Haworth & Lexon Law Newsletter (201107)

Haworth & Lexon Law Newsletter
No.7 2011 (Total:No.114) Aug.15, 2011
Edited by Haworth & Lexon
 

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Haworth & Lexon Law Newsletter is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, E-commerce, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.
 

Guidelines:


Latest News:

昉artner with Haworth & Lexon Chongqing Office Partner Wins State Honorary Title

Latest Laws and Regulations:

旳mendment to Regulations on Material Assets Restructuring by Listed Companies

旾nterpretations III of the Supreme People抯 Court on Several Issues concerning Application of Marriage Law of the People抯 Republic of China

昉rovisions of the Supreme People抯 Court on Several Issues concerning the Trial of Administrative Cases of Government Information Disclosure

昍ules on Archival Filing Administration of Export Food Production Enterprises

旵ircular of the General Office of the Ministry of Commerce on Implementing the Opinions on Regulating the Administration of Commercial Prepaid Cards

旵ircular on Printing and Issuing Administrative Measures for GMP Certification

旵ircular on Adjusting the Deduction Criteria for the Individual Income Tax on Natural Person Investors of Individual Industrial and Commercial Households, Sole Proprietorship and Partnership Enterprises

Legal Practices:

昉rinciples and Standards for Determining the Domicile of a Legal Person

旴rief Analysis on Controversial Key Clauses of "Goods Transport Contract"

旳dministrative Measures for Equity Investment Administrations for Tianjin Equity Investment Enterprises by Tianjin Municipal People抯 Government

 

Latest News

A Partner with Haworth & Lexon Chongqing Office Wins State Honorary Title

In May 2011, Attorney Jia Rui, a partner with Haworth & Lexon Chongqing Office, was awarded jointly by the Publicity Department of the Central Committee of the Communist Party of China and the Ministry of Justice the title 揗odel for State Law Publicity and Education?for the years between 2006 and 2010.

In addition, Attorney Jia Rui was elected Executive Director of Chongqing Bar Association at the fifth lawyer congress conference in Chongqing City on July 8, 2011.

 

Latest Laws and Regulations

Amendment to Regulations on Material Assets Restructuring by Listed Companies


On August 1, 2011, China Securities Regulatory Commission (CSRC) promulgated the Decision on Amendment to Regulations on Material Assets Restructuring and Supporting Financing by Listed Companies (hereinafter referred to as the Decision) and Opinions on the Application of Articles 13 and 43 of Administrative Measures for Material Assets Restructuring by Listed Companies桹pinion No. 12 on the Application of Securities and Futures Laws (Opinions on the Application) and put them into effet as of September 1, 2011.

The Decision made some amendments and supplements to Administrative Measures for Material Assets Restructuring by Listed Companies (hereinafter referred to as Measures for Restructuring) as follows:

1. A new provision that explicitly defines the back door listing has been added. Back door listing refers to a business strategy (including that the listed company purchases assets from the purchaser at the same time when the company抯 right of control is being changed) that the total assets purchased from the purchaser by a listed company account for 100% of the total assets in the audited consolidated financial statement of the last fiscal year of the listed company before the change of the company抯 right of control. It is accordingly stipulated that the going concern for an operational entity seeking back door listing shall be at least three (3) years, and the net profits of the latest two (2) fiscal years shall be positive and accumulatively amount to over RMB 20 million. With regard to industrial requirements, the Decision stipulates that the assets purchased by a listed company that belong to a specific industry such as finance and venture capital investment shall be otherwise provided for by China Securities Regulatory Commission (CSRC).

2. It is explicitly defined that under the background of the aforementioned back door listing, the continuous supervision term of the independent financial consultant shall be no less than three (3) fiscal years as of the date when CSRC completes the examination and approval of this material assets restructuring.

3. The Decision improves the provisions on assets purchase via share issue. To boost industrial integration and consolidate its cooperativity with the exsiting main business, a listed company may, provided that there is no change in the right of control, purchase assets via share issue at the volume of no less than 5% of the listed company's total capital stocks after the share issue to specific persons other than controlling shareholders, actual controllers or affiliated persons under their control. If the shares issued are less than 5% of the listed company's subsequent total capital stock, the transaction amount of the proposed assets purchase by the mainboard and small & medium-sized board listed companies shall be no less than RMB 100 million, and the transaction amount of the proposed assets purchase by growth enterprise market (GEM) listed companies shall be no less than RMB 50 million.

4. The Decision explicitly stipulates that a listed company that purchases assets via share issue may raise some supporting funds by directed share issue for which the pricing method shall be determined pursuant to the existing pertinent provisions.

The Opinions on the Application define the principle for calculation as set out in Item 4 of Clause 1 of Article 13 under Measures for Restructuring and prescribe the principles for the implementation of accumulative totals for the first time and anticipated merging. Besides, the Opinions on the Application proposes with respect to Article 43 of Measures for Restructuring that the proportion of complementary funds raised at the same time when the listed companies issue shares to purchase assets for the purpose of improving the integrated performance of restructuring programs shall not exceed 25% of the transaction amount, and shall be reviewed together by the committee for mergers, acquisitions and reorganisations; if the proportion is over 25%, the supporting funds shall be reviewed all together by the issuance examination committee.

 

Interpretations III of the Supreme People抯 Court on Several Issues concerning Application of Marriage Law of the People抯 Republic of China


The Supreme People抯 Court promulgated on August 9, 2011 the Interpretations III of the Supreme People抯 Court on Several Issues concerning Application of Marriage Law of the People抯 Republic of China (hereinafter referred to as Interpretations). After the Interpretations have been put into effect, where there is any discrepancy between the previous pertinent judicial interpretations of the Supreme People抯 Court and the Interpretations, the Interpretations shall prevail.

The Interpretations have 19 articles that mainly cover claims for verification of parenthood, claims for payment of maintenance costs, claims for separating joint properties during duration of marriage, proporty division after divorce, etc. as follows:

1. Where one party of a couple files an action before a people抯 court for verification of parenthood or no parenthood and provides necessary evidence, the people抯 court may presume that the claim filed by the party for verification of parenthood or no parenthood stands if the other party fails to provide eidence to the contrary and refuses paternity test.

2. During the duration of marriage, if either party of a couple files a claim for separating joint properties, the people抯 court will not support except for the following major reasons and without prejuidice to creditors?rights: (1) a spouse conceals, transfers, sells, destroys or squanders community property, fabricates joint debts, or commits any other conduct that seriously damages the community property; or (2) a person to whom a spouse has a statutory obligation of support suffers from a serious illness and needs medical treatment, but the other spouse refuses to pay the relevant medical expenses.

3. Where the title to a real estate purchased by the parents of one party for the party under the party抯 name after the party抯 marriage is registered, such real estate shall be deemed a gift given by the parents to the party and be determined as the party抯 personal property. Where the title to a real estate purchased by the parents of both parties is registered under the name of one party, such real estate may be determined as jointly owned by both parties according to the proportion of capital contributions made by their respective parents, unless it is otherwise agreed on by the parties concerned.

4. Where the husband claims for damages on the ground that his wife violates his reproductive right by terminating pregnancy without his consent, the people抯 court shall not support the claim.

5. Where a spouse signs a real estate purchase contract, and makes a down payment with his/her personal property and gets a loan from a bank before marriage, if the spouse repays the loan with community property after marriage and the real estate is registered under the name of the payer of the down payment, such real estate shall be handled at the time of divorce by both parties by agreement. If no agreement is reached according to the preceding paragraph, the people抯 court may render a judgment to award such real estate to the party under whose name the real estate is registered, and the unpaid loan shall be the personal debt of the party under whose name the real estate is registered. For the part of the loan having been jointly repaid by both parties after marriage and the corresponding property appreciation, the party under whose name the real estate is registered shall compensate the other party at the time of divorce.

6. Protection of the bona fide third party. Where a spouse sells a housing unit which is community property without the consent of the other spouse, and a bona fide third party who purchases the housing unit has paid a reasonable consideration and has handled the property registration formalities, if the other spouse claims for recovery of the housing unit, the people抯 court shall not support the claim.Where a spouse disposes of a housing unit which is community property without the consent of the other spouse, causing any loss to the other spouse, the other spouse may claim compensation for loss at divorce.

7. Where the spouses enter into a property division agreement conditioned upon a divorce registration or a divorce in the people抯 court by agreement, if no divorce agreement is reached and one spouse denies the validity of the property division agreement in the divorce lawsuit, the people抯 court shall legally divide their community property in light of actualities.

 

Provisions of the Supreme People抯 Court on Several Issues concerning the Trial of Administrative Cases of Government Information Disclosure

The Supreme People抯 Court promulgated on July 29, 2011 the Provisions on Several Issues concerning the Trial of Administrative Cases of Government Information Disclosure (hereinafter referred to as Provisions) and put them into effect on August 13, 2011.

Citizens, legal persons or other organizations may file an administrative lawsuit in accordance with law against the following specific administrative acts in government information disclosure, the people抯 court shall accept such lawsuits that: (1) apply to administrative organs for obtaining government information, but the administrative organs refuse to provide the information or fail to give a reply within the prescribed time limit; (2) believe that the government information provided by administrative organs do not conform to the contents as requested in their application or in the proper form as prescribed by laws and regulations; (3) believe that the government information disclosed by administrative organs on their own initiative or upon the application of others infringes upon their business secret or personal privacy; (4) believe that the government information record provided by administrative organs that are related to themselves are not accurate and request such administrative organs to make corrections, but the administrative organs refuse to make corrections, fail to give reply within the prescribed time limit, or fail to transfer the matter to the competent organs for handling; (5) believe other specific administrative acts of administrative organs in the government information disclosure have infringed upon their lawful rights and interests. The Provisions also specifiy four circumstances when an administrative lawsuit filed by citizens, legal persons or other organizations are not accepted by the people抯 court, e.g. requesting the administrative organs to provide public publications such as government bulletins, newspaper, magazines and books, but the administratie organs refuse to provide such publications.

Where citizens, legal persons or other organizations believe that administrative organs do not legally perform their obligation of government information disclosure, they shall first apply to such administrative organs for obtaining the government information; where citizens, legal persons or other organizations do not agree with the administrative organs on their reply or postponement of reply, they shall file an lawsuit to the people抯 court.

With regard to the burden of proof on the part of the defendant, where the defendant refuses to provide the plaintiff with the government information, it shall put to proof the basis of the refusal and the conditions of performing the obligations of legal notification and justification. Where the defendant, for the benefit of the public, decides to publish the government information containing business secrets and personal privacy, it shall put to proof and explain the reason for the severe consequences induced from non-disclosure of such information that has been deemed closely related to public interests. Where the defendant refuses to correct the government information record related to the plaintiff, it shall put to proof and explain the reason for the refusal. The plaintiff also bears the burden of proof to some extent. Where the defendant refuses to provide the information by giving the reason that such information has no connection with the special needs of the claimant as its own production, living and scientific research, the people's court may order the plaintiff to explain the causes of such special needs. When the plaintiff files a lawsuit against the defendant for the latter's refusal of correcting the government information record, it shall provide the matter of fact for the actuality that it has applied to the defendant for correction, the government information is closely related to its own self and the record is not accurate.

With regard to the manner of trial, the Provisions explicitly define that when the people's court is hearing the administrative case of government information disclosure, it shall adopt an appropriate manner of trial on the basis of actualities, in order to avoid the disclosure of government information containing secrets of state, business secrets, personal privacy or other contents that shall be kept secret in accordance with law.

 

Rules on Archival Filing Administration of Export Food Production Enterprises

The General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) promulgated on July 26, 2011 the Rules on Archival Filing Administration of Export Food Production Enterprises and put them into effect on October 1, 2011.

China practices a system of archival filing administration for export food production enterprises. Where an export food production enterprise fails to perform its obligation of archival filing in accordance with law or its archival filing fails to meet the pertinent requirements after being reviewed, its products shall not be exported.

When an export food production enterprise files for record, it shall submit a written application and the following relevant documents and evidentiary materials and shall be responsible for the authenticity of such documents and materials: (1) business license, organization code, the identity certification of the legal representative or authorized person-in-charge; (2) statement and inspection report made or prepared by the enterprise itself, stating its commitment of compliance with the hygiene requirements for export food production enterprise and requirements by the importing country (region); (3) working conditions (plan of the production area and workshops), producing and processing techniques of products, critical processing links, use of raw materials, supplementary materials and food additives, eligibilities of the sanitation and quality control personnel and specialized technical personnel, and other basic information about it; (4) basic information about the establishment and implementation of the food safety and sanitation control system; (5) a food production permit or any other administrative license that shall be obtained according to law; (6) other certifications, internal laboratory eligibilities and other relevant situations.

The appraisal group shall make an appraisal report and submit it to the inspection and quarantine bureau directly under AQSIQ within five (5) working days after completing the appraisal of an export food production enterprise. The inspection and quarantine bureau directly under AQSIQ shall, within ten (10) days after receiving the appraisal report, examine it and decide whether or not to approve the application for archival filing. If the application meets the archival filing requirements, it shall issue the "Archival Filing Certificate for Export Food Production Enterprise" (hereinafter referred to as 揂rchival FilingCertificate?; in the case of a disapproval, it shall notify the export food manufacturer and clarify the reasons in writing. The "Archival FilingCertificate" is valid for four (4) years.

 

Circular of the General Office of the Ministry of Commerce on Implementing the Opinions on Regulating the Administration of Commercial Prepaid Cards
The General Office of the Ministry of Commerce promulgated on August 1, 2011 the Circular on Implementing the Opinions on Regulating the Administration of Commercial Prepaid Cards.

The Circular on Implementing the Opinions on Regulating the Administration of Commercial Prepaid Cards stipulates that the competent departments of commerce at all levels shall urge businesses and enterprises to formulate measures for issuing and handling single-purpose prepaid cards with the least delay possible and to implement the following systems. The first system is the real-name registration system for purchase of prepaid cards. Any entity or individual purchasing registered commercial prepaid cards or purchasing no less than RMB10,000 unregistered commercial prepaid cards at one time shall be subject to real-name registration with the card issuer. The second system is the non-cash purchase system of prepaid cards. Any entity that purchases no less than RMB 5,000 cards at one time or any individual who purchases no less than RMB 50,000 cards at one time shall do so through bank transfer rather than in cash. For purchase through bank transfer, a card issuer shall register the names of paying and receiving accounts, account numbers, amount etc. of each transaction. The third system is the system of setting quotas for the issuance of prepaid cards. The par value of an unregistered single-purpose commercial prepaid card shall not exceed RMB1,000, and that of a registered single-purpose commercial prepaid card shall not exceed RMB 5,000.

 

Circular on Printing and Issuing Administrative Measures for GMP Certification


The State Food and Drug Administration (SFDA) promulgated on August 2, 2011 the Circular on Printing and Issuing Administrative Measures for GMP Certification (hereinafter referred to as the Circular) and put it into effect as of the aforementioned date.

The Circular redivides the duties and functions of the State Food and Drug Administration (SFDA), i.e. SFDA is in charge of national GMP certification of drugs, including GMP certification and follow-up check of injections, radioactive drugs, biologicals, etc. and coordinating with GMP overseas check of imported drugs or GMP domestic check of national or regional drugs. Provincial drug administrations shall be in charge of GMP certification and follow-up check of other drugs than injections, radioactive drugs and biologicals within their jurisdication and GMP drug check work entrusted by SFDA.

Any drug manufacturing enterprise that has obtained the "Drug GMP Certificate" shall reapply for drug GMP certification six (6) months before the expiry of the certificate. The drug administration at the provincial level or above shall conduct formal examination of the drug GMP application and the relevant materials and accept the application eligible with complete necessary materials and compliant with the legal form; with regard to the application submitted not in accordance with the relevant regulations and lacking in pertinent materials or incompliant with the legal form, the drug administration shall send, immediately or within five (5) days, a written notification to the applicant of corresponding supplements and rectifications. Where the drug certification and inspection authority conducts a technical examination of pertinent materials for application and claims that some supplements are needed, it shall notify the applicant of this in writting and the applicant shall provide supplementarty materials within the prescribed time limit. In case any applicant does not duly submit the supplementary materials, its application for certification shall be terminated.

When the drug certification and inspection authority has completed the technical inspection of the materials for declaration, it shall formulate an on-site inspection scheme and organize an on-site inspection. The term for formulating the work scheme and conducting the on-site inspection is 40 working days. The risk assessment of any defect inspection shall take into accounts the category of the product, nature of the defect and frequency of the defect. Defects are categorized into severe defect, major defect and common defect, of which the risk level descends in proper sequence. If the applicant enterprise has no objection to the defect discovered in the inspection, it shall rectify such defect and promptly report the rectification progress to the drug certification and inspection authority designated for supervision over the inspection process. If the enterprise has any objections, it shall make proper explanations.

The principle for integrated evaluation shall be risk assessment which takes into account the nature of defects, severity and category of the products. At on-site inspection and integrated evaluation, the defect at the lower level may rise to the first level or the second level in an accumulative manner while the defect rectified may descend to the lower level. The rectification progress of the severe defect shall be inspected on-site.

(1) Where there is a common defect, or the rectification progress of the major or common defect proves that the enterprise is able to adopt effective measures to rectify, the evaluation result shall be "qualified";

(2) Where there is a severe defect or several major defects which demonstrate that the enterprise fails to effectively supervise over or control the whole production process, or the rectification progress or plan of the major or common defects cannot prove that the enterprise is able to adopt effective measures to rectify, the evaluation result shall be "disqualified".

Within the term of the Drug GMP Certificate, any change of the organizational structure related to the quality management system, the key staff, etc. shall be applied by the enterprise with the original certificate issuance authority for record in accordance with the related provisions within 30 days after the change occurs. The changed organizational structure, key staff, etc. shall ensure the effective performance of the quality management system and maintain them agreeable with the relevant requirements.

 

Circular on Adjusting the Deduction Criteria for the Individual Income Tax on Natural Person Investors of Individual Industrial and Commercial Households, Sole Proprietorship and Partnership Enterprises


The State Administration of Taxation promulgated on July 29 2011 the Circular on Adjusting the Deduction Criteria for the Individual Income Tax on Natural Person Investors of Individual Industrial and Commercial Households, Sole Proprietorship and Partnership Enterprises (hereinafter referred to as the Circular) and put it into effect on September 1, 2011.

Pursuant to the Circular, when individual income tax is collected from natural person investors of individual industrial and commercial households, sole proprietorship and partnership enterprises, the threshold shall be uniformly at RMB 42,000 per year (RMB 3500 per month).

Legal Practices

Principles and Standards for Determining the Domicile of Legal Person

 

Article 22 of Civil Procedure Law of the People抯 Republic of China stipulates that a civil action instituted against a legal person or any other organization shall come under the jurisdiction of the people's court in the place where the defendant is domiciled. Therefore, correctly determining the domicile of a legal person is indispensable for the plaintiff to file an lawsuit as well as for the defendant to defend itself in the court.

I. The exsiting laws and regulations regard a legal person's main place of business or main administrative office as its domicile

Both Article 39 of Genereal Principles of the Civil Law of the People抯 Republic of China and Article 10 of Company Law stipulate that a legal person's domicile shall be the place where its main administrative office is located. Article 4 of Opinions of the Supreme People抯 Court on Several Issues concerning the Application of Civil Procedure Law of the People抯 Republic of China stipulates that a legal person's domicile refers to its main place of business or main administrative office. Explanation V of Beijing Higher People抯 Court on Several Issues concerning the Trial of Civil and Commercial Cases (for Trial Implementation) also explicitly stipulates that where a legal person's practical place of business or its administrative office turn out to be located at its registered address, the legal person's domicile is also deemed as located at its registered address; where a legal person's practical place of business or its administrative office is not located at its registered address, the legal person's domicile then refers to its practical place of business or its administrative office.

Pursuant to the aforementioned legal provisions and judicial interpretations, it poses no difficulty in determining a legal person's domicile, i.e. a legal person's domicile is not necessarily located at the registered address on its business license. When the legal person's domicile and its registered address on its business license are different, its main place of business or main administrative office shall be deemed as its domicile. Even if the legal person抯 domicile and the registered address are the same, the connection to determine the domicile of a legal person is its main place of business or main administrative office rather than its registered place.

II. How to determine a legal person's domicile in real practices

(1) Pursuant to the aforementioned legal provisions, cases that a legal person's domicile is regarded as its main place of business or main administrative office include:

Cases where the court determines a legal person's domicile as its main place of business or main administrative office are quite a few. For example, Liu Yanmei filed a lawsuit against Beijing Yongkang Honglu Scientific and Technological Development Company Limited for settlement of the dispute over the franchise contract at the Court of Xicheng District (No.14404 (2008) XMCZ), but the Court held that the main place of business or main administrative office of the defendant is located in Chaoyang District and consequently transferred the case to the People抯 Court of Chaoyang District.

The ruling verdict paper issued by Shanghai Pudong New Area People抯 Court for the dispute over the purchase & sale contract between two electrical appliances companies (No.2065 (2005) PME (S) CZ) approves the objection to jurisdiction pursuant to the practice that a legal person's domicile refers to its main place of business of main administrative office.

(2) Cases where a legal person's domicile is regarded as its registered address on the business license include:

A legal person's domicile shall be subject to the place registered with the registration authority, i.e. in real practices the domicile is located at the registered address on the business license. The Verdict No. 8 (2001) MSZZ of the Supreme People抯 Court gives testimony to this judgement (The ruling verdict paper reads: 搃t is verified through investigation that the domiciles of both Glocal Communication and Haier Air-conditionner are located in Qingdao City, Shandong Province, which is evidenced by the two companies' business licenses.?

In accordance with the common practice adopted by Shanghai courts, it is commonly accepted that a legal person's registered address is deemed as the place where the court has the jurisdiction. And according to the common practices of the case filing chambers and judicial tribunals of Shanghai courts, if the plaintiff files a lawsuit to the court and claims that its domicile is located at the registered address on the business license, the court, generally speaking, does not investigate into this information. In this connection, similar verdicts of Shanghai No.2 Intermediate People's Court and Shanghai Pudong New Area People's Court can also be referred to. The Verdict No. 29 (2009) HEZMW(Z)ZZ of Shanghai No.2 Intermediate People's Court and the Verdict No. 34 (2007) PMS(Z)CZ of Shanghai Pudong New Area People's Court both state that "a legal person's domicile registered with the state administration for industry and commerce (i.e. the registered place) shall be regarded as its main place of business or main administrative office and is granted the effect of demonstration".

It is worth noting that neither the explanations given by Beijing Higher People's Court nor the real practices adopted by Shanghai courts have made any breakthrough to Article 4 of Opinions of the Supreme People抯 Court on Several Issues concerning the Application of Civil Procedure Law of the People抯 Republic of China. The main place of business and main administrative office are still connected with the jurisdiction of a legal person's domicile, and the difference is that Shanghai courts have presumed a legal person's registered place as its main place of business or main administrative office in light of the effect of demonstration of the registered place.

(3) What needs to be taken into account for determining a legal person's main place of business and main administrative office in real practices

Article 6 of Questions and Answers concerning Civil and Commercial Trial of Shanghai Courts in 2005 (VI) of Shanghai Higher People's Court stipulates that a legal person's domicile refers in principle to its main place of business or main administrative office. Only when the evidence adduced by the litigant is insufficient for affirming this or when it is impossible for the court to investigate and verify this shall the enterprise's registered place be deemed as the enterprise's domicile. To understand how to define that the evidence adduced is sufficient to prove a legal person's main administrative office, we may refer to the existing court verdicts, such as Verdict No. 59 (2005) of HGMS(S)ZZ. In addition to the address of service and pictures of the place of business, such other factors as provisions of the contract in the present case, business invoices, tax vouchers, etc. can also be used as evidentiary materials.

Besides, area of the place of business, nature of the administrative office, the service time of the main place of business or main administrative office, etc. are also taken into account by the courts.

With regard to the dispute over the jurisdiction between Shanghai Zhonglu Media Company Ltd. and Shanghai Haibei Corporate Image Design Company Ltd. (No. 466 (2004) of HYZMS(S)ZZ), both the court of first instance and the court of second instance confirmed that No. 832 Huamu Road is the administrative office and office of finance department of the appellant's legal representative (the defendant of the first trial), and accordingly determined that this place is the appellant's (the defendant of the first trial) main administrative office.

For example, Chen Tong filed a lawsuit against Beijing Qianxiang Scientific and Technological Development Company (hereinafter referred to as Qianxiang Company) for Qianxiang Company's infringement upon Chen Tong's copyright (No. 10446 (2006) of YZMZZ of Beijing No.1 Intermediate People's Court). In this case, the registered place of the defendant Qiangxiang Company on the business license is Xueyuan Road that is directly under the jurisdiction of the Court of Haidian District, but Chen Tong claimed that both Qianxiang Company's main administrative office and main business activities are in Chaoyang District and for this reason raised an objection to the jurisdiction. After hearings, both the court of first instance and the court of second instance claimed that although a company's registered place might generally be considered as the basis for determining the company's domicile, in this case, the evidence adduced by Qianxiang Company could prove that the area of the office it rented in Chaoyang District is far larger than that of the administrative office it rented in Haidian District, and therefore the domicile of the defendant Qianxiang Company could be deemed as in Chaoyang District.

(The author抯 contact information: baileyxu@hllawyers.com, celinechen@hllawyers.com)

 

Brief Analysis on Controversial Key Clauses of "Goods Transport Contract"

With the globalization of world economy and improvement of domestic transportation network, logistics and transportation industry is enjoying a fairly rapid growth in China. As the basis for logistics and transportation business, generally speaking, "Goods Transport Contract" consists of standard clauses drafted by the carrier or the agent for goods transport. Therefore, as the shipper, every enterprise or consumer shall pay special attention to each 搕rap?in the "Goods Transport Contract" so as to protect their own interests to the greatest extent in case disputes occur. On the other hand, every logistics enterprise shall conclude contract terms and conditions in accordance with law in order to avoid some terms and conditions being held null and void by the court when disputes arise and consequently being forced to bear liabilities.

Concluded from real practices of and research into different cases by the author, the following three clauses tend to give rise to disputes in the "Goods Transport Contract".

1. Exmption Clauses

As prescribed by the "Goods Transport Contract", it is the core obligation of the carrier to safely and timely deliver the goods to the destination, which is also the fundamental purpose of both parties hereto when they conclude the contract. Therefore, damages or losses of cargoes during shipment is the most common cause of disputes in the "Goods Transport Contract". Article 311 of the Contract Law of the People抯 Republic of China stipulates that the carrier is liable for damages in case of damages or losses of the cargoes in the course of carriage, unless there is any evidence proving that such damages or losses of the cargoes are caused by force majeure, the intrinsic characteristics and reasonable depletion of the cargoes, or the fault of the shipper or consignee.

In real practices, the carrier sometimes will, in addition to the statutory grounds of relief that already exist, supplement to the contract some clauses relieving its liabilities for damages, which to some extent increases the burden of the shipper. Pursuant to Article 40 of Contract Law of the People抯 Republic of China, the standard clauses supplemented by the party that relieve itself from liabilities, increase liabilities of the other party, and deprive the material rights of the other party shall be held invalid. Therefore, in judicial practices, the exemption clauses other than statutory grounds of relief will be held null and void.

2. Limited Indemnity Clause The legal rights and interests of the shipper concerning ownership of the liability for damages or losses of goods are fully protected by law , but it does not necessarily mean that the total damages to be paid by the carrier to the shipper is equal to the actual losses incurred by the shipper. Pursuant to Article 312 of the Contract Law of the People's Republic of China, in case of damages or losses of the cargoes, the damages payable is the amount agreed by the parties hereto; if the amount of damages is not agreed or is not clearly agreed, it shall be calculated on the basis of the prevailing market price at the destination when the cargoes are or ought to be delivered. In other words, in case both parties hereto explicitly agree on the maximum damages to be borne by the carrier, the shipper may be not able to cover all the losses incurred.

Up until now, provisions on the maximum indemnity quota of the carrier in the "Goods Transport Contract" are prevalent in logistics industry. Though such provisions tend to increase the risk incurred by the shipper, they yet reduce the much too high risk borne by the carrier when the carrier provides transport services, which thus is conducive to the development of the logistics industry. Therefore, it is not prohibited by law that the parties to the "Goods Transport Contract" agree on the indemnity quota, but the carrier shall supplement such clauses to the Contract in a legitimate manner to avoid them being held null and void. If the carrier has already highlighted the clauses of indemnity quota appropriately in the Contract (e.g. inserted such clauses in an appropriate position of the Contract and clearly marked them to catch the shipper's eyes ), or it has even obtained the signature of the carrier in the signature column, under which circumstances, such clauses shall be held effective and valid.

3. Insurance and Concurrent Insurance Agency Clauses

In case the value of the goods carried by the carrier is relatively high and accordingly the indemnity quota borne by the carrier does not agree with the risk borne by the shipper, the shipper usually may choose support value clauses to increase the carrier's indemnity limit. The shipper shall pay additional fees to the carrier for support value while the carrier may regard itself as the insured and purchase insurance from an insurance company for such transport business to shift the risk borne by itself. In real practices, lawful and effective support value clauses in the Contract will be given priority to, but the logistics company shall also avoid the support value clauses being held null and void as standard clauses when drafting them.

Another way of shifting risks in real practices is that the carrier concurrently undertaking insurance business purchases the insurance on behalf of the shipper. Accordingly, the shipper may claim for indemnities against the insurer in case of damages or losses of the goods so as to cover its own losses. However, under such model, the shipper shall pay special attention to the following two aspects:

(1) In case there are some effective clauses of indemnity quota agreed in the "Goods Transport Contract", the liability for indemnification by the carrier to the shipper shall be not higher than the indemnity quota under such clauses, regardless of whether or not the shipper has already indemnified the insurer. On the other hand, the clauses for settlement of claims in the transport insurance contract pose more uncertainties to the shipper, thus it is suggested that under the circumstances where the carrier concurrently undertakes the insurance business, the shipper should fully interpret the clauses in the insurance policy and clauses of settlement of claims in order to assess the risks it is confronted with.

(2) Pursuant to provisions of Interim Measures on the Administration of Concurrent-Business Insurance Agency in China, the agent抯 application for qualification of concurrently undertaking the insurance business shall be submitted by the principal insurance company to China Insurance Regulatory Commission (CIRC) for approval and CIRC shall issue a 揅oncurrent-Business Insurance Agency License?to the examined and approved concurrent insurance agent, and the enterprise concurrently undertaking the insurance business may undertake the insurance business on behalf of only one insurance company. Therefore, the shipper shall note whether the carrier concurrently undertaking the insurance business has the required qualification in order to avoid such possibilities as a fraud or a circumstance that invalidates insurance during the concurrent insurance agent business.

(The author抯 contact information:rickylv@hllawyers.com)

 

Administrative Measures for Equity Investment Administrations for Tianjin Equity Investment Enterprises by Tianjin Municipal People抯 Government

On July 11, 2011, Tianjin Municipal Development and Reform Commission, Tianjin Municipal People抯 Government Financial Affairs Office and other three authorities jointly promulgated the Administrative Measures for Equity Investment Administrations for Tianjin Equity Investment Enterprises (hereinafter referred to as the Administrative Measures). The Administrative Measures is a substitute for the previous Trial Measures for Registration and Archival Filing Administration for Tianjin Equity Investment Funds and Equity Investment Funds Management Companies (Enterprises) (No. 813 [2008] of Tianjin Municipal Development and Reform Commission), specifying more detailed standards for establishment of equity investment enterprises and equity investment management companies, fund-raise and investment, risk control, information disclosure, archival filing administration and so on. The Administrative Measures became effective as of September 1, 2011, in virtue of which, equity investment institutions in Tianjin will have more standardized formalities for registration, trusteeship, filing, operation, etc.

Compared with the previous Trial Measures for Registration and Archival Filing Administration for Tianjin Equity Investment Funds and Equity Investment Funds Management Companies (Enterprises) (No. 813 [2008] of JFGCJ) promulgated in 2008, the new Administrative Measures highlights the changes in the following aspects:

Firstly, the organizational form of equity investment enterprises and their administrations is further defined.

The Administrative Measures clearly stipulates that equity investment enterprises and equity investment management institutions may be established in the form of a company limited by shares, a limited liability company and a partnership, but equity investment enterprises shall not be established in the form of general partnership which, on the other hand, can be adopted by an equity investment management institution.

Secondly, the threshold for registration of equity investment enterprises and administrations is raised.

For the registered (subscribed) capital of equity investment enterprises and administrations, the Administrative Measures stipulate that it shall be no less than RMB 100,000,000, in particular, the first-phase capital actually subscribed by partnership equity investment enterprises shall be no less than 10,000,000; the first-phase capital actually subscribed by equity investment administrations shall be no less than RMB 2,000,000. All corporate equity investment enterprises and equity investment administrations shall comply with the provisions of relevant laws and regulations on the proportion of first-phase subscribtion. In addition, the Administrative Measures require that all equity investment enterprises and equity investment administrations shall sign and seal the Letter of Commitment to Legal Compliance of Fund Raise and get the Risk Indication Letter.

Thirdly, requirements on the capital contribution of investors are explicitly specified.

The Administrative Measures abide by the principle of conservatism, requiring that natural person investors shall possess capabilities for risk identification and risk resistance with good credit standing and respectability. Each natural person investor shall subscribe (contribute) at least RMB 2,000,000; where a natural person is a contributor of an equity investment enterprise, it shall provide the relevant equity investment administration and custodian bank in charge of trusteeship with a certificate of self-owned financial assets amounting to RMB 2,000,000 or above, which shall be produced by the relevant financial institution; meanwhile, for institutional investors, each of them is required to subscribe (contribute) at least RMB 10,000,000 and it is prohibited that multi-investors entrust a certain investor to subscribe capital to the investment enterprise.

Fourthly, compulsory trusteeship of fund is carried out and management of custodian banks in charge of trusteeship for equity investment enterprises is intensified.

The Administrative Measures make specific provisions on the definition of trusteeship business of equity investment enterprises, qualifications for, duties of and business process of custodian banks, etc. The Administrative Measures stipulates that the funds of equity investment enterprises is subject to compulsory trusteeship and the custodian bank in charge of trusteeship shall strictly abide by relevant laws and regulations of the State on anti-money laundering and be equipped with software and hardware conditions required for prevention of illegal fund raise. Next, the custodian bank shall meet such conditions as with a qualification for fund assets trusteeship, with a legal person commercial bank registered in Tianjin or a Tianjin sub-branch authorized by the head office of the commercial bank, with a special trusteeship business department, with a sound system of trusteeship business management, operation and risk control and the related hardware facilities.

Fifthly, archival filing administration of equity investment enterprises is intensified.

The Administrative Measures stipulates that an enterprise with a total capital of over RMB 500,000,000 or the currency equivalent must be subject to the preliminary examination by Tianjin Municipal Development and Reform Commission and then be transferred to National Development and Reform Commission for archival filing in accordance wtih the relevant provisions of Circular of the General Office of the National Development and Reform Commission on Further Standardizing the Development and archival filing Management Work of Equity Investment Enterprises in Pilot Areas; an equity investment enterprise with a registered (subscribed) capital of over RMB 100,000,000 or the currency equivalent and less than RMB 500,000,000 or the currency equivalent must apply with the municipal archival filing office for archival filing and the equity investment administration shall also be filed for record by way of parenthesis.

Meanwhile, the Administrative Measures specifies that only those equity investment enterprises and equity investment administrations that have been filed for record may enjoy the relevant preferential policies as set out in Measures for Promoting the Development of the Industry of Equity Investment Funds (No. 45 [2009] of JZF). On the other hand, equity investment enterprises that should have been filed for record but not shall be considered as 揺quity investment enterprises and trustee administrations that evade archival filing regulation?and will be publicized via websites of Tianjin Municipal Development and Reform Commission and Tianjin Private Equity Association. Lists of the aforementioned equity investment enterprises will also be handed over to the relevant authority by the municipal archival filing office for administrative punishment.

In addition, it is worth being noted that equity investment enterprises and equity investment administrations as set out in the Administrative Measures include domestic-funded enterprises and foreign-invested enterprises, but there is not yet any explicit regulation for registration, examination and approval of foreign-invested equity investment enterprises and equity investment administrations; what can be referred to is simply 搘here there is otherwise a stipulation on the examination and approval of foreign-invested equity investment enterprises and equity investment administrations, such stipulation shall be applicable?

It can be concluded that the Administrative Measures is intended for regulating and promoting the development of equity investment enterprises and their administrations in a healthy manner and strictly guarding against financial risks, illegal fund raise, etc.. This is conducive to the registration, trusteeship, archival filing and business operation of Tianjing equity investment enterprises and equity administrations and also beneficial to the protection of investors' legitimate rights and interests.