Asialaw Asia-Pacific In-house Counsel Summit 2015 - Key Takeaways

May 27 2015 | Kowloon Shangri-La Hotel, Hong Kong


Maximising value through cross-border M&A deals

• Engaging the right local counsel who understand cultural and language barriers is essential in cross-border deals
• When identifying target companies, potential for growth and to become global are the key attractive factors
• A main challenge when conducting legal due diligence is ascertaining credibility of financial accounts and validating financial projections
• There is a shift in perception that Asian buyers are disadvantaged in an M&A auction process. Ultimately, M&A deals are a people business and there are increasingly more instances of an Asian buyer, with an established relationship with the Western target, making integration easier
• Do not underestimate the relief that boilerplate provisions can bring to a cross-border transaction

Foreign investment in China
• The released draft on the Foreign Investment Enterprise law is a positive step forward to help clarify how to do business in China
• Uncertainty remains with existing investment structures that won’t fit in well with the new law and whether structures should be changed
• Depending on the type of business, some market participants’ reaction has been to remove VIE structures in order to enter the Asia market
• The National Security Review procedure still has some uncertainty with timeline control and scope of regulators’ enforcement power
• There is an expectation that MOFCOM enforcement for compliance with foreign investment law will become the next big topic

Adding value: building global supply chain integrity
• Selecting the wrong partner to cooperate with may result in higher costs to the business, damaging business reputation, causing delays and loss of future business
• Businesses must conduct thorough due diligence checks - it is inadequate to simply include a limitation of liability clause in the contract
• It is best to make announced and unannounced physical visits to suppliers and third parties
• In-house counsel lawyers should develop a systematic global or regional programme to mitigate risks the best they can
• Conducting regular risk assessment is key and must be aligned with the business strategy

Recent anti-corruption and compliance trends and implications on businesses in Korea
• The much anticipated Kim Young-ran Law comes into effect on September 2016, giving companies sufficient time to understand its impact and implications
• The new law significantly expands the scope of application to public officials and others, as well as reaching their spouse
• Corporate liability will be imposed for improper benefits or payments by employees. There is potential relief if a company can show it has exercised due care and supervision to prevent the improper activity
• New developments are seen as positive in persuading businesses that it is good business sense to be compliant

Roadmap for Philippines
• The Philippines government has established a PPP framework; a positive step towards improving local infrastructure
• Institutions are gaining strength locally and are confident they will be able to endure and adapt to political changes
• Process of due diligence is improving, making it more transparent for companies to invest into the country
• The trend for deals that encounter problems is to enter into arbitration, knowing that dealing with local courts can lead to delays
• It is important for parties dealing with the Philippines to choose the right seat for disputes. Enforcement in other countries may be more efficient and swift

Cross-border data transfers and privacy challenges
• In-house counsel face a challenge of standardising data privacy policies with varying compliance requirements across the region; jurisdictions with the highest requirements are South Korea and Australia
• There are more cases of class action being brought against companies for data privacy breaches; which is becoming increasingly hard to control under a cross-border environment
• It is the regulators’ practice now to name and shame corporates in the event of data breach. There is less room for negotiations and corporates should have a response team ready
• Data breach and challenges will inevitably happen to each business in some form. This is becoming the new norm and will have a quick reaction on a company’s share price
• Businesses must understand the purpose of the data being collected and used, which will help map out a legal remedy and approach to handling data

Preparing for full implementation of the Competition Ordinance in Hong Kong
• The Competition Commission is finalising its guidelines now; working on leniency policy and an MOU with communications authorities
• Enforcement will be focused on anti-competition agreements and substantial market power abuse
• Construction industry will be impacted considering joint ventures is common practice; the ordinance will imply a cultural shift in market practices in Hong Kong
• The distinction between price fixing cartel and information exchange is fine and important
• The Commission will have the power to investigate and bring cases before the tribunal. Penalties imposed will be decided by the tribunal alone

Conducting internal investigations and minimising costs to your business
• Increasingly, financial services regulators are becoming more active with more emphasis on whistleblowing activities
• Regulators now have a higher expectation for companies to engage in transparent dialogue and to cooperate with regulators; there is more pressure on notifications and self-reporting from a companies’ perspective
• There are various channels to identify problems that may be escalated to the regulators’ attention; including complaint hotlines, ethics hotlines and whistleblowing
• When it comes to China, it is more productive to report misconduct to headquarters and have them lead the investigation
• Various factors impact whether an investigation warrants hiring an external investigator, an example is the benefit of privilege.

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