Circular on Reforming the Management of the Settlement of Foreign Capital from Foreign-Invested Enterprises (Huifa No. 19 【2015】)

On 30 March 2015, the State Administration of Foreign Exchange of People’s Republic of China (“SAFE”) issued the Circular on Reforming the Management of the Settlement of Foreign Capital from Foreign-Invested Enterprises (《关于改革外商投资企业外汇资本金结汇管理方式的通知》) (Huifa No. 19 【2015】) in which it announced that from 1 June 2015 onwards, new legislation for reforming the management of the settlement of foreign capital from foreign-invested enterprises will become effective in the whole country.

The primary function of this reform is to implement willingness exchange settlement (意愿结汇) for foreign capital from foreign-invested enterprises, thereby the use of the exchanged Renminbi (“RMB”) is relaxed. The new legislation will nevertheless maintain restrictions to the use of the exchanged Renminbi on: (1) expenditures other than those that are within the scope of business or not prohibited by legislations; (2) direct or indirect investment in securities; (3) direct or indirect issuance of RMB-denominated entrusted loans, repayment of inter-enterprise lending (including those with third-party advances) or repayment of third-party banks that has taken up the lending; and (4) purchase of real estate not for self-use (foreign-invested enterprises with registered businesses in investment of real estate are exempted).

Previously, foreign capital from foreign-invested enterprises was not permitted to be used in equity investments in China. The substantial change to be brought about by this new legislation is that the investee enterprise in China will first need to apply with SAFE for a domestic re-investment registration (境内再投资登记) and then open a relevant settled foreign currency receiver account (结汇待支付账户). After which, the investing foreign-invested enterprise may remit settled foreign capital (which is in RMB) to the said account.

In the recent case Provisional Liquidators of China Medical Technologies Inc v Samson Tsang Tak Yung [2015] HKEC 224, HCCW No.435 of 2012, the liquidators’ application to produce the “private papers” (such as bank statements and purported divorce documents) of the company’s former CFO was rejected by the Court.

Under section 221 of the Companies (Winding-up and Miscellaneous Provisions) Ordinance, Cap.32 of the Laws of Hong Kong (the “Ordinance”), the Court is empowered to order persons who have information relating to the “affairs, or property of the company” to be examined on oath (section 221 (1) and (2)) or to produce documents “relating to the company” (section 221(3)).

The liquidators in the case sought production of a wide-ranging of documents from the former CFO on the basis that he and his associates had allegedly been misappropriating the funds of the company following its IPO and issuance of bonds. In essence, the justifications for the production of the “private papers” put forward by the liquidators were that (1) the liquidators are responsible for the recovery of the company’s property and this included contingent claims on behalf of the company and (2) with reference to the similar powers in other common law jurisdictions the power of production should not be limited to documents “relating to the company” but included documents relating to the “affairs, or property” of the company”.

While granting wide orders for production against the CFO and orders for his examination, the Court refused to order production of the his private papers, considering that the power of production under section 221(3) of the Ordinance does not cover a defendant’s private papers and that “an order for production of private papers is more intrusive than an examination at which [the defendant] can be asked questions about his financial circumstances”.

It has been reported that leave to appeal against the decision has been granted. It remains to be seen whether the decision will be upheld in the appellate court.

On 4 May 2015, SW partner Mr. Eric Lui, senior associate Ms. Freda Au, legal executives Mr. Stanley Hung and Mr. Man Wong delivered a presentation on stamp duty issues involving properties and share transactions at Commercial Business II – Corporate Banking and Financial Institutions of Bank of China (Hong Kong) Limited (“BCHK”). Over 50 representatives from BCHK attended the seminar.

In the first part of the seminar, Mr. Lui introduced our firm to the audience and the joint venture law firm with AllBright Law Offices in Qianhai Modern Service Industry Co-operation Zone which will provide legal services to clients in both Hong Kong and Mainland China.

In the second part of the seminar, Mr. Wong and Mr. Hung gave practical advice to the audience on how the Stamp Duty Ordinance applies to property, and share transactions in Hong Kong and recent cases on Stamp Duty.

Please contact our Mr. Eric Lui for any enquiries or further information about this event.

On 2 May 2015, SW litigation partners Mr Eric Lui, Mr Neville Watkins, Ms Heidi Chui and associate Ms Katy Lai attended the ceremony marking the appointment of Mr Nigel Kat, Mr Martin Hui Siu-ting, Mr Hectar Pun Hei, Mr David Leung Cheuk-yin, Mr Jeremy Bartlett, Mr Douglas Lam Tak-yip, Mr Victor Dawes, Mr William Tam Yiu-ho, Mr Bernard Man and Mr Wayne Walsh as Senior Counsel of the Hong Kong Special Administrative Region at the Island Shangri-la Hotel.

Photo taken with Mr Victor Dawes SC (Left: Ms Heidi Chui, Mr Eric Lui, Mr Victor Dawes SC, Ms Katy Lai, Mr Neville Watkins)

Please contact our Mr Lui for any enquiries or further information about this event.

Stevenson, Wong & Co. assisted Shenzhen Qianhai Financial Holdings Co., Ltd. to issue RMB1 billion credit enhanced bonds on HKEx (85714.hk)

Acting for Shenzhen Qianhai Financial Holdings Co., Ltd. (the “Issuer”) as the legal advisers as to Hong Kong laws for its CNY1,000,000,000 4.55 percent credit enhanced bonds with the benefit of an irrevocable standby letter of credit provided by China Development Bank Corporation. The joint global coordinators were Industrial and Commercial Bank of China (Asia) Limited and Hongkong and Shanghai Banking Corporation Limited. The joint lead managers and joint bookrunners were CITIC Securities International, CMB International, Guotai Junan International, Shanghai Pudong Development Bank Co., Ltd. (Hong Kong branch), Haitong International and BOC International.The net proceeds will be used by the Issuer as follows: 50 percent will be remitted into the PRC and used for equity investments in enterprises established in Qianhai Shenzhen-Hongkong Modern Service Industry Cooperation Zone of Shenzhen (“Qianhai”), and 50 percent will be injected into the Issuer’s Hong Kong subsidiary, Qianhai International Holdings Co., Ltd. The Issuer is the first financial investment service platform in Qianhai and is wholly-owned by the Authority of Qianhai Shenzhen-Hongkong Modern Service Industry Cooperation Zone of Shenzhen.

Please contact our Mr. Hank Lo for any enquiries or further information about this transaction.

The 12th Annual Asian Legal Business (ALB) China Law Awards 2015 was held on April 23, 2015 in Beijing which recognizes the excellence and outstanding achievements of China’s leading law firms and in-house legal teams as well as the top deals and dealmakers for the past year.

The awards night on April 23, 2015 was held at The Park Hyatt Hotel in Beijing and attracted CEOs, bankers and legal luminaries from the judiciary, domestic and multinational companies, law firms, and academe in China. At the award ceremony, AllBright Law Offices which is in association with SW won the prize for the Shanghai Law Firm of the Year. AllBright’s partner, Yang Bin, received the award on behalf of the firm and gave a thank you speech. The Annual ALB China Law Awards provides unparalleled networking opportunities, live entertainment and fine gourmet food, a must go to ceremony in every lawyer’s event calendar.