Three experienced corporate counsel share their practical insights into topical outbound investment issues with Richard Li
What legal challenges may await when engaging in cross-border business? This question is popping up more frequently for the decision makers at Chinese companies as Chinese outbound investment continues to grow, and as past experiences have taught more investors the virtues of prudence and caution.
There can hardly be a one-size-fits-all answer, since investors who come from different industries or target different overseas markets often have their own unique problems to solve. But many of them still share some common challenges. Practical experiences of seasoned in-house counsel can therefore still serve as a good reference for their peers.
For this report, we asked three senior corporate counsel to share their experiences of the various issues they have grappled with involving outbound investment. We asked them how they handled specific legal problems, what solutions they used, and what experiences they accrued. Their discussion covers antitrust issues in overseas markets, multi-jurisdictional compliance management, and how to build contractual bulwarks against legal uncertainty in some foreign markets.
You may find their experiences useful, or may have your own opinions on the same issues. We welcome all corporate counsel engaging in China-related business to share your ideas with us.
Leslie Zhang Weihua
Zhang: Our major concern in overseas investments is risks linked to the change of laws and regulations in foreign countries, taxation disputes and the standards they tend to use in law enforcement. We usually cope with these risks by purchasing insurance products and actively communicating with the counterparties; we may also resort to the [central] government, or lawsuit, or arbitration for help. We may also require inclusion of “stabilization clause” and “waiver of sovereign immunity” in contracts with foreign governments.
In the front of M&A, foreign sellers are increasingly focused on change of the PRC law as well as risks associated with the [central] government’s regulatory approval, given the changed regulatory policy that the government has on outbound investments. Our countermeasures include reverse breakup fees, tiered reverse breakup fees, promises to secure governmental approval through best reasonable efforts, and agreements to deposit reverse breakup fees in escrow accounts upon execution of contract, depending on the bargaining power. We may also include in the contract the requirement that the Chinese buyer not be held responsible for risks relating to changes of PRC law and/or risks associated with government’s regulatory approval.
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