October 2008

By Liu Yanling, Partner and head of King & Wood’s Bankruptcy, Restructuring & Insolvency Practice

Stellar Megaunion Corporation (“SMC”) was in serious debt, as it could barely repay its liabilities. New World China Land (“NWCL”), which was seeking an opportunity to go public, proposed to acquire SMC as a shell company which has no assets, but is publicly listed. To achieve this goal, NWCL conducted several rounds of negotiations with SMC’s creditors to settle SMC’s debts and clear the roadblocks for the acquisition. However, the parties were unable to make much progress in the negotiations due to the large number of SMC’s creditors involved. As SMC needed to solve its debt crisis as soon as possible and its negotiations with NWCL were deadlocked, the company decided to reorganize to completely release itself from the heavy debt burdens in a short period time.
Continue Reading Debt Restructuring — Second Life for a Distressed Company

At first glance, the goals of intellectual property law and competition law might appear to conflict. IPR owners are granted statutory rights to control access and charge monopoly rents to others for use of their rights. IPR owners may also use terms of IPR licences to regulate downstream activities of their distributors, such as imposing exclusivity, territorial restraints and price restraints. Competition law, on the other hand, is directed at curtailing such market power which may prove harmful to economic welfare.
Continue Reading Intersect Between Intellectual Property Law And Competition Law

Huang Caihua, Associate, Foreign Direct Investment

Recently, the Chinese government issued a couple of new laws and regulations to curb overseas “hot” money and strengthen the administration of foreign exchange. On August 5, 2008, the State Council amended and promulgated the Regulations on Foreign Exchange Administration of the People’s Republic of China which requires that foreign exchange and the fund for settlement in a capital account should be used as approved by relevant approval authorities. On August 29, 2008, the Circular of Relevant Implementation Questions Concerning the Improvement of Administration of Payment and Settlement of Foreign Exchange Capital of Foreign Invested Enterprises (the “Circular”) was then issued by the State Administration of Foreign Exchange (“SAFE”), according to which the RMB settled from the capital account of a foreign invested enterprise (“FIE”) should be used in accordance with the business scope approved by the governmental agencies and may not be used to make equity investments in China. This means foreign investors cannot directly make use of the foreign exchange in their capital account to invest in China, which is expected to have a major impact on domestic re-investment by FIEs.
Continue Reading Foreign Exchange Capital: Restrictions on Domestic Investment

Duan Haiyan, associate, Labor & Employment

The Implementation Regulations of the PRC Employment Contract Law, which has been anticipated for over a year, became effective on September 18, 2008. Overall, the Regulations are consistent with the spirit of the Employment Contract Law and resolves certain problems in its implementation. However, the Regulations have a relatively limited impact and failed to meet many expectations.
Continue Reading Employment Contract Law Implementation Regulations: Initial Thoughts

Ting Xu, Associate, Trademark Department

On May 26, 2008, the China Trademark Review and Adjudication Board (“TRAB”) of the State Administration for Industry and Commerce (SAIC) made a decision in favor of Changyu Winery Group, upholding its exclusive use of the mark “cabernet” in Chinese （“解百纳”） as a registered trademark. The decision further found that Changyu established “解百纳”  as one of its trademarks through its use and did not consider “解百纳” the generic name for these cabernet grape varieties.  This means other wineries such as China Great Wall Winery, Dynasty Fine Wines Group Limited and Yantai Weilong Grape Wine Co. are prohibited from using the mark “解百纳”, which may certainly cause damage to these wine makers in marketing their products.
Continue Reading Wine Confusion: Trademark Dispute over Cabernet