable word. But what does it really mean?
To capital markets lawyers, the term “compliance” can refer specifically to compliance with listing rules and other obligations that come with listed company status. But the word is often used more broadly, to mean any company’s adherence to the law. In this sense, it can apply to anything from labour law and health and safety regulations to rules on price-fixing, tax or environmental pollution.
This summer, there is a widespread feeling that the central government’s emphasis has shifted from the promulgation of major new laws to the better enforcement of existing ones. For this reason, and following the recent high-profile convictions of Stern Hu of Rio Tinto and Huang Guangyu of Gome Electronics for misdeeds in their business dealings, compliance is foremost in the minds of lawyers and corporate counsel at domestic and international companies.
One major area of concern is compliance with rules against bribery and corruption. The Foreign Corrupt Practices Act in the US is well known, and other countries have enacted similar laws. But some foreign companies’ assumption that by complying with their home country’s requirements they will automatically meet their obligations under Chinese law is a serious mistake. And as Huang Guangyu’s conviction demonstrates, it is clear that domestic companies also need to be seen to be clean.
In Are you compliant?, we look in detail at compliance, with a focus on corruption and the services that are available to help companies fight it. Wu Wei, a partner at King & Wood who previously worked for ten years at the Supreme People’s Procuratorate, offers a guide to corporate gift-giving, examining what value of gifts can be given and what cannot under China’s comprehensive anti-bribery law.
And in After Expo, we examine current efforts to turn the Paris of the East into a source of funds for companies at all points of the compass. If Shanghai is to succeed in its ambitions, compliance will be crucial.
Listing rules have been drafted for foreign companies wishing to list on the Shanghai Stock Exchange’s much anticipated international board. Foreign investment enterprises in China may also get the chance to list on the Shanghai main board in their own right, although the rules for this are still to be finalized.
In all areas, compliance with the rules, rather than merely having them look good on paper, will be key to credibility and success.
