Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Outbound Investment

U.S. / U.K. UPDATE: Corporate Governance — the New Paradigm

Editor’s Note: This article was authored by Martin Lipton and Sabastian V. Niles of Wachtell, Lipton, Rosen & Katz.

Main Article:

This week witnessed two very significant developments in the new paradigm for corporate governance, one in the U.S. and one in the U.K. Both will have cross-border impact. Both have the purpose of promoting investment to achieve sustainable long-term investment and growth.

In the U.K., government proposals for corporate governance reform center on (1) better aligning executive pay with performance and with explaining, if not actually improving, worker wages by publicizing and focusing the attention of corporate directors on the ratio of average worker wages to executive compensation, and (2) improving governance by emphasizing that Section 172 of the Company Law, a constituency statute, provides that directors owe fiduciary duties not just to shareholders, but to customers, suppliers, workers and the community and economy. There is a provision for worker-board engagement by a designated independent director, a formal worker advisory council or a director from the workforce. The report directly relates improving stakeholder governance to mitigating inequality in the U.K. society.

In the U.S., Vanguard sent a letter to the boards and CEOs of all of the corporations in the Vanguard portfolios worldwide setting forth its views on governance, engagement and stewardship. It also issued its 2017 investment stewardship report. The report sets forth Vanguard’s policy for dealing with activist pressure and contains illustrations of how Vanguard dealt with several actual activist campaigns. (See our memo on the Vanguard letter.)

The U.K. government report and the Vanguard letter and report, together with the effort by the World Economic Forum to promote acceptance of The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth issued last year by its International Business Council, gives hope that they will spark additional efforts that together will alleviate the pressure, by asset managers for short-term performance and by activist hedge funds for quick gains from financial engineering, against long-term investment in R&D; capex and reinvestment in the business; building strong employee relations, employment stability and employee training; and sustainability and good corporate citizenship.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CHINESE UPDATE — SASAC to Strengthen Supervision on Outbound Investment of Central Enterprises

Editors’ Note: Contributed by Mr. Adam Li, a partner at JunHe, and member of XBMA’s Legal Roundtable. Mr. Li is a leading expert in international mergers & acquisitions, capital markets and international financial transactions involving Chinese companies.  Authored by Ms. Fang He, a partner at JunHe and a member of XBMA’s Legal Roundtable.  Ms. He has broad experience in M&A, outbound investment, foreign direct investment, and private equity.  Ms. Qingxin Yang, an associate at JunHe, helped preparing the article.

Highlights:

SASAC issued new regulations recently, under which SASAC has adopted the concept of Negative List, and further strengthened its supervision of outbound investment by central enterprises.

Main Article

The State-owned Asset Supervision & Administration Commission of the State Council (“SASAC”) published the Measures for the Supervision and Administration of Outbound Investment of Central Enterprises (“Measures”) on January 7, 2017, which replaced the Interim Measures for the Supervision and Administration of Outbound Investment of Central Enterprises (“Interim Measures”) issued by SASAC in 2012.

Negative List

The biggest difference between the Measures and the Interim Measures is the introduction of Negative List of Outbound Investment Projects by Central Enterprises. There are two categories on the Negative List: Prohibited Category and Specially Supervised Category. Central enterprises are prohibited from investing in outbound investment projects in Prohibited Category, and should submit investment plan to SASAC to go through investor examination procedure before investing in projects in Specially Supervised Category on the Negative List. A central enterprise can make its own decision to invest in projects outside the Negative List according to its development strategies and plans. Central enterprises are also asked to make a more specific and stricter Outbound Investment Negative List for themselves based on the Outbound Investment Negative List issued by SASAC.

To invest in projects in Specially Supervised Category on the Negative List, a central enterprise shall submit investment plan to SASAC to go through investor examination procedure before submitting filings to the authorities in charge of outbound investment such as National Development and Reform Commission (“NDRC”) and Ministry of Commerce (“MOC”). In the previous Interim Measures, a central enterprise just needs to submit a filing to SASAC if it intends to invest in an overseas project falling into its principal business.  Filing procedure is relatively simpler compared to the examination procedure, and normally SASAC will not conduct substantial examination and review in the filing procedure. After the introduction of the Negative List, central enterprises have to submit investment plan to SASAC for examination before submitting to NDRC and MOC for filing when investing in projects in Specially Supervised Category on the Negative List. SASAC will conduct a full and substantial examination of the projects from different aspects such as risk of the project, ownership structure, capital strength, profitability level, as well as competition and exit conditions. Besides, when necessary, SASAC may entrust third-party advisors to give advice on the project. Thus, to invest in projects in the Specially Supervised Category on the Negative List would be more difficult and take much longer time.

In addition, the Measures continues the principle in the Interim Measures that a central enterprise shall not make outbound investment in projects beyond its principal business, otherwise, approval from SASAC shall be required.

Important Concepts Clarified

Two concepts are made clear in Measures: Major Outbound Investment Project and Principal Business of central enterprise. Major Outbound Investment Project means the investment project of a central enterprise decided by its board of directors after consideration in accordance with its bylaw and investment management system. Principal Business is the main business of a central enterprise decided by its development strategies and plans and confirmed and published by SASAC. Non-Principal business is the other business. With a clear definition, a central enterprise is able to decide if a project is a Major Outbound Investment Project and/or falls into its principal business in order to go through different decision-making and examination/filing procedures.

In summary, the Measures have introduced the concept of Negative List, and strengthened the examination and supervision on outbound investment by central enterprises. We will keep a close watch on the Negative List to be published by SASAC and may further comment.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

Promoting Long-Term Value Creation – The Launch of the Investor Stewardship Group (ISG) and ISG’s Framework for U.S. Stewardship and Governance

Editors’ Note: This article was co-authored by Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles and Sara J. Lewis of Wachtell, Lipton, Rosen & Katz.


Executive Summary/Highlights:

A long-running, two-year effort by the senior corporate governance heads of major U.S. investors to develop the first stewardship code for the U.S. market culminated today in the launch of the Investor Stewardship Group (ISG) and ISG’s associated Framework for U.S. Stewardship and Governance. Investor co-founders and signatories include U.S. Asset Managers (BlackRock; MFS; State Street Global Advisors; TIAA Investments; T. Rowe Price; Vanguard; ValueAct Capital; Wellington Management); U.S. Asset Owners (CalSTRS; Florida State Board of Administration (SBA); Washington State Investment Board); and non-U.S. Asset Owners/Managers (GIC Private Limited (Singapore’s Sovereign Wealth Fund); Legal and General Investment Management; MN Netherlands; PGGM; Royal Bank of Canada (Asset Management)).

Focused explicitly on combating short-termism, providing a “framework for promoting long-term value creation for U.S. companies and the broader U.S. economy” and promoting “responsible” engagement, the principles are designed to be independent of proxy advisory firm guidelines and may help disintermediate the proxy advisory firms, traditional activist hedge funds and short-term pressures from dictating corporate governance and corporate strategy.

Importantly, the ISG Framework would operate to hold investors, and not just public companies, to a higher standard, rejecting the scorched-earth activist pressure tactics to which public companies have often been subject, and instead requiring investors to “address and attempt to resolve differences with companies in a constructive and pragmatic manner.” In addition, the ISG Framework emphasizes that asset managers and owners are responsible to their ultimate long-term beneficiaries, especially the millions of individual investors whose retirement and long-term savings are held by these funds, and that proxy voting and engagement guidelines of investors should be designed to protect the interests of these long-term clients and beneficiaries. While the ISG Framework is not intended to be prescriptive or comprehensive in nature, with companies and investors being free to apply it in a manner they deem appropriate, it is intended to provide guidance and clarity as to the expectations that an increasingly large number of investors will have not only of public companies, but also of each other.

Click here to read the full article.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CHINESE UPDATE – Limitations on Overseas Direct Investment, A First Step of Temporary Capital Controls?

Editors’ Note: Contributed by Adam Li, a partner at JunHe, and member of XBMA’s Legal Roundtable. Mr. Li is a leading expert in international mergers & acquisitions, capital markets and international financial transactions involving Chinese companies. This article was authored by Natasha Xie, a partner based in JunHe’s Shanghai offices who specializes in foreign direct investment, M&A, banking and finance.

Main Article:

During this sensitive time when capital control measures are about to come out, through an interview of officials of the State Administration of Foreign Exchange (“SAFE”), the Xinhua News Agency on December 8 revealed the details and direction of policy on the recent tightening of overseas direct investment (“ODI“).  The effects on ODI from the tightening of policy restrictions, starting from several months past and up to present, are rapidly magnifying.

At the opening of the news interview, it was stated that cross-border capital flows were generally stable, and according to monitoring, there was no finding that desire for foreign exchange purchases by enterprises or individuals would surge sharply; however, it was pointed out that a large number of ODI projects have already been placed under scrutiny of various departments (i.e., NDRC, MOFCOM, PBOC, and SAFE).  During the interview, SAFE officials pointed out that four categories are considered abnormal circumstances of ODI behavior: (1) newly established enterprises without substance of business carry out overseas investment; (2) the scale of overseas investment is far greater than the registered capital of the domestic parent company, and the operational status as reflected by financial statements of the parent company is not comparable to support the scale of overseas investment; (3) no correlation exists between the main business of the domestic parent company and the overseas investment project; (4) the RMB used for investment obtains from an abnormal source, being suspect of illegally transferring assets for Chinese individuals and illegal operation of underground money exchange.  Having such a wide range for the definitional scope of abnormal behavior is really rare.  From the perspective of SAFE, only enterprises with the capability and qualification can make overseas direct investment, while pooling of funds by individual investors for conducting overseas direct investment does not conform to the so-called “authenticity and compliance” principle.

In addition, this interview once again mentioned the ways of foreign exchange payment violations by individuals, that is by way of split where the annual remittance quotas of other individuals are used in performing fund remittances; as well as the possible consequences of such violations, that is these individuals might be put on an “Attention Name List,” and have their annual remittance quotas for the next two years canceled, and where circumstances are serious, be put on file for punishment.

Our Interpretation: Except for ODIs conducted by enterprises possessing ample financial strength and where the ODI is closely related with the main business of such enterprises, other types of ODI would basically be stopped.  In addition, there is a large possibility that the next step of SAFE will be to take further steps in regulatory and enforcement measures regarding overseas investment by individuals.

 

境外直接投资受限——临时资本管制的第一步?

在这样一个资本管制措施呼之欲出的敏感时刻,新华社于12月8日对国家外汇管理局(“外管局”)有关负责人的新闻专访透露了近期有关境外直接投资(“ODI”)收紧的细节以及政策走向。从几个月前就开始的口径收紧到目前的明令限制,境外直接投资受到的影响正在急剧放大。

新闻专访开篇就称跨境资金流动总体相对稳定,根据监测没有发现企业和个人购汇意愿激增,但随之指出大量境外直接投资项目已经置于各部门(发展改革委、商务部、人民银行、外汇局)的重点审查之下。外管局负责人在专访中指出了四类被认为存在异常情况的境外直接投资行为:(1)刚成立的没有实体业务的企业开展境外投资;(2)境外投资规模远大于境内母公司注册资本,母公司企业财务报表反映的经营状况难以支撑其境外投资的规模;(3)境外投资项目与境内母公司主营业务不存在相关性;(4)用于投资的人民币来源异常,涉嫌为个人向境外非法转移资产和地下钱庄非法经营。上述对异常行为的界定范围之广殊为罕见。在外管局看来,只有有能力和有条件的企业才可以开展境外直接投资,而汇集个人投资者的资金进行境外投资不符合所谓“真实合规”的原则。

此外,该篇专访又再次提到个人对外付汇的违规方式,即通过分拆方式,利用他人的年度用汇额度进行资金汇出,以及此种违规行为的可能后果,即个人可能被列入“关注名单”,取消其之后两年内的便利化购汇额度,情节严重的可以立案处罚。

我们的解读:除非是具备充足资金实力的实体企业进行与其主营业务密切相关的境外直接投资,其他类型的境外直接投资基本上会被叫停。此外,对个人的海外投资,外管局下一步有比较大的可能采取进一步的监管手段和执法措施。

 

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

The Dutch Corporate Governance Code and The New Paradigm

Editors’ Note: This article was co-authored by Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles and Sara J. Lewis of Wachtell, Lipton, Rosen & Katz.

Executive Summary/Highlights:

The new Dutch Corporate Governance Code, issued December 8, 2016, provides an interesting analog to The New Paradigm, A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, issued September 2, 2016, by the International Business Council of the World Economic Forum. The new Dutch Code is applicable to the typical two-tier Dutch company with a management board and a supervisory board. The similarities between the Dutch Code and the New Paradigm demonstrate that the principles of The New Paradigm, which are to a large extent based on the U.S. and U.K. corporate governance structure with single-tier boards, are relevant and readily adaptable to the European two-tier board structure.

Both the New Paradigm and the Dutch Code fundamentally envision a company as a long-term alliance between its shareholders and other stakeholders. They are both based on the notions that a company should and will be effectively managed for long-term growth and increased value, pursue thoughtful ESG and CSR policies, be transparent, be appropriately responsive to shareholder interests and engage with shareholders and other stakeholders.

Like The New Paradigm, the Dutch Code is fundamentally designed to promote long-term growth and value creation. The management board is tasked with achieving this goal and the supervisory board is tasked with monitoring the management board’s efforts to achieve it.

Click here to read the full article.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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