Viewpoints

168 articles

• 2026-10-15

  Reinstatement claims after Judicial Interpretation (II)

  Judicial Interpretation (II) has clarified what "objectively impossible to perform" means, and courts now lean towards granting reinstatement where an employer relies only on a loss of trust, on the employee's post having been filled, or on the employee's complaints about colleagues. Claims still succeed most readily where the employee falls within a protected category, such as pregnancy, a work-related injury or a medical treatment period. Employers should terminate with care, and employees should weigh the cost of litigation before insisting on reinstatement.

• 2026-10-10

  Can an employer unilaterally terminate an expired employment contract more than one month later?

  Under Judicial Interpretation (II), in force since 1 September 2025, an employer has one month after an employment contract expires to end the relationship lawfully by paying economic compensation (N). Once that month passes without any objection from the employer, the employee acquires a right to renew on the original terms, the employer loses the right to terminate at will, and any termination becomes unlawful, triggering statutory compensation of 2N. Employers should set expiry alerts and decide on renewal early, while employees who wish to stay should request renewal in writing within the month.

• 2026-09-22

  Can an employer recover losses caused by an employee's serious dereliction of duty?

  Where an employee's serious dereliction of duty causes loss, an employer may both dismiss for serious breach of discipline and claim damages, but such claims are demanding on evidence. Arbitration and adjudication bodies usually apportion only part of the loss, weighing the employer's ordinary business risk, causation, the employee's degree of fault, the fairness of risk-sharing and any supervisory failure by the employer. Losses caused by ordinary negligence are generally treated as business risk, while intentional misconduct or gross negligence may attract liability, sometimes in full. Setting off loss against wages is capped at 20 per cent of monthly pay.

• 2026-08-24

  Can employers in Shanghai set sick pay at their own discretion?

  Shanghai's 1995 notice on sick pay for enterprise employees lapsed on 15 August 2026, and employers have been asking on what basis sick pay should now be paid. The fallback is the 1995 Ministry of Labor opinion, which requires sick pay during the medical treatment period to be no less than 80 per cent of the local minimum wage. Where internal rules still reproduce the old notice, its formula continues to apply in substance; where they do not, employers must now set the rate themselves. Shanghai's rules on medical treatment periods are unchanged.

• 2026-08-07

  Automatic renewal clauses and claims for double wages

  Clauses providing for automatic renewal of an employment contract on expiry, whether in the contract or in the employee handbook, are generally upheld in Shanghai, so an employee cannot claim double wages simply because no new written contract was signed. The outcome turns on proof: where the employer cannot show that the handbook was actually delivered to the employee, a renewal clause in it will not defeat a claim for double wages. Beijing, Jiangsu, Zhejiang and Jilin take a similar approach. Employers should nonetheless use such clauses with care after the 2025 change on open-ended contracts.

• 2026-07-24

  Is a borrowed salary scheme unlawful?

  A borrowed salary scheme pays a fixed "guaranteed salary" when an employee earns no commission, then deducts those payments from later commission, so that the guaranteed salary is treated as a loan. Whether the scheme is lawful depends first on whether the parties are in an employment relationship: outside one, the arrangement is an ordinary loan and is valid if genuinely agreed. Inside one, it is not necessarily unlawful, but the employee's take-home pay must not fall below the minimum wage and the advance must be genuinely voluntary.

• 2026-07-04

  What is the difference between standby duty and overtime?

  A travel agency paid an employee RMB 1,000 a month to handle customer ticket enquiries in a WeChat group between 6 pm and 10 pm after work. When she was dismissed she claimed four hours of overtime for that period, and the courts refused it: where an employer assigns standby duty connected with the employee's own work but the employee may rest during it, the time is not overtime. The courts contrasted standby duty, being on call in a special period, with overtime, and calculated economic compensation on the basic wage alone.

• 2026-06-24

  What counts as 12 months of continuous employment for annual leave, and how to prove it

  Whether a newly hired employee may take paid annual leave at once turns on the requirement of 12 months or more of continuous employment. Beijing and Tianjin treat any earlier 12-month continuous period as sufficient, however long the gap before joining; Chongqing allows a gap of up to one month; the Pudong court in Shanghai and Shenzhen require the two employments to dovetail, so that two working days between jobs restart the clock. Employers should check local practice, and may ask for the termination certificate, social insurance records, the former contract and wage statements as proof.

• 2026-06-12

  Are rehired retirees the same as over-age workers? Questions and answers on the Interim Provisions

  The Interim Provisions on the Protection of the Rights and Interests of Over-Age Workers take effect on 1 July 2026, after the repeal of the rule that treated retirees drawing a pension as being in a service relationship. The Provisions cover anyone above the delayed statutory retirement age who works under an employer's management for pay, whether or not retirement formalities have been completed, so a rehired retiree is not automatically an over-age worker. Employers must sign a written work agreement, pay work-related injury insurance and protect four basic entitlements, but no statutory annual leave arises.

• 2026-05-19

  Does the new traffic accident interpretation settle the overlap with work injury claims?

  Where an employee is injured in a traffic accident on the way to or from work and the accident is not mainly his or her responsibility, both tort damages and work injury benefits may be available. The courts have long allowed limited double recovery: medical expenses are compensated once only, while items such as disability compensation and lost wages may be claimed under both routes. Article 10(1) of Judicial Interpretation (II) on road traffic accident damages confirms that sums already paid from the medical and work injury insurance funds cannot be claimed again from the tortfeasor.

• 2026-05-13

  Can an employer cut pay across the board through a democratic procedure when business is poor?

  Practice divides on whether an employer in financial difficulty may cut pay for all staff through a democratic procedure. Many courts hold that a democratic procedure cannot replace individual agreement, so a resolution does not bind an employee who expressly objects, and that a cut aimed at one department is unlawful. Others uphold an across-the-board cut where the employer proves serious losses, follows the democratic procedure and keeps the reduction reasonable. Shanghai courts have accepted cuts of 33 and 10 per cent on that basis, and a Jiangsu collective contract gave a negotiated cut binding force.

• 2026-04-05

  Is an employer liable for double wages when an employee signs a blank employment contract?

  Where an employee signs a blank employment contract that the employer completes later, practice divides on whether double wages are payable. Some courts hold that a contract missing the mandatory terms does not satisfy the formal requirements and that the consequences fall on an employer that required the employee to sign first and fill in later. Others treat the signature of a capable adult as authority to complete the contract. Courts in Shanghai lean to the second view: missing terms make the contract incomplete, not absent, so no double wages are owed.

• 2026-03-24

  When an employee disappears: what should the employer do?

  An employee may suddenly become uncontactable because the police have restricted his or her liberty, because the person has fled with family to avoid debts, or because of a suspected suicide attempt or a sudden collapse at home. Treating the absence as an automatic resignation, or simply terminating, carries real legal risk. The employer should first make contact through every channel, serve a notice requiring return to work, keep a record, and only then dismiss for serious breach, notifying the trade union. Because the notice must be capable of service, a contractual address should be agreed at the outset.

• 2026-03-07

  Must an employee work the full 30 days after resigning, and can the employer dismiss in that period?

  An employee who resigns must give 30 days' written notice, but leaving sooner does not invalidate the resignation; it may only expose the employee to liability for any loss caused. Conversely, the 30 days exist to protect the employer, which may waive the period and agree an earlier end date. The notice period does not suspend the contract: if the employee commits serious misconduct during those 30 days, the employer may still dismiss for serious breach, provided it proves the case.

• 2026-02-21

  Must the employer pay medical costs that the work injury fund refuses to cover?

  Where treatment for a work-related injury costs more than the work injury insurance schedules allow, regional practice divides into five positions: sharing between employer and employee (Jilin, Xiamen, Wuxi); no employer liability unless agreed (Zhejiang, Chongqing, parts of Shanghai and Guangzhou); employer liability for necessary and reasonable treatment unless it proves the cost unrelated to the injury (Beijing, Hubei, Hunan, Shandong, Jiangxi, Jiangsu and most other regions); no liability at all (Fujian, Shenzhen, Shanghai); and strict employer liability (Chaoyang, Xi'an, Hebei). Shanghai's High Court leans to the fourth.

• 2026-02-03

  Does poor performance or a failed appraisal amount to being incompetent for the position?

  Employers often treat a weak sales record or a failed performance appraisal as proof that an employee is incompetent, which allows reassignment and then dismissal under Article 40 of the Labor Contract Law. The courts require more: results depend on the market, the product, the targets and the support given as well as on individual ability, so a missed target or a low monthly score does not on its own establish incompetence. The 1994 Ministry of Labor guidance defines incompetence by reference to the contractual tasks or the workload of comparable employees.

• 2026-01-15

  When special working hours are not approved, what can an employer do under the standard system?

  Employers in Shanghai face stricter scrutiny of applications to use comprehensive or non-fixed working hours, and many guard and cleaning posts that routinely work 12 hours or more can no longer obtain approval. The standard system then applies, and hours beyond eight a day become overtime. The article sets out lawful ways to organise work: shorter shifts with more staff, flexible weekly rest days, a six-day week within 40 hours, piece rates, time off in lieu for rest-day overtime, and standby duty. Daily hours must still respect the overtime cap.

• 2025-05-14

  New rules in May 2025: what changes

  This round-up covers seven sets of rules taking effect in May and June 2025: the revised marriage registration regulations, in force on 10 May and introducing nationwide registration; the Supreme People's Court interpretation on prepaid consumption contracts, in force on 1 May and aimed at unfair standard terms and operators who take payments and disappear; the Rural Collective Economic Organisation Law and the Private Economy Promotion Law; the rules on religious activities by foreigners; the courier regulations; and the provisions on classifying state secrets.

• 2025-02-18

  The limits of an employer's autonomy in employment: job reassignment as a test case

  Using job reassignment as its focus, this article examines the limits on an employer's autonomy in employment, drawing on more than 30 Shanghai judgments. Courts accept reassignment where the contract, the internal rules or the statutory grounds allow it, but require that pay not fall significantly, that the new post be comparable and not demeaning, and that the employer follow a proper procedure and prove the business need. The author argues that autonomy must satisfy legality, reasonableness and proper procedure, and tests practice against the six unlawful scenarios listed in the 2023 draft judicial interpretation.

• 2023-05-15

  New rules in May

  This digest collects national and Shanghai rules of spring 2023. At national level it covers the notice allowing mortgaged property to be transferred without first repaying the loan, the three revised antitrust regulations on monopoly agreements, abuse of dominance and merger review, the rules on abuse of administrative power, the enforcement procedure of the cyberspace administration, and two model texts on harassment and on the protection of women employees. For Shanghai it lists the regulation on social fire-fighting organisations and the measures on art museums, with publication and commencement dates for each.

• 2023-05-15

  Preventing sexual harassment in the workplace

  Sexual harassment entered the Law on the Protection of the Rights and Interests of Women in 2005, and each amendment since has tightened the rules. Article 1010 of the Civil Code requires employers to adopt reasonable measures of prevention, of receiving complaints and of investigation and handling, and the 2023 revision of the women's law adds detail: Article 23 identifies the forms the conduct may take, Article 25 lists eight measures an employer must adopt and Article 80 attaches liability to an employer that fails in that duty. Two model texts released in March 2023 turn those rules into workplace policy.

• 2023-03-29

  Can a marriage be annulled?

  The Civil Code allows a marriage to be annulled on two grounds: where one party was coerced into it, and where one party failed to disclose a serious illness before the registration. The application must be made to a people's court within one year, running from the end of the coercion, from the restoration of personal liberty or from the discovery of the illness, and a marriage registration office has no power to annul a marriage at all. An annulled marriage has no legal effect from the outset, and the party without fault may claim damages.

• 2023-03-01

  New rules in March

  March 2023 brought a heavy batch of new rules, most of them taking effect on 1 March. At national level the Legislation Law was amended and twelve sets of measures and provisions were issued, covering related-party transactions of financial holding companies, private asset management by securities and futures institutions, overseas listings by domestic companies, consumer protection in banking and insurance, work-relief, food-related products, drugs, cosmetics, soil and water conservation, construction quality testing, and two model texts on harassment and on women employees. Shanghai's regulation on building a barrier-free environment also took effect.

• 2023-03-01

  Does income from separate property become joint property after marriage?

  Income produced during marriage by one spouse's separate property falls into three categories: investment returns, fruits and appreciation. Article 26 of the judicial interpretation on the Book on Marriage and Family provides that such income is, in principle, joint property, with fruits and passive appreciation excepted. The test is whether the spouse contributed to producing the income: returns on investment reflect active effort and are shared, while natural fruits and appreciation caused by inflation or the market are not. The interpretation does not confine separate property to assets held before the marriage.

• 2023-02-28

  Can a gift of a house between spouses be revoked on divorce?

  Where spouses agree, before or during the marriage, to give a house owned by one of them to the other or to hold it in common, and the donor revokes the gift before the transfer is registered, the courts deal with the dispute under Article 32 of the judicial interpretation on marriage and family and Article 658 of the Civil Code. The donor may revoke before the right in the property passes, unless the gift has been notarised or is of a public-interest or moral character. Once the transfer is registered the right to revoke at will is lost.

• 2023-02-06

  New rules in February

  February 2023 brought seven national measures and four from Shanghai, most of them taking effect on 1 February or 1 March. The national batch covers quality testing of construction projects, soil and water conservation plans, quality management of water conservancy projects, securities brokerage, banking and insurance statistics, medium- and long-term foreign debt of enterprises and industrial energy conservation inspection. Shanghai's four deal with the reuse of solid waste in Pudong New Area, with disinfection, with information infrastructure and with hearings in administrative penalty cases.

• 2023-02-06

  Is a loan agreement between spouses valid?

  The contract part of the Civil Code puts no limit on loan contracts beyond the ban on usury and the requirement that interest comply with state rules, and Article 82 of the interpretation on marriage and family recognises a loan between spouses where joint property is lent to one of them for a personal business or other personal affairs. Such an agreement is treated as an agreed disposal of joint property and may be dealt with under its terms on divorce. The lender must show the source of the funds, their personal use and the terms agreed.

• 2023-01-09

  New rules in January

  January brought five national rules and one from Shanghai. The measures on securities brokerage and on private asset management by securities and futures institutions tighten internal control and adjust the rules on equity investment, while those on medium- and long-term foreign debt, on regulatory statistics for banking and insurance, and on the price of water supplied by water conservancy projects deal with procedure, duties over data and a cost-plus-return method of setting tariffs. Shanghai's measures on disinfection were also issued.

• 2022-12-05

  Shanghai legislates on letting: the Housing Leasing Regulations, part one

  Shanghai's new Housing Leasing Regulations, examined here in the first of two parts, ban the use of a dwelling for group renting, the subdivision of a bare flat into rooms let cheaply to many people. Article 15 requires the smallest letting unit to be a room as originally designed or lawfully converted, forbids letting kitchens, bathrooms, balconies and storage space as living accommodation, and limits occupants and floor area per person. Article 52 sets fines of RMB 10,000 to 50,000, rising to RMB 200,000 if the breach continues.

• 2022-12-01

  How child support is decided on divorce

  Article 1067 of the Civil Code gives "child support" a wide meaning: it covers the child's living costs, education and medical expenses. Where the parents cannot agree, a court decides, taking the child's best interests as its first consideration, so that the child's needs are met at the local standard of living and the burden is shared according to what each parent can afford. The interpretation sets the usual figure at 20 to 30 per cent of monthly income, payable until the child is 18, and allows the amount to be raised later.

• 2022-12-01

  New rules in December

  December's batch of new rules is largely made up of rules published in November 2022. The private pension scheme lets participants open an account through a commercial bank or the unified national online service, with contributions capped at RMB 12,000 a year and tax relief attached. The other measures deal with the off-balance-sheet business of commercial banks, the supervisory assessment of corporate governance, deep synthesis of internet information, the real-name system for railway passenger tickets, app-based ride-hailing services and comprehensive agricultural administrative enforcement.

• 2022-11-08

  When may a divorce not be filed?

  Three situations restrict the filing of a divorce. A husband may not file while his wife is pregnant, within one year of the birth or within six months of a termination of pregnancy, unless she files or the court considers his request necessary to accept. The spouse of a soldier on active service needs the soldier's consent, unless the soldier is seriously at fault. And where a court has refused a divorce or the parties have been reconciled, the plaintiff may not sue again within six months without new circumstances or grounds.

• 2022-11-06

  The divorce cooling-off period

  Where spouses apply to a registration office to divorce by consent, the Civil Code imposes a cooling-off period of 30 days from the date the application is received, during which either of them may withdraw it. If neither withdraws, the parties must appear in person within the following 30 days to collect the certificate; if they do not, the application is treated as withdrawn. The period applies only to divorce by agreement, not to litigation, so a spouse who has suffered domestic violence may still go to court.

• 2022-11-01

  New rules in November

  Three national laws adopted on 30 October 2022 headline the November round-up: a revised Law on the Protection of the Rights and Interests of Women, the Animal Husbandry Law and the Yellow River Protection Law, taking effect between 1 January and 1 April 2023. The same month brought the Regulation on Promoting the Development of Individual Industrial and Commercial Households, customs measures on goods in transit and rules on corporate food safety responsibility. Shanghai added provisions on residential community governance in Pudong New Area and a revised animal epidemic prevention regulation.

• 2022-10-27

  Financial assistance, economic compensation and damages on divorce: how do they relate?

  Three remedies available on divorce are often confused. Financial assistance under Article 1090 of the Civil Code applies where one spouse is in difficulty and the other can afford to help; no other condition is attached. Economic compensation under Article 1088 rewards the spouse who carried more of the family's obligations, such as raising children or caring for elderly parents, and does not depend on hardship. Damages under Article 1091 are available to the spouse without fault where the other committed bigamy, cohabited with another person, used domestic violence, abused or abandoned family members, or was guilty of other serious fault.

• 2022-10-27

  What is a void marriage

  A marriage certificate issued by the civil affairs bureau does not by itself make a marriage valid. Under the Civil Code a marriage is void on three grounds: bigamy, a prohibited degree of kinship, or a party below the statutory age of marriage, which is 22 for men and 20 for women. Either spouse or an interested person may ask a people's court to declare the marriage void, and the range of interested persons depends on the ground relied on. Such a claim cannot be withdrawn, and the court may declare the marriage void of its own motion.

• 2022-10-15

  How long must spouses live apart before they can divorce?

  Chinese law has no concept of automatic divorce: however long spouses live apart, the marriage does not end by itself, and it must be ended either by registration or by a court. Living apart for two years because of incompatible temperaments is a statutory ground on which a court must grant a divorce where mediation fails, but the separation must be a genuine cessation of married life, not separate bedrooms or absence for work or study. The Civil Code adds a second route: a further year apart after a court has refused a divorce.

• 2022-10-14

  New rules in October

  October 2022 brought both national and Shanghai measures. Nationally, public security organs gained detailed provisions on combating organised crime, and the banking regulator revised its licensing measures for foreign-funded banks, Chinese-funded commercial banks and rural small and medium-sized banking institutions, all effective 8 October. Measures on compliance administration by central enterprises took effect on 1 October. In Shanghai, measures on filing by occupational disease diagnosis institutions and a regulation promoting the artificial intelligence industry both came into force on the same day.

• 2022-10-12

  Are loyalty agreements signed during a marriage legally binding?

  Spouses sometimes sign a loyalty agreement promising fidelity and a fixed sum in damages if one of them has an affair. The courts have not been uniform: Shenzhen has accepted such claims, while courts in Shanghai and Jiangsu have refused to hear them, holding that fidelity is a moral rather than a legal duty. Since the Civil Code the Supreme People's Court has said that disputes over loyalty agreements are best not accepted at all. The agreement binds the parties in conscience but is not enforceable, and the law neither prohibits it nor gives it effect.

• 2020-12-14

  The Virtual Asset (Service Providers) Act will be phased in

  The Cayman Islands' Virtual Asset (Service Providers) Act, 2020, passed on 25 May 2020, requires anyone providing virtual asset services to register with or be licensed by the Cayman Islands Monetary Authority. The government has said the regime will start in two phases. From 31 October 2020 the focus is anti-money-laundering and counter-financing-of-terrorism compliance, supervision and enforcement; provisions on enforcement, penalties and offences apply from 31 January 2021; and the remaining provisions, including licensing, custody and trading platform requirements and the sandbox regime, are expected to commence in June 2021.

• 2020-12-14

  Voluntary liquidation of Cayman entities before 31 December 2020, and the new administrative fines

  As 2020 closes, anyone holding a Cayman company or limited partnership that no longer trades should decide whether to keep it, not least to avoid the annual government registration fee due in January 2021 and, in some cases, administrative fines. Voluntary liquidators of a Cayman company or an exempted limited partnership must hold the final general meeting or file the final dissolution notice by 31 January 2021. Funds registered with the Cayman Islands Monetary Authority should begin liquidation and file with CIMA before 31 December 2020. CIMA may now impose tiered administrative fines for breaches of nine regulatory laws.

• 2020-12-11

  The Cayman Islands is removed from the EU list of non-cooperative jurisdictions

  The Cayman Islands has been removed from the European Union's list of non-cooperative jurisdictions for tax purposes, a decision announced on 6 October 2020 and welcomed by the Islands' government and by the rest of its financial services industry. The EU decision recognises Cayman's continuing efforts to meet its standards on tax transparency and its continued commitment to widening the regulatory framework for investment funds and the reach of anti-money-laundering supervision. Cayman had been placed on the list in February 2020, and this was the first review of the list since then. Since 2018 the Islands have adopted a series of legislative measures, among them amendments to the Mutual Funds Act and a new Private Funds Act.

• 2020-12-11

  New amendments to the Cayman Private Funds Law

  The Private Funds (Amendment) Act, 2020, passed on 7 July 2020, amends the Private Funds Law, 2020 in several significant ways. It widens the definition of "private fund" and brings within registration with the Cayman Islands Monetary Authority certain corporate entities previously thought to be excluded: the principal business, spreading of investment risk and incentive scheme limbs of the definition have been deleted, and "issuing" has become "issuing or having issued" investment interests. It also requires those who value fund assets, act as custodian or monitor cash to identify, manage and monitor conflicts of interest and disclose them to investors.

• 2020-12-11

  The first Economic Substance Act annual report for a Cayman company is due on 31 December 2020

  Under the International Tax Co-operation (Economic Substance) Act (2020 revision), a relevant entity — a Cayman company, including an exempted company, a segregated portfolio company or an LLC — must satisfy the economic substance test for any relevant activity it carries on: conducting core income-generating activities in the Islands, being directed and managed there, and having adequate operating expenditure, physical presence and full-time employees there. Entities whose financial year ran from 1 January to 31 December 2019 had to file their first annual report with the Tax Information Authority by 31 December 2020. Failure brings a fine of 12,500 US dollars, rising to 125,000 US dollars.

• 2020-12-11

  Voluntary liquidation or striking off? Dissolution of a Cayman company may be achieved by striking off instead of voluntary liquidation

  Once a Cayman Islands company has ceased trading there are two main routes to voluntary dissolution: (i) voluntary liquidation or (ii) striking off. Either removes the company from the register kept by the Cayman Islands Registrar of Companies and it eventually ceases to exist. Where the company has entered into agreements or carried on transactions since incorporation, formal liquidation by solvent voluntary liquidation is the more usual and more appropriate course; where it has not, the simpler striking-off procedure may be considered. Striking off is cheaper and quicker, but creditors and shareholders may apply to restore the company for two years afterwards.

• 2020-12-02

  Game changer! Licensing requirements for virtual assets in the Cayman Islands, part 2

  Part 2 of this series examines the licensing requirements of the Cayman Islands' Virtual Asset (Service Providers) Act, 2020. A virtual asset is a digital representation of value that can be traded or transferred digitally and used for payment or investment, other than a digital representation of fiat currency; virtual service tokens fall outside the regime. Providing custody of virtual assets or operating a virtual asset trading platform requires a virtual asset service licence, while other virtual asset services require registration with the Cayman Islands Monetary Authority, which weighs the scale, scope and complexity of the business and the fitness of its controllers. A sandbox licence of up to one year is also available.

• 2020-12-02

  Game changer! Introducing the Cayman Islands virtual asset regulation, part 1

  On 25 May 2020 the Government of the Cayman Islands passed the Virtual Asset (Service Providers) Act, 2020, giving a legal framework for conducting virtual asset business in the Islands and for registering and licensing those who provide virtual asset services. Part 1 of this two-part series looks at registration. It explains what a virtual asset, a virtual asset service and a virtual asset service provider are, who must register with the Cayman Islands Monetary Authority, the continuing obligations that follow registration, the rules on issuing virtual assets above and below the prescribed threshold, and CIMA's supervisory and enforcement powers.

• 2020-11-29

  How should a small business structure its equity? A lawyer's view

  Many start-ups begin with a simple split of shares among the founders, but how that split is designed has a decisive effect on later financing rounds and on equity incentives for executives. Equal shareholdings are best avoided: contributions differ, and each financing round dilutes every shareholder by 10% to 20%, so the lead founder generally needs 60% or more to keep control. Allocation should follow capital, ability, professional background and contribution, and a founder who only puts in money might receive no more than 5%. Founders should also sign a shareholders' agreement and decide in good time on an option pool.

• 2020-11-29

  Training providers are collapsing: how to avoid the traps

  After years of breakneck growth, the social training sector is showing the after-effects of expansion that management could not keep up with. This year several well-known offline providers, among them Yousheng Education, Jushi Dazhen and Fanqietian, and the online provider Dada English, have closed branches or disappeared, leaving parents unable to obtain refunds. Rules issued since 2018 cap prepayment: no single charge may cover more than three months, and an online provider charging by lesson may not collect more than 60 lessons at a time. Parents should check reputation, ensure the contracting party matches the payee, and watch for rent or staffing problems.

• 2020-08-15

  Shanghai treated DC diet pills as narcotics, and a reversal has begun

  Several people in Shanghai who had taken Diet Clinic (DC) diet pills bought from Thailand were found by the police to be taking drugs and were penalised and ordered into community rehabilitation. Because the pills contain a controlled psychotropic substance, using them unlawfully can indeed amount to drug use. Counsel instructed by those affected argued that measured use of the pills for weight loss at normal dosage should not be so classified, and the police have accepted that argument and opened a review. Overdosing on the pills over the long term remains drug use.

• 2020-05-22

  A 26-year-old accused of fundraising fraud: what the offence involves

  Police in Lin'an, Hangzhou, have broken up a fundraising fraud in which a 26-year-old woman borrowed more than RMB 14 million over two years from friends and former classmates, promising high interest. She spent over RMB 3 million on beauty treatments alone, along with designer bags and other luxury goods, and circulated staged videos of property transactions to win lenders' confidence. Only about RMB 40,000 was left in her accounts when she was arrested, and more than 40 victims are involved. She has been arrested on suspicion of fundraising fraud.

• 2020-05-15

  New rules taking effect in May

  A batch of national and Shanghai rules took effect on 1 May 2020. The Supreme People's Court rewrote the rules on evidence in civil litigation, expanding the provisions on witnesses and confirming that instant-messaging and social-media records and other electronic data may be admitted as evidence. A regulation on payment of migrant workers' wages adds a penalty of 50 to 100 per cent on sums overdue. Shanghai's new rent standard for low-rent housing, its rules on building a science and technology innovation centre, and its rewritten fire safety regulation also came into force.

• 2020-04-20

  Using the law for protection against domestic violence

  A woman in Guangyuan, Sichuan, has publicly accused her husband of sixteen years of domestic violence, releasing video recordings and saying that he transferred assets during their divorce proceedings. The case has revived attention on what a victim can do. Leave the scene first and protect the head, neck, chest and abdomen; seek medical examination within 24 hours and keep the records; call 110 or the 12338 women's hotline; and apply to a court for a personal safety protection order, which can bar the abuser from the home and from contact.

• 2020-03-10

  Containment has moved from counter-attack to stalemate, which is no signal of safety

  Two villagers in Laowu village in Hubei's Yangxin county kept going out to the clinic and to shops and kept playing cards with neighbours after developing fever and a cough, concealing their condition, and seven cases of COVID-19 have now been confirmed in the village. The village party secretary issued passes allowing them through the checkpoint and then failed to follow up, and has been removed from her posts. Both villagers and the official may be liable for the offence of obstructing the prevention and control of infectious diseases. A stalemate in containment is not safety.

• 2020-02-12

  Force majeure in Belt and Road jurisdictions affected by the epidemic: Australia

  Australian federal law contains no statutory definition of force majeure, so relief depends on the clause the parties have written into their contract. Where a contract has no such clause, or where business is conducted on purchase orders alone, the common law doctrine of frustration may apply, with markedly different consequences: frustration usually discharges the contract as at the date of the frustrating event, so advance payments and deposits may not be recoverable. Chinese enterprises should confirm the wording of any force majeure clause before negotiating, and should include the epidemic expressly as a triggering event in future contracts.

• 2020-01-19

  Fujian man detained for endangering public safety after opening a gas cylinder to kill himself

  A man in Fengcheng township, Anxi county, Fujian, opened a gas cylinder in his rented room on the morning of 3 January intending to kill himself, refused to speak to the officers who came to talk him down, and threatened to ignite the cylinder and take those present with him. The surrounding buildings are all homes and a petrol station stands nearby; specialist police subdued him and the danger passed. Suicide is not itself an offence in Chinese law, but where the method endangers others or public safety it may be criminal, and he faces the offence of endangering public safety by dangerous means.

• 2019-12-27

  WeChat Moments is not lawless territory: what should friends stop posting?

  WeChat Moments is read daily by most users, and because it is semi-public and spreads easily, what is posted there is not unconstrained. Four categories of post are commonly unlawful. Defaming or insulting others infringes their right of reputation. Selling prohibited goods, from counterfeit drugs to controlled weapons and wildlife, may amount to producing or selling counterfeit drugs, illegal business operation or trafficking in protected wildlife. Spreading rumours draws detention under the public security rules, and inventing or circulating false threat information is a criminal offence.

• 2019-12-19

  A passenger who got off between stops was run over: who bears the liability?

  In Baoding, Hebei, in October 2019 a woman who had missed her stop asked the bus driver to stop outside a station. He was carrying no other passengers, so he pulled up in the overtaking lane; she ran out and was struck by a fast-moving dump truck and killed. Stopping outside a designated stop is a breach of both the road traffic rules and the rules on road transport. The driver may face criminal and civil liability, the bus company is the proper defendant in civil proceedings, and the truck driver's conduct must also be assessed.

• 2019-11-19

  What can be done about a barrage of advertising text messages?

  Downloading an app or buying something online is often followed by a flood of marketing texts that cannot be unsubscribed, even where the message invites a reply of "T". Sending bulk advertising without the recipient's consent breaches the Advertising Law and the rules on short message services, which carry fines of up to RMB 30,000. Consumers can report the sender to the 12321 centre for spam and unwanted online information or to the market supervision authorities, ask their telecoms operator to block such messages, and sue where their personal information has been disclosed.

• 2019-11-19

  A restriction on high spending does not make a person a laolai

  On 9 November 2019 the China Enforcement Information Disclosure website recorded that the Jiading District People's Court in Shanghai had issued an order restricting consumption against Wang Sicong, in enforcement of a judgment debt owed by Shanghai Panda Interactive Entertainment Culture. A person subject to enforcement is not the same as a "laolai", the dishonest judgment debtor who has the means to pay and refuses; the second status follows only if the order is disobeyed. Both, however, carry the same restrictions on flights, luxury hotels, property purchases and private schooling.

• 2019-11-19

  Can a taolu loan be recognised on sight?

  A student who searched online for an abortion clinic was quoted RMB 1,350, was charged RMB 2,000 for tests on arrival, and was then steered into borrowing over RMB 20,000 for the procedure, ending up with a bill of RMB 23,000. The case has renewed attention on taolu lending: lending designed from the outset to manufacture a false debt and seize the borrower's property. Its hallmarks are a low threshold, high interest and unlawful debt collection. Shanghai's courts began a campaign against it in 2017, and joint opinions issued in 2019 set out how it is to be charged.

• 2019-11-19

  Man detained after exposing himself to a 12-year-old girl

  A 37-year-old man exposed himself to a 12-year-old girl beside the toilets in a Shenzhen shopping centre on 28 August 2019; her father called the police and officers arrested him the same day. The centre's manager said it was not his first offence. Exposure is ordinarily an offence against public order punishable by detention, but exposing oneself to a child under 14 may amount to indecent assault on a child, and he has been detained on that suspicion. The girl has since been afraid to use the toilet alone.

• 2019-10-19

  Cutting another driver off in a fit of temper may bring criminal charges

  At an intersection in Songyuan, Jilin, on 7 October 2019, a taxi turning right tried to pass in front of a bus and the bus did not give way. The two drivers then jostled on the road until the taxi stopped across the bus's path and its driver argued with the bus driver, while passengers urged the bus driver to hit the taxi. He did, injuring passengers on the bus. Both drivers were criminally detained: driving public service vehicles with disregard for public safety falls within the offence of endangering public safety by dangerous means, and passengers who egged the driver on may be instigators.

• 2019-10-19

  How much do you know about the law on endangered wildlife?

  Xining Customs have broken up a major smuggling case involving products of endangered species, seizing ivory, a tiger skin, pangolin scales, and lion bone and teeth, much of it taken from young animals. Article 341 of the Criminal Law punishes not only the illegal hunting or killing of rare and endangered wildlife but also the illegal purchase, transport or sale of such animals and their products, by up to five years' imprisonment and more. Buying animals in order to release them is also unlawful, and eating them carries a risk of disease.

• 2019-10-19

  Lingang Special Area issues its "1+4" industrial policy two months after launch

  The Lingang Special Area of the China (Shanghai) Pilot Free Trade Zone was inaugurated on 20 August 2019, and at the two-month mark its administrative committee issued a package of industrial policies known as "1+4". A general policy supports advanced manufacturing, strategic emerging industries and the integration of science and technology with industry, while four specific measures cover integrated circuits, artificial intelligence, biomedicine and aerospace, ten measures for each. There are 56 measures in all, aimed at building a world-class cluster of frontier industries.

• 2019-10-19

  Can a depressed wife's RMB 550,000 in donations be recovered?

  A man in Hefei who had saved RMB 550,000 over ten years found that his wife had given all of it to 218 charities through WeChat and Alipay. She was later diagnosed with moderate depression, and he asked the foundations to refund the money. Chinese law treats a donation as a gift contract: the gift cannot be revoked at will once it has been performed, and depression is not in itself a lack of civil capacity, so a refund rests on the foundations' goodwill rather than on a legal right.

• 2019-09-30

  Live larvae in an unexpired Shuanghui sausage: why the offer of RMB 100 falls short

  A woman reported that her husband found live white larvae inside a Shuanghui sausage that was still within its shelf life, and that the manufacturer offered only RMB 50 and then RMB 100 in compensation. Article 148 of the Food Safety Law entitles a consumer harmed by food that does not meet food safety standards to claim from either the seller or the producer, and to enhanced damages of ten times the price or three times the loss, with a floor of RMB 1,000. The article sets out how to preserve evidence and escalate a complaint.

• 2019-09-28

  Dismissed while pregnant and billed RMB 130,000: how pregnant employees can protect their rights

  A woman at a Qingdao electronics company was moved from quality inspection to a workshop handling chemical adhesives after she asked not to work overtime while pregnant, was later accused of leaving her post without approval, and was dismissed with a demand for RMB 131,652 in losses. The arbitration commission found the dismissal unlawful while the first-instance court upheld it, and the appeal is unresolved. The article explains the statutory protection for pregnant employees and the five issues the courts must decide.

• 2019-09-19

  Hidden camera, naked photographs and blackmail: what the law does about it

  A man in Jinan photographed a woman in her shower through her bathroom window, traced her personal details from her delivery and courier labels, added her on WeChat and QQ, and then sent her the images and demanded RMB 100,000, later reduced to RMB 50,000, to return them. He was detained on suspicion of extortion. Secret photography of this kind is unlawful but not in itself a crime; the demand for money is what makes out extortion under Article 274 of the Criminal Law.

• 2019-09-19

  Three days' absence where the rules are silent: serious breach of labor discipline?

  An employee took three days of personal leave after her application was refused, and the company dismissed her for serious breach of labor discipline even though its internal rules said nothing about how many days of absence justify dismissal. The arbitration commission upheld the dismissal, holding that an unexplained absence after a refused application shows a refusal to accept management and contradicts the duty to observe labor discipline, so Article 25(2) of the Labor Law applied and no compensation was payable.

• 2019-09-19

  An LV bag left at a restaurant and thrown away as rubbish: must the restaurant pay?

  A diner left an LV bag at a restaurant and telephoned the same day; the receptionist confirmed the bag had been found and undertook to keep it, but no period of safekeeping was agreed. Two months later the bag was still in the cupboard, yet when she returned in mid-August it had been thrown out as rubbish. Because the restaurant had agreed to keep the bag, it owed a custodian's duty of care and must compensate for the loss, though the owner's own carelessness reduces the award.

• 2019-09-19

  Identity card lost, then made a "company boss" with RMB 2 million of debt

  A woman who lost her identity card in February 2016 received a court summons three years later and found she had been registered as shareholder and legal representative of a Shenzhen company carrying nearly RMB 2 million of debt, and that a bank account had been opened in her name. Because the registrations relied on a digital certificate issued without face verification, she can apply to the registration authority to cancel them, sue the authority, or report the impersonation to the police.

• 2019-09-19

  Selling one's own child: liability on both sides of the transaction

  A man in Changzhou was traced after an advertisement offering a baby for sale appeared on a social app; he had bought a three-day-old girl for RMB 50,000 from her father, who said he could not afford to raise her, and then resold her to a childless couple in Nanjing. Under Article 240 of the Criminal Law and the 2010 joint opinion on trafficking, a parent who hands over a child for the purpose of unlawful gain commits child trafficking; genuine private adoption, by contrast, attracts no such liability, but the buyers still face punishment. All the suspects are in criminal detention.

• 2019-09-19

  Obscene videos posted in a chat group: administrators who look away can be jailed

  Three administrators of a QQ group with 447 members took no action while other members uploaded 221 obscene video files and images, and a court in Yangshan, Guangdong, convicted them of disseminating obscene material, sentencing one to a year and the other two to ten months. Under the 2010 judicial interpretation, the creator, administrators and principal disseminators of an online group used mainly for obscene material face that offence once the group reaches 30 members or serious consequences follow, and the same applies to an administrator who simply permits or acquiesces in the postings.

• 2019-08-19

  A 15-year-old took his mother's Mercedes and killed a woman: why criminal liability may not follow

  A 15-year-old in Zoucheng, Shandong, took his mother's Mercedes without permission to attend a classmate's birthday party and on the way home struck and killed a woman, then drove on; he gave himself up the next day with his mother. Because he was under 16 and the offence is not among those listed in Article 17(2) of the Criminal Law, he bears no criminal liability, but he and his guardian face a substantial civil claim under Article 32 of the Tort Liability Law.

• 2019-08-19

  A RMB 150,000 parcel destroyed as rubbish: how the sender can claim

  A woman in Changsha sent a 27-kilogram parcel containing her entire household, valued by her at about RMB 150,000, but the courier misread the label, assumed it was clothing for recycling and delivered it to a recycling plant, where it was shredded. She had not bought declared-value cover, so under the Courier Market Administration Measures and the Contract Law she cannot rely on a declared sum and must instead prove the contents were worth what she claims in order to recover their market value, a burden the courts will scrutinise closely.

• 2019-08-19

  Urge no one to drink: when fellow diners share liability

  A man who drank with nine colleagues, drove home and killed a cyclist sued the nine for 40 per cent of the damages, arguing that they had failed to see him home safely; the Lanxi court dismissed the claim because they had told him to take a taxi, did not know he had a car and had done all that was required of them. The article sets out the four situations in which fellow drinkers do bear liability, from forcing drink on another to failing to see an intoxicated person safely home.

• 2019-08-19

  Teacher dies during a meal break while working overtime, and four refusals to treat it as a work injury

  A teacher in Jishan county, Shanxi, died of a sudden cardiac arrest during a lunch break while working overtime at school; the human resources and social security bureau refused four times to recognise the death as a work-related injury, holding that the meal was not working time and the restaurant was not the workplace, even after three court judgments and one administrative review had set its decisions aside. Article 71 of the Administrative Litigation Law bars a defendant from repeating substantially the same act on the same facts and grounds.

• 2019-08-19

  Who ended the employment contract? Dealing with the case where neither side can prove it

  An investment company and its account manager each said the other had ended the contract: she alleged an oral dismissal for poor performance, the company alleged an oral resignation. The arbitration commission held that the employer, holding the management power and the duty to keep records, bears the burden of proving who terminated, and on failing to do so must pay compensation for unlawful termination. The article compares the three approaches taken in Guangdong, Zhejiang and Jiangsu and endorses the third.

• 2019-08-19

  Harassed a petrol station attendant, then set fire to his motorcycle

  At a petrol station in Qujing, Yunnan, a man who had been drinking reached out to touch the face of the woman serving him, insulted her when she stepped back, and then lit his motorcycle with a lighter, engulfing the machine and the fuel nozzle in flame; staff and bystanders put the fire out and he was detained. The groping is an offence under Article 44 of the Public Security Administration Punishments Law, and the arson is an offence under Article 114 of the Criminal Law whether or not serious consequences follow.

• 2019-08-19

  Is a clause deeming an employee to have resigned of his own accord valid?

  A consulting company's employment contract provided that a marketing director whose quarterly sales were graded D would be deemed unable to perform the role and deemed to have resigned, and the company ended his contract on that basis after a quarter with no sales. The arbitration commission held the clause invalid: Article 40(2) of the Labor Contract Law requires retraining or redeployment first, and an employer cannot contract out of that duty or of the requirement to give notice, so the termination was unlawful and compensation was payable.

• 2019-08-19

  Is concealing marital status on a job application form a fraudulent misrepresentation?

  A restaurant company dismissed a deputy store manager during probation for entering "single" on the application form when she had been married for nine months, relying on a clause warning that concealment would amount to fraud. The arbitration commission held the dismissal unlawful: Article 8 of the Labor Contract Law requires disclosure only of matters directly related to the employment contract, and marital status is a private matter that has no bearing on ability to do the job, so the company had to pay compensation.

• 2019-08-19

  Refusing to pay his 77-year-old mother RMB 200 a month: eight months in prison

  A court ordered a woman's five children to pay her RMB 200 each a month, but the third son refused, saying the lawsuit had been instigated by his brothers and had humiliated him before his neighbours; he ignored enforcement notices and was abusive to court officers. He was convicted of refusing to execute a judgment and sentenced to eight months. The article explains that the sentence punishes the refusal to obey the court, not the failure to support a parent.

• 2019-08-19

  Administrative and legal penalties side by side: online rumour-mongers to be blacklisted

  A Weibo user who fabricated a claim that Shanghai economic crime police were shielding a private individual was detained for five days for provoking a disturbance, and the detention was suspended because he needed surgery for a fractured heel, as the Detention Centre Regulations require. The article explains that suspension and outlines a draft measure under which serious and persistent bad-faith providers of internet information services would be blacklisted for three years and subject to joint sanctions, so that administrative and legal penalties work in parallel.

• 2019-08-19

  Self-defence in dispute again: a woman born in the 1990s kills a knife-wielding intruder

  After a drunken man repeatedly harassed her family and hacked at their door with a cleaver, Tang Xue went out with two small knives, was kicked, and in the struggle stabbed him in the chest; he died of blood loss. The procuratorate charged her with intentional injury, treating her as having exceeded the limits of self-defence rather than acting in defence, and the case is still under review. The article sets out the five conditions for self-defence and why the subjective condition is the hardest to assess.

• 2019-07-30

  When the probation period meets the medical treatment period

  An employee on a two-month probation took a month of sick leave for foot surgery, and on his return the company agreed with him in writing to extend the probation by a month to make up for it. The arbitration commission held the extension void: Article 19(2) of the Labor Contract Law allows only one probation period for the same employer and employee, and three months exceeded the statutory maximum for a two-year contract. The company had to pay compensation.

• 2019-07-27

  Repeated attacks by people with mental illness and the anxiety they expose

  The actor Simon Yam, of Hong Kong, China, was stabbed in the abdomen with a fruit knife by a man who rushed onto the stage at a shop-opening ceremony in Zhongshan on 20 July 2019; the wound did not injure any organ and his life was not in danger. The attacker, 53, was diagnosed with paranoid schizophrenia, and the case has renewed public debate about criminal responsibility for offenders with mental illness and about the treatment, day-to-day care and supervision of patients, which families often cannot bear alone.

• 2019-07-26

  A teacher who abuses a pupil: verbal violence and the offence of insult, punishable by up to three years

  A 13-year-old girl at a school in Shangluo, Shaanxi, recorded more than 100 clips over three weeks of her form teacher swearing at her and asking classmates to name who in the class was "worthless", and the teacher was stripped of his teaching qualification. Article 37 of the Teachers Law allows a school or education authority to impose a sanction or dismiss a teacher who insults pupils, Article 42 of the Public Security Administration Punishments Law provides for detention, and serious cases fall under the offence of insult in Article 246 of the Criminal Law.

• 2019-07-25

  An inflatable attraction collapses again: who answers for it?

  Part of the roof of a "Deep Sea Treasure" inflatable attraction at a tourism company in Huangshan collapsed on 20 July, injuring several people and killing a girl of eight; the cause is still under investigation. Under Article 37 of the Tort Liability Law the operator and organiser of a public place owe a duty of safety, which requires them to foresee dangers, inspect and maintain the equipment and take preventive measures, and under Article 41 a producer is liable for loss caused by a defective product, so either or both may be responsible.

• 2019-07-22

  A couple who threw excrement at strangers to make a prank video

  A couple in Wuhan mixed animal and human excrement into a bucket of slurry and threw it over unsuspecting passers-by at a metro station exit while filming the results for online attention; five such incidents have been verified. The article explains when such conduct crosses from an ordinary public security offence under Article 26 of the Public Security Administration Punishments Law into the crime of provoking a disturbance under Article 293 of the Criminal Law, and the two have been detained.

• 2019-07-19

  Theft in an earthquake zone: punish it to the full

  After the magnitude 6.0 earthquake in Changning county, Yibin, Sichuan, on 17 June 2019, which killed 13 people and injured 226, three brothers from Guizhou travelled there intending to steal, found the roads closed, and instead broke into a middle school, taking more than RMB 10,000 that pupils had brought for their living expenses. They have been detained. The article explains the grading of theft in Article 264 of the Criminal Law and the halved threshold that applies to theft at the scene of a disaster.

• 2019-07-19

  A father lured into a pyramid scheme by his daughter falls to his death

  A man fell from a building in Mudanjiang, Heilongjiang, at half past three in the morning, and his daughter took him to hospital and asked for a death certificate so that he could be cremated; because the death was not natural the doctors called the police. Investigators found that she had lured her father into a pyramid scheme, where members beat him and kept him under guard, and that he fell while trying to escape. All those involved have been detained for unlawful detention.

• 2019-07-19

  "Children abused in Guizhou": the rumour, and what the facts turned out to be

  On 26 June 2019 an internet user posted photographs and screenshots alleging that children in welfare homes and schools for left-behind children in Bijie and Kaili, Guizhou, had been sexually abused by adults. Joint checks by the public security, civil affairs and women's federation authorities found nothing, and the poster, Zhao, admitted that he had collected the images online and fabricated the story purely for attention. The article sets out the civil, administrative and criminal liability that spreading a rumour may attract.

• 2019-07-19

  A man who beat his wife and children: netizens call for severe punishment and the loss of his guardianship

  On 12 July 2019 the police in Donghai county, Jiangsu, received a report that a man had beaten his children with a stick. Ge, 36, had been drinking, had driven while drunk and had beaten his wife before striking his eight-year-old daughter and thirteen-year-old son and making them film each other, intending to send the video to his wife to force her home. He was criminally detained. The article sets out the seven grounds on which a court may revoke a parent's guardianship, who may apply, and what the Anti-Domestic Violence Law offers victims.

• 2019-07-19

  The limits of an employer's discretion over annual bonuses

  Wu joined a clothing company in March 2014 as an administrative employee on a monthly salary of 6,000 yuan. In February 2019 the company told him that, because he had quarrelled with a colleague, it would pay him nothing for 2018. The arbitration commission upheld his claim: the company had never adopted the appraisal rules that its staff handbook empowered it to make, and a single written statement from his supervisor was too weak to prove the quarrel. The article examines how far an employer may decide who receives a bonus and how much.

• 2019-07-19

  Key points in disputes over double wages

  Guo joined a technology company on 12 March 2018 and signed a Job Responsibility Statement for a fixed six-month term which set out his post, pay, hours and leave but was not called an employment contract. When the company offered to renew it, Guo demanded six months of double wages and a proper contract first. The arbitration commission rejected his claim: the statement contained the essential terms of an employment contract, and the company had negotiated honestly, so no double wages were payable. The article explains why cause matters more than form.

• 2019-07-19

  Drink-driving: what had the passer-by done wrong? Harm to others and to oneself deserves severe punishment

  At about 1 a.m. on 20 June 2019 a vehicle overturned on the Ring Expressway outside Guilin, and the auxiliary police officers He Jinglun and Zhong Fei went with the duty officers to deal with it. A white car bearing the plate Gui C60A75 drove at speed into the scene, struck both men and killed them where they stood. The driver, Tang, is suspected of drink-driving and has been taken into custody. The article sets out the offence of causing a traffic accident, the thresholds for its aggravated form, and the physical effects of alcohol.

• 2019-07-09

  Beef offal soaked in strong alkaline liquid in an unlicensed workshop: where is the bottom line of food safety?

  Acting on a tip-off, reporters and market supervision officers watched a house in southern Nanjing and, in the early hours of 17 June 2019, followed a van loaded with black bags of beef tripe, beef stomach and beef to a wholesale market and on towards Hangzhou. A raid on 19 June found a filthy processing room holding tubs of tripe, reed tripe, aorta and tendon in liquid that tested strongly alkaline, along with sodium hydroxide, sodium nitrite and beef essence. Test results are pending; the article sets out the offences that may arise.

• 2019-06-30

  Say no to objects falling from height, so that tragedy is not repeated

  On 13 June 2019 a window fell from a high-rise at a residential compound in Futian district, Shenzhen, and struck a five-year-old boy walking with his mother. After three attempts at resuscitation and three days in intensive care he was pronounced clinically dead on 16 June. Six days later a ten-year-old girl in Nanjing was injured by an object thrown from a building. The article explains the liability of owners, managers and users, how a defendant may show that he is not responsible, and the criminal exposure.

• 2019-06-25

  The labor dispute that followed a board resolution removing a finance director

  Fan joined a technology company as finance director on 5 June 2017 on a three-year contract providing a monthly salary of not less than 8,000 yuan; in practice he was paid 40,000 yuan a month. On 26 January 2018 the board removed him from the post pending an internal audit and a new assignment, and from February to June the company paid him only the local minimum wage. The arbitration commission ordered arrears calculated at the contractual 8,000 yuan: the removal itself lay outside its remit, but the company could not simply leave him idle.

• 2019-06-21

  Should a beloved car be lent to another person?

  A man in Taizhou, Zhejiang, swapped his Land Rover for a friend's Tesla, worth more than 600,000 yuan, and drove to a swimming trip. When he threw a cigarette butt out of the window and the wind blew it back in, he bent to pick it up, the car left the road and ran into a stream, water reached the control board and the car was assessed as a write-off. The article sets out when an owner who lends a car is liable, how insurance responds, and four checks to make before lending.

• 2019-06-18

  Child abuse in kindergartens keeps happening: how are children to be protected?

  A video circulating online showed a female teacher at Dongjiang kindergarten in Qiaotou town, Dongguan, striking three children within six minutes on the morning of 3 June, dragging and pushing them, slapping their faces and kicking them. The abuse came to light when a parent noticed a child's fear of the kindergarten and asked to see the footage. Teacher Jiang, an intern, was criminally detained on suspicion of abusing a person under guardianship or care. The article explains the offence and the gaps in supervision.

• 2019-06-08

  When your right to privacy is being infringed, do you really know it?

  Late on 31 May 2019 a man at Xidan Joy City in Beijing was caught photographing up a woman's skirt with his mobile phone. Only he, the victim and her boyfriend were on the escalator; he stood behind her in a wide stance with the phone on his knee and the camera facing upwards, which drew the boyfriend's attention. He denied it, but the police found the video on his phone and detained him for seven days. The article sets out the prohibition on secretly filming others' private matters and the four rights that privacy comprises.

• 2019-06-08

  Your photographs may be misused already: is it still safe to post them?

  A woman in Shenzhen, Ms Liu, found that private photographs of herself and a close friend had been forwarded to WeChat Moments with vulgar captions and turned, without her knowledge, into low-grade advertising for a car dealership. The dealership said the three people pictured were not its staff and that it had spent days explaining the matter to customers and fielding nuisance calls. Both sides reported it to the police. The article sets out the rights to portrait, reputation and privacy, and how to reduce the risk of having photographs taken.

• 2019-06-01

  Huya and Douyu: how abusive complaints undermine the safe harbour, and what a platform can do

  From August 2018 Douyu complained to Apple 23 times that Huya's app infringed copyright in videos of three streamers under contract to Douyu. Huya produced its own contracts and statements that no cooperation existed or had ended, yet Douyu complained again and Apple, making no substantive judgment, merely relayed the correspondence between them. Huya obtained an injunction from the Nansha court in Guangzhou restraining the complaints. The article asks how a platform should design a complaint process that is both effective and defensible.

• 2019-05-01

  Social insurance changes from 1 May: has your pension shrunk?

  From 1 May 2019 provinces may reduce the employer's contribution to the basic pension for urban employees to 16 per cent, and the contribution base is to be set on average urban wages calculated across both private and non-private employers, which will lower it for many. Only the employer's share falls, so take-home pay is untouched, while lower-paid workers pay less. The central adjustment ratio rises to 3.5 per cent, so that pensions continue to be paid in full and on time.

• 2019-04-12

  Changing jobs often: does it damage a person's credit?

  Article 3 of the Labor Law gives workers the right to equal employment and to choose their occupation, and in general an employee may leave by giving thirty days' written notice. The article argues that frequent job changes are a lawful exercise of that right, that tagging every job-seeker as suspect in order to catch a few professional claimants is unfair, and that a government credit system set up to restrain job-hopping would exceed the state's authority, since the market already screens candidates at the hiring stage.

• 2019-04-04

  Food safety at a Chengdu school: thinking through the reversals

  Where a school canteen buys mouldy ingredients and serves them to pupils, the contractor and its staff may be guilty of producing or selling food that does not meet safety standards, and the school and the contractor may be joint tortfeasors liable for medical costs and other reasonable expenses. The article sets out the criminal, administrative and civil liability involved, and argues that individual precautions such as organic food or private insurance cannot answer risks that cut across class, so public institutions and supervision must.

• 2019-03-08

  A heavy fine for a third child: a burden that cannot be borne

  A couple in Heze, Shandong, who had a third child were assessed for a social maintenance fee and, having failed to pay, faced enforcement proceedings brought by the health and family planning department. The article accepts that the application had a legal basis and that the sum matched local standards, but asks whether enforcement took account of the family's means, whether they were told of their right to pay in instalments, and whether a fee of this kind belongs in an era that now encourages childbirth.

• 2019-03-01

  CNKI and the business of scholarship

  In May 2018 a law student at Soochow University paid in 50 yuan to download a paper priced at seven yuan from CNKI, found that the balance could not be refunded, and sued. The court held the minimum top-up and the refund charge to be unfair terms that restricted consumers' right to choose, and therefore void. The article examines CNKI's high prices and thin payments to authors, whether its dominant position has been abused, and why public access to knowledge matters.

• 2019-02-22

  Top of the civil service examination but not appointed: lawful, yet unreasonable

  Under the provisional rules on civil service recruitment, appointment turns not only on the written and oral examinations but also on an assessment, a medical examination and public notice, and the assessment is an independent stage at which candidates start level again. In practice employers usually appoint the highest scorer, so passing over the first place may be lawful, but the reasons must be given in detail. In the Xia Min case the official explanation was too vague to convince, and public confidence suffered.

• 2019-02-02

  A public official causes a fatal accident: how is he to be exempt from liability?

  Mao Zhiyao, a public official in Longxi county, Gansu, drove drunk and caused a death, yet was exempted from criminal punishment, a result that led the court to open a special review. The article sets out the two offences involved, causing a traffic accident and dangerous driving, and argues that voluntary surrender "may" rather than "shall" mitigate, that compensation and forgiveness can reduce a sentence by no more than 40 per cent, and that the judgment fell below the statutory minimum, so that punishment and offence are out of balance.

• 2019-01-18

  The fall of a hundred-billion-yuan empire: where does the health products industry go?

  On 25 December 2018 the DXY account published an article questioning Quanjian's products and alleging false advertising, unlicensed medical practice and pyramid selling under the name of traditional Chinese medicine. Tianjin formed a joint investigation, the police opened a case for organising and leading pyramid selling and for false advertising, and within three weeks 18 people including the founder, Shu Yuhui, had been detained and 16 arrested. The article asks why regulation failed for so long, and what the industry must now do.

• 2019-01-18

  A legal first-aid kit for the wave of redundancies

  Over recent months one major company after another has announced redundancies, as slower growth, the new social insurance rules in force from January 2019 and the tax reform raise the cost of employment. The article sets out when an employer may make economic redundancies under Article 41 of the Labor Contract Law, the substantive and procedural conditions, the employees who must be retained first and those who cannot be made redundant at all, and how severance is calculated on gross rather than basic pay.

• 2018-12-29

  The feeling and the law behind maintenance for a university student

  The Beijing No. 1 Intermediate People's Court has decided an appeal in which a divorced father refused to go on paying maintenance once his son turned eighteen and went to university. The court of first instance had ordered 2,000 yuan a month; the appeal court dismissed the claim, holding that an adult student able to support himself falls outside the children whom parents are bound by law to maintain. The article explains the legal test and the practical obstacles to student independence.

• 2018-12-29

  Juvenile crime: tolerance cannot be the only answer

  In December 2018 a twelve-year-old boy in Yuanjiang, Hunan, killed his mother with a knife after she beat him for smoking, and was released because he was below the age of criminal responsibility; his relatives' attempt to send him back to school met fierce opposition from other parents. The article sets out the age thresholds in the Criminal Law, the rising figures for juvenile offending, the argument for lowering the age, and the correction and education that should follow instead of simple release.

• 2018-11-30

  What is new in the individual income tax rules: the special additional deductions

  From 1 October 2018 the threshold for individual income tax in China rose from 3,500 yuan to 5,000 yuan a month, and from 1 January 2019 six special additional deductions took effect, for children's education, continuing education, support of elderly parents, serious illness, housing loan interest and housing rent. The article explains each deduction in turn and works through an example in which a taxpayer's monthly tax falls from 3,120 yuan to 830 yuan, a reduction of 73 per cent.

• 2018-08-28

  Tighter filing for private funds: three key changes

  The Asset Management Association of China has moved the updating of related parties in its AMBERS system out of routine manager information and into the module for major changes, so that such changes now need manual review. A major change not completed within six months of filing, or returned more than five times, bars the institution from filing new products, and on-site interviews with managers are becoming routine. The article explains each change and its practical consequences for managers and investors.

• 2018-08-21

  The legality of evidence, and how to solve the problem in practice

  Chinese practice requires evidence to be authentic, relevant and lawful, and evidence obtained by seriously infringing another person's rights, in breach of a legal prohibition or contrary to public order and good morals is inadmissible. Where the excluded item is the decisive evidence, as with covert recordings in a divorce case, a party may ask the court to collect the evidence, rely on other evidence that corroborates, or apply for preservation. The article explains the concept, its purpose and these practical routes.

• 2018-08-07

  ABS series (5): as ABS default risk climbs, how CDS manages risk

  A credit default swap is a contract under which one party pays a fee at intervals to another and receives compensation if a specified credit event occurs in a reference entity, so that it works rather like insurance on a debt without the buyer having to hold the bond. The article explains how CDS works, its three main forms, the Chinese pilot rules of 2016 and the first transactions under them, and suggests that CDS written on ABS could disperse risk further.

• 2018-07-19

  ABS series (4): opportunities in property developers' financing innovation, and where REITs are heading

  REITs are a widely used real estate investment vehicle abroad, with 86.1 billion yuan issued in China in 2017 and more than a trillion US dollars of assets worldwide, some ninety per cent of it in equity REITs. Because the mainland has no REITs that fully meet international rules, the market uses securitised quasi-REITs secured on commercial property rents and capital growth, and policy has gradually turned supportive. The article traces that shift and the legal services such transactions require.

• 2018-07-09

  ABS series (3): a new breakthrough for securitisation, and the practical points of REITs

  With regulators tightening the rules on leverage, many financing channels are drying up, so companies are looking to securitisation to raise funds without adding debt to their balance sheets. On 21 June 2018 the first shelf-registered equity quasi-REIT for long-term rented flats was issued, following the guidelines of 24 April on securitising rental housing. The article sets out the conditions such products must meet, the more mature alternatives of home-purchase receivables and property fees, the filing route through the exchanges, and the negative list.

• 2018-07-04

  ABS series (2): securitisation leads a new direction in property financing

  Financing conditions for Chinese property developers have tightened as regulators curb leverage and the property bubble: entrusted loans have fallen for five consecutive months and trust loans dropped sharply in May 2018. A JLL study argues that asset securitisation, long mature in the United States but only beginning in China, could become the main financing route for developers and asset holders, with CMBS, RMBS and ABS releasing asset value while preserving some of its upside. The article sets out the figures and the landmark deals.

• 2018-06-27

  ABS series (1): the detailed process and rules for corporate asset securitisation

  Asset-backed securitisation takes assets that will produce future cash flow, structures and enhances them, and issues securities against them, turning an expected future return into money now. China has four models, of which the CSRC-regulated special plan for non-financial enterprises is the subject of this article. It follows the process from choosing the underlying assets, through the bankruptcy-remote special purpose vehicle, to issue and sale, management and final settlement, and closes with the benefits claimed for issuers and for investors.

• 2018-06-13

  The procedure for applying for reorganisation, and the points of review

  A bankruptcy court confirmed a reorganisation plan over the objection of U.S. Bank by treating the buyer of an insider's claim as a non-statutory outsider, so that the plan could be crammed down. The Ninth Circuit affirmed, and the question it had to answer was narrower: whether the mixed question of law and fact, namely whether the buyer was an insider, should be reviewed afresh or only for clear error. The article sets out the statutory definition of insider, the two-part test and the standard of review.

• 2018-05-23

  An economic identity card for the private fund industry, and the good news it signals

  On 7 May 2018 the Asset Management Association of China brought online the credit information reports for members that manage private securities investment funds, so that a member may read its own report each quarter through the AMBERS system. The reports score members on compliance, stability, professionalism and transparency across fifteen indicators, may not be used for public marketing, but may be given one to one to counterparties. The article explains what the reports offer investors, the industry and the managers themselves.

• 2018-05-07

  The eight core effects of the new asset management rules on private fund management

  In April 2018 the People's Bank of China, the banking and insurance regulator, the securities regulator and the foreign exchange regulator jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions, which sets one set of standards for products of every type. The Opinions end promises of principal and return, require products to be matched to investors, bar capital pools and multi-layer nesting, curb channel business, impose custody and a risk reserve, and raise the qualifications demanded of staff. The article sets out the eight effects that matter most to private fund managers, and the deadline of the end of 2020 for compliance.

• 2018-05-07

  The eight core effects of the new asset management rules on private fund management (Part One)

  In April 2018 four regulators jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions, which sets one set of standards for products of every type and ends the grey areas in which private funds had been operating. This first part takes the opening four of its eight points: the rule that the investor bears the risk, with guarantees, buy-backs and implicit repayment prohibited and defined; the standard for a qualified investor and the minimum subscription for a single product; the ban on split sales and on capital pools; and the higher qualification requirements for practitioners, including a new training and accountability system.

• 2018-05-04

  Asset securitisation, viewed from several angles

  Securitisation takes a project that has little ready cash today but is expected to earn in future, and uses the cash flow it will produce to back securities that are structured, repackaged and then issued and traded in the capital markets. The term is used broadly of securitisation of physical assets, credit assets, securities and cash, and narrowly of credit assets alone, the sense given it by the pilot rules issued jointly in 2005 by the central bank and the banking regulator, under which a bank entrusts loans to a trustee that issues beneficiary securities to investors.

• 2018-04-02

  Joining hands with a commercial bank: wholly foreign-owned private funds open a new investment channel

  On 28 March 2018 Standard Chartered China announced that it would distribute, as agent, an asset management plan investing in private fund products issued in China by a qualified wholly foreign-owned enterprise, the first time since 2016 that investors could reach such products through a bank. The article explains what a WOFE private securities fund is, and the five conditions the Asset Management Association of China imposes on a WOFE manager: incorporation in China, a home regulator that has signed an MOU with the CSRC, a licensed financial institution as shareholder, no major penalty in three years, and the same for any ultimate controller.

• 2018-03-14

  May the confidentiality agreement not be a mere formality

  Employees who hold a company's confidential information, above all its technicians and managers, are in effect walking trade secrets, and once they leave, disclosure too often follows. Drawing on three cases, this article shows what a confidentiality agreement needs if it is to have any force: the company must first identify what is genuinely a trade secret, remembering that the duty rests on the existence of a secret and not on the contract alone, and must then set out the scope, what may be disclosed to third parties, the protective measures, a term running until the information becomes public, and liability for breach. Checking a new employee's existing obligations matters too.

• 2018-03-05

  Research on legal issues of trade secrets: the Hangzhou Fangda Trading case

  Chen, a foreign trade salesman at Hangzhou Fangda, a knitting and garment trading company, left when his two-year contract expired and joined Ninglü, and was later found to have kept dealing with Fangda's customers, undercutting its prices with the customer information he had obtained. Fangda sued, and every claim was dismissed. The article explains why: a customer list is a trade secret only if it carries information beyond what is publicly known, and the plaintiff could prove neither that its list crossed that line nor that the customer contact details had been obtained by improper means.

• 2018-02-26

  The use of interim injunctions in protecting trade secrets

  A trade secret, once lost, is lost for good, and damages awarded afterwards are poor consolation when the information has already leaked. The article explains the interim injunction as it has developed since the early nineteenth century, and argues that Chinese law already provides a basis for one in trade secret cases: article 162 of the Supreme People's Court's opinions on the General Principles of Civil Law, read with a 2001 speech by the then Vice-President of the Court. It then sets out the four conditions: the right applicant, urgency, the likelihood of irreparable loss, and the court with jurisdiction.

• 2018-02-26

  What the new Anti-Unfair Competition Law changes on trade secrets

  The revised Anti-Unfair Competition Law, in force from 1 January 2018, rewrites the trade secret provisions of a statute drafted in 1993. It redefines a trade secret as information not known to the public, of commercial value, and subject to corresponding confidentiality measures taken by the rights holder, so bringing negative results such as failed experimental data within protection. It also names employees and former employees among those whose acts may be attributed, and raises administrative fines to a maximum of RMB 3 million, with damages of up to the same figure and a credit record for offenders.

• 2018-02-05

  Six things you need to know about non-compete agreements

  Information travels with people, and where talent moves a trade secret may leak, which is why many companies sign non-compete agreements with their staff. This article answers six common questions. If no compensation is paid, the employee may not always be free of the restriction: Shanghai requires a demand first, while Shenzhen ends the clause automatically. It distinguishes the contractual non-compete from the statutory duty of directors and senior officers, explains the 30 per cent compensation standard, when to sign, why an agreement does more than monitoring software, and the routes of remedy.

• 2018-02-05

  Using evidence preservation properly to solve the difficulty of proof in trade secret cases

  Intellectual property cases are harder to investigate than ordinary civil cases because the right is intangible, and trade secret actions hardest of all: the secret is by nature hidden, and the infringer, who knows how the company uses and stores it, acts with care and holds the material closely. Whether the rights holder can obtain and fix evidence through the courts is therefore decisive. The article sets out what is to be preserved, the three means of preservation, notarisation, before and during proceedings, the conditions for an application, and what a written application must contain.

• 2018-01-29

  Establishing damages in trade secret infringement

  A trade secret is an intangible asset whose value is often harder to fix than that of tangible property, which raises the question how a company whose secret has been infringed should claim damages. The article surveys the remedies available, the statutory basis, and the methods of calculation. Of the remedies in the Tort Liability Law, cessation of infringement and damages are the ones that matter in practice, since a secret once public cannot be restored. Damages may rest on the actual loss, the infringer's profit, a reasonable multiple of a licence fee, a fixed award, or reasonable costs.

• 2018-01-24

  How to protect your trade secrets: the use of non-compete clauses

  A non-compete clause binds a worker who holds an employer's trade secrets not to work for a competing employer, or trade on his own account in the same line, for a period after the contract ends, and for no longer than two years. This article sets out the three benefits such a clause brings the employer, preventing leaks, easing proof of infringement and reducing the loss of talent, and then the rules on who may be bound, the monthly compensation, the maximum term and liquidated damages. An appendix gathers the compensation standards applied in Beijing, Shanghai, Shenzhen and other cities.

• 2018-01-22

  An analysis of the factors that shape the outcome of patent infringement disputes

  A patent infringement claim turns on three legal elements: ownership of the patent right, the facts of infringement, and the degree of fault, the first two deciding whether infringement is made out and whether the patentee recovers. This article examines the factors that recur most often in the reported cases: invalidation of the patent in suit, the all-elements rule and infringement by equivalents, the "overall observation" test for designs, prior art and prior design, functional features, prosecution history estoppel, and lawful source. Each is illustrated from decisions of the Supreme People's Court and the lower courts.

• 2018-01-15

  Risks in buying and selling a second-hand home, and how to guard against them

  As Shanghai prices climbed sharply from late 2015, the second-hand market brought a run of disputes over sellers raising the price, breach of contract, and one flat sold twice. This article identifies the three parties, seller, buyer and agent, and ranks the two commonest risks. The graver is a sale by someone who lacks the power to dispose of the property, or on a forged or later revoked authority, which usually ends in restitution and damages borne by the signatory and the agent. The second is the draft agreement signed before online registration, which a rising market tempts sellers to break.

• 2017-12-18

  Eight points made clear by the Supreme People's Court's interpretation on medical injury

  The Supreme People's Court's Interpretation on Several Issues concerning the Application of Law in the Trial of Cases of Disputes over Liability for Medical Injury has been in force since 14 December 2017, in 26 articles addressing the difficult points that medical disputes have raised in practice. This article takes its eight clarifications in turn: cosmetic medicine falls within diagnosis and treatment; the patient bears the burden of proving fault and causation; the time allowed for producing medical records; experts attending to assist cross-examination; the limited weight of a report commissioned by one side; emergency treatment without consent; apportionment where several institutions are involved; and punitive damages for defective products.

• 2017-12-11

  The trading systems for shares on the New Third Board

  Shares on the New Third Board, the National Equities Exchange and Quotations, change hands under three principal trading systems: negotiated transfer, market-making transfer and auction transfer. This article takes the three systems in turn, setting out how each of them is to be understood as a matter of the trading rules, and then summarises the conditions that a trading participant must satisfy before it is admitted to the market. The piece is therefore an outline of the trading framework rather than an account of any particular transaction, and is meant as an introduction to the three systems.

• 2017-11-27

  Questions that commonly arise in trade secret litigation

  Four questions are answered here. Whether a breach of a non-compete or confidentiality agreement goes to labor arbitration or to court turns on whether the employer sues in contract, which is a labor dispute, or in tort, which is not. Forensic appraisal of a trade secret covers only the factual questions of secrecy and identity, not questions of law. Loss may be measured by the rights holder's loss, the infringer's operating profit, one to three times a licence fee, or a statutory award of RMB 10,000 to 1 million, and reasonable costs are recoverable if properly evidenced.

• 2017-11-13

  Guidance from the AMAC comes thick and fast: the rules for filing private fund managers keep tightening

  Only days after its fourteenth set of questions and answers, the Asset Management Association of China posted a note on registering private fund managers on its reporting platform, addressing dozens of points from the papers required to operating conditions, staff qualifications and business scope. This article takes the parts that matter most: that a registered office and a place of business in different districts are no obstacle; that every senior officer of a securities fund manager, and at least two of any other, must hold the fund qualification; that employment is proved by contract and social insurance; that the name must signal fund or investment management; and that an advisory fund cannot be the first product filed.

• 2017-11-06

  "Playing the lawyer's part as a fresh force" better: study and reflection on the 19th Congress

  At the end of October Shanghai Minton Law Firm held a study session for its staff under the theme of welcoming the 19th Congress, at which the firm's director set out the theme of the congress, the structure of its report, and the new thinking it advanced, with particular attention to the many passages on ruling the country by law. Four of the firm's lawyers then gave their own reflections: on legal literacy, on reform and innovation, on financial risk and intellectual property, and on the duty of a lawyer who is a Party member.

• 2017-10-23

  Private placements on the New Third Board, and the procedure for them

  A private placement on the New Third Board is the issue of shares by a company applying to be listed, or already listed, to specified subscribers. It covers two situations: an issue that takes the total number of shareholders above 200, and an issue by a public company that already has more than 200. This outline sets out who may subscribe, the size thresholds for institutional and individual qualified investors and the limit of 35 subscribers, when the CSRC's approval is required and when it is exempt, the single and instalment methods of issue, and the filing duties that follow.

• 2017-10-16

  How a company should protect its trade secrets

  A company's commercial information falls into three kinds: information that can only be a trade secret, such as customer lists and management techniques; information that might be patentable but falls short on novelty or inventiveness; and information that meets the requirements, which may be patented or kept secret. This article compares patent protection with trade secret protection and suggests how to choose between them, by reference to how advanced the technology is and what market benefit it yields, and recommends taking protective measures from the development stage, with the technical, managerial and legal staff working together.

• 2017-10-09

  The new private fund rules take effect this month: compliance management keeps rising

  Two new rules on compliance in securities investment, in force this month, also bring private asset management institutions within their scope and make clear that compliance staff do not include those in risk management posts. This article gathers what the rules require. A compliance department must be set up, with at least two compliance officers having three years' experience; the compliance officer is a senior manager reporting to the board, with set qualifications and pay protection; and the firm must assess the effectiveness of its compliance annually and report each year, bringing subsidiaries into one system.

• 2017-09-27

  The rules on identifying related parties on the Main Board, ChiNext and the New Third Board

  To protect investors and prevent a listed company from dressing up its accounts, shifting profit or transferring benefit, the intermediaries in a due diligence investigation always check related parties closely, and the check differs with the board on which the company lists. This article sets out how a related party is identified on each board, and why the regulators are strict: independence of business, core competitiveness, and the fairness of any related-party transaction. It then describes the four lines of inquiry, into shareholders and officers, major suppliers and customers, large transactions and the compliance of such transactions.

• 2017-09-20

  How a company should use a non-compete agreement, or clause, correctly

  A non-compete is a common means of protecting trade secrets, but many employees and managers are unclear about how it works, and a company that uses it wrongly leaves the agreement a dead letter and may even provoke a Labor Dispute. This article sets out the statutory basis, who may be bound and why the restriction is confined to core staff, the compensation that must be paid, the two-year maximum, and the point that a signed agreement binds nobody until the company activates it and pays. It closes with practical guidance, including the distinction between a confidentiality fee and non-compete compensation.

• 2017-09-11

  The AMAC issues a fourth licence to a wholly foreign-owned private fund manager: how overseas managers queue up to enter the Chinese market

  Man Group (Shanghai) Investment Management registered with the Asset Management Association of China on 7 September 2017 as a wholly foreign-owned private securities investment fund manager, with paid-in capital of USD 1 million, becoming the fourth foreign manager to do so after Fidelity, UBS and Fullerton. This article sets out what the policy allows, and the five conditions imposed by the tenth set of questions and answers, on incorporation in China, a licensed shareholder whose regulator has signed an MOU with the CSRC, no major penalty, use of foreign exchange, and independent investment decisions made in China.

• 2017-09-01

  Persons acting in concert, explained

  Whether a company lists on the Main Board or is quoted on the New Third Board, persons acting in concert are always reviewed closely, and where shareholding is dispersed many investors agree to act together to steady the structure of the company or to secure control of it. This article explains the concept in the CSRC's takeover measures and its twelve presumptions, the contrary evidence an intermediary must produce, the aggregation of shares and the 5 per cent reporting duty, the difference between acting in concert and joint actual control, and how the courts have upheld concert party agreements in the Huadian litigation.

• 2017-08-25

  How the law can protect your customer list

  Cases abound of employees leaving with customer information, taking business with them and causing heavy loss, yet the judgments in such actions differ widely. The reason is that a customer list is not automatically a trade secret, and a customer who follows an employee has not necessarily been poached. This article sets out the three requirements a list must satisfy, secrecy, value and confidentiality measures, and the practical steps that satisfy them: a customer file marked as confidential, confidentiality and non-compete clauses, retained contracts, orders and invoices, and an archive of long-standing customers.

• 2017-08-18

  A rosy outlook for private funds, strict supervision close behind, and the growing importance of professionalism

  By the end of July 2017 there were 20,110 registered private fund managers in China, with 58,734 funds filed and nearly RMB 10 trillion under management, and 176 equity managers each above RMB 10 billion. Supervision has tightened in step: a self-regulatory system of "seven plus two" rules, more rounds of feedback on filings, and a number of firms penalised. The number of people working in the industry has nevertheless fallen by 57,000 since February. This article reports a forum at which practitioners agreed that integration and professionalism now decide who survives.

• 2017-08-11

  Continuing disclosure on the New Third Board, explained

  With merger activity and investment on the New Third Board still brisk, the national equities system has tightened its supervision of quoted companies, above all over continuing disclosure, and has recently penalised companies that failed in their duty to disclose. Under article 3 of the disclosure rules, a quoted company must make continuing disclosure by periodic and ad hoc reports. This article sets out the general principles, the annual, half-year and quarterly reports with their deadlines and the responsibilities of the board, the supervisory board and the sponsoring broker, the first disclosure of major events, resolutions, related-party transactions and the other matters requiring an ad hoc announcement.

• 2017-08-04

  The filing documents required of P2P platforms in Shanghai, explained

  P2P platforms are a major vehicle of private lending, and as their customer numbers and transaction volumes have surged, disputes and serious risks have appeared. After Guangzhou and Beijing, the Shanghai financial office issued on 1 June 2017 a draft of its measures for the administration of online lending intermediaries, regulating filing, rectification and operation. This article sets out how a platform is characterised in law, the time and body for filing, the fourteen documents a new platform must submit, the extra documents required of one already trading, and the two steps to be completed within six months of filing.

• 2017-07-21

  How to get a special legal opinion through without a single round of feedback

  Since February 2016, when the Asset Management Association of China required a law firm's legal opinion on any change of major matters by a private fund manager, tens of thousands of opinions have been submitted and comparatively few have passed without comment. This article sets out the requirements: the ten-day filing deadline, what counts as a major matter, what the opinion must cover and how the due diligence must be done, with practical guidance on explaining the reason for a change, verifying the identity of new officers and disclosing new related parties, and a warning that the AMAC is now grading law firms by quality.

• 2017-07-07

  Dealing with competing business when quoting on the New Third Board

  Competing business arises where a company carries on the same or a similar business as its controlling shareholder, actual controller, or a person or company with a material influence over it and the enterprises they control. It obstructs quotation because the controller can shift business and opportunities between the two, to the harm of the quoted company and its investors. This article sets out the scope of the check, the five tests that distinguish competition from mere similarity, the four ways of removing the conflict by reorganisation, divestment, changing the competitor or an undertaking, and the rules that govern it.

• 2017-06-30

  How a company should use a non-compete clause

  Because a non-compete restricts a worker's freedom to choose his employment, the law sets high requirements for its use, and a company should handle it correctly so as to avoid defects in validity and obtain the restriction the clause is meant to give. This article answers five questions: what the clause must contain, that it may bind only staff who hold trade secrets, the compensation standard nationally and in Shanghai, Beijing, Tianjin, Jiangsu, Shenzhen and Zhejiang, whether a clause without compensation is still valid, and how the company may waive the restriction on a month's notice.

• 2017-06-23

  Private fund managers and the requirement of specialised management

  Three sets of rules — the Interim Measures for the Supervision and Administration of Private Investment Funds, the measures on registration and filing, and the Asset Management Association of China's published answers — repeatedly require private fund institutions to put specialised management in place so as to prevent the transfer of benefits and conflicts of interest. This article examines the requirement from two sides: the specialisation of the manager's own business, covering its name, business scope, the single institution and business type it may register and how to rectify a registration that covers several types; and the specialisation of its senior management, covering concurrent posts elsewhere and the prohibited practice of "affiliation".

• 2017-06-16

  How a company listing on the NEEQ can meet the "clear shareholding" requirement

  The business rules of the National Equities Exchange and Quotations require a joint stock company applying to list its shares to have a clear shareholding structure, and in practice an unclear structure is a substantive obstacle to listing. Intermediaries therefore check that point closely in due diligence. This article sets out what the standard means — a structure that is clear, plainly owned, genuine and lawful, with no dispute over the shares held by controlling shareholders, actual controllers or their affiliates — and then works through the four practical checks: eliminating nominee shareholdings, verifying that every transfer of shares was lawful, confirming that capital was genuinely paid in, and ruling out latent disputes.

• 2017-05-16

  How to protect your trade secrets: how the non-compete clause is applied

  A non-compete clause restricts a worker who holds an employer's trade secrets from working for a competitor, or trading on his own account in the same line, for a period after the contract ends, and for no longer than two years. It brings the employer three benefits — it prevents leaks, it eases the proof of breach and it reduces the loss of talent — but the law also sets conditions on its use. This article examines those conditions: the statutory basis, who may be bound, the monthly compensation, the two-year ceiling and the open question of liquidated damages; an appendix gathers the standards applied in Shenzhen, Beijing, Shanghai, Zhejiang, Jiangsu and elsewhere.

• 2016-09-30

  The New Third Board: China's NASDAQ?

  Like NASDAQ in the United States, China's New Third Board grew up to regulate the over-the-counter market and to give small and medium-sized enterprises a platform for raising capital; launched in January 2006 for Zhongguancun companies alone, it was extended to three more high-tech zones in 2012 and to all qualifying companies at the end of 2013. This article argues that a company need not list there merely as a step towards a transfer to the main board, explains why the market's real attraction in 2014 was the market-making system, and uses foreign exchange quotes to show how a market maker works.

• 2016-09-27

  A San Francisco EB-5 project

  Hunters Point Shipyard, a new district of San Francisco planned over more than a decade, offers an EB-5 project issued jointly by the San Francisco Bay Area Regional Center and Lennar, one of the country's largest homebuilders, for foreigners seeking permanent resident status there. The first phase has about 1,400 homes on 75 acres, and its 88 waterfront apartments, on sale from June 2014, are oversubscribed. The article sets out the claimed advantages — the government partnership, the waterfront setting, the record on conditional green cards, priority purchase, a US$500,000 investment and a refund if a green card is refused — and the subscription steps for the fifth phase.

• 2016-09-27

  The Los Angeles Marriott hotel EB-5 project

  A dual-brand hotel under Marriott's Courtyard and Residence Inn flags is to be developed at Marina del Rey in Los Angeles by the Invest LA Regional Center with the Chinese-American developer Singpoli Group, the franchise rights and deposit for both brands having recently been secured. The site faces the sea with a marina behind it, and the building will replace the existing Courtyard on Maxella Avenue, becoming the third largest hotel in Marina del Rey. The article describes the location, a construction budget of about US$70 million, and an EB-5 raise of up to 72 investors at US$500,000 each, on five-year mortgage terms at 1 per cent a year, expected to create 782 jobs.

• 2016-09-27

  Has the United States stopped EB-5 investor visa applications? An American lawyer's analysis

  On 23 August 2014 Charles Oppenheim, who chairs the immigrant visa control and reporting division of the US Department of State, announced that the EB-5 quota had been exhausted with immediate effect, at a China issues meeting held during the American Immigration Lawyers Association's EB-5 conference in Chicago. This article explains what the announcement does and does not mean: no cut-off date has been set for China, the September bulletin is unchanged, 10,000 fresh numbers become available on 1 October 2014, and interviews already scheduled will proceed. It then explains why a cut-off date is expected for China in 2015, the likely two-year queue, the risks for ageing-out children and job creation, and Mr Oppenheim's distinction between "oversubscribed" and "retrogression".

• 2016-09-27

  Eight factors in assessing an EB-5 project

  An EB-5 investor should look at more than the sales pitch. The eight factors set out here are whether the project creates more jobs than the investor needs, and how far the job report relies on tenant-occupancy jobs; the stage the construction has reached, since a conditional green card lasts only two years; the developer's own money and reputation; how much of the capital comes from EB-5; whether a bank has lent; what security and guarantees back the loan; and the commercial prospects of the project itself. A bank loan and a developer with capital at risk are the simplest signs of reliability.

• 2016-06-25

  Minton explains the law: efficiency and safety in the movement of funds on a P2P platform

  A P2P platform is an information intermediary for private lending and in theory has no business moving funds at all. In practice almost every platform takes a mandate, by agreement with its clients, to freeze and transfer money for the borrower and the bidders, so as to speed up matching and cut default rates. This article divides that process into three parts — the loan and deposit, the interest and service fee, and the money involved in credit enhancement — and examines the risks in each: the doubtful validity of an "irrevocable mandate" in a standard-form contract, the danger of a fund pool amounting to unlawful absorption of public deposits, and the questions raised by a risk fund.