A proud family business agrees to join forces with an international player – interview with Marein Smits in Lawyer Monthly Magazine

Earlier this year MBrands BV (Mystic and Magic Marine) and North Technology Group (North Kiteboarding) decided to continue together in a new dynamic company called North Actionsports Group.

MBrands International was co-assisted by Marein Smits from Wintertaling advocaten en notarissen. Marein was interviewed by Lawyer Monthly Magazine about this acquisition. You can find the interview here.

Event GO -NH – 8 May 2019

Event GO -NH – 8 May 2019

23 April 2019

On Wednesday 8 May we will host another meeting of GO!-NH. GO!-NH is an accelerator programme of the Province of Noord-Holland and Innomics. The program accelerates start-ups and innovation teams of large organizations in a three-month program, from an idea to a company that is ready to storm the market with innovative solutions. They receive training, tools and professional support from experts including Wintertaling.

 

Nine teams will visit us. They will start in the morning with a workshop given by Tim Carapiet van Wintertaling and Rutger Kemper van Leapfunder. In the afternoon there will be intakes that will be joined by four more external organizations. The day will end with a drink in our bar.

 

 

Wintertaling advises Lexington based PE Watermill Group on Dutch part of acquisition of Enbi

 

Read here the full article.

 

New PRC Foreign Direct Investment Law

On 15th of March 2019, the New PRC Foreign Investment Law has been approved which will have a big influence on foreign direct investment (“FDI”) in China. The previous vice minister of Ministry of Commerce of the People’s Republic of China (“MOFCOM”) predicted that with the approval of this new Law, the second spring for foreign enterprises to invest in China is coming soon.

Taking effect on January 1st 2020, the new Foreign Investment Law shall replace the following three original laws on foreign direct investment (“FDI”): ‘The law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures’, ‘The law of the People’s Republic of China on Sino-Foreign Contractual Joint Ventures’ and ‘The law of the People’s Republic of China on Foreign Capital Enterprises’.

Prior to the approval of the new FDI law, there already has been a lot of discussion on the mere 41 clauses, as people regard this new legislation more as a policy or guideline. The new FDI law is somewhat vague and lacking detailed clauses. No doubt, it will trigger several related legislations and interpretations in order to implement this new PRC FDI Law.

In essence, the new law is meant to facilitate the further opening up of the Chinese market for foreign investment – especially now it is engaged in a trade war with the United States and increasing tensions with Europe as well. It aims at encouraging foreign investments and protecting interests of foreign investors for it has clear protection provisions on issues such as expropriation (the state depriving real estate property from the owner) including financial compensation by the authorities and their justification of the need to expropriate, strengthening intellectual property protection against infringements, and explicitly prohibiting mandatory technology transfer by the foreign investor to their domestic Chinese partner (although this was never a straight formal obligation under the law but demanded in practice by the Chinese partner instigated by the under FDI authorities).

To conclude, this new law provides a stronger legal land economic environment for foreign investors but there is still a lot to be detailed in the new FDI law – as it just took less than three months from first discussion about the law until the last vote through China’s Standing Committee of the National People’s Congress. We believe a major reason behind this radically new legislation is to respond to the complaints from the US government on mandatory technology transfer, thus easing the economic tensions with the US.

For foreign investors, it is best to focus on the actual details of the new FDI law before making final investment decisions. Our Wintertaling China Desk will keep following the implementation of this crucial new law. Should you have any questions, please do reach out to us.

Getting your money out of China

How to get your money out of China has increasingly been a serious and significant issue not only for foreigners but also for Chinese people themselves.

In 2017, the Wanda Group – a vast Chinese multinational conglomerate and owner of Wanda Cinemas and the Hoyts Group, was stopped by the government in the process of making overseas mergers and acquisitions. The China Banking Regulatory Commission prohibited large state-owned banks from granting loans to Wanda for these overseas M&A projects. At the same time, privately held enterprise groups such as Wanda were forced by the Chinese government to sell overseas assets and transfer funds back to China. The same happened to Anbang Insurance Group who acquired the Dutch insurance company Vivat in 2015 and within four years is now divesting it again.

In late 2016 the Chinese government began to strictly control all foreign exchange transactions and is even boosting this control since 2018. In addition to statistical foreign balance of payment (“BOP”) purposes, the controlling of foreign exchange (“forex”) transactions for both corporations and private individual citizens, the ultimate focus of forex control is to limit Chinese capital investments abroad.

For individuals, since the beginning of 2017, the PRC State Administration of Foreign Exchange (“SAFE”) announced new regulations on the restriction of purchase of forex in overseas real estate and capital market investment. Furthermore, while maintaining the US$ 50,000 foreign exchange purchase limit, a specific application form needs to be filled in.

For enterprises, China has moved towards a more foreign currency system, however, still under substantial monitoring. Under China’s BOP, there are two types of bank accounts: firstly, the current account which covers frequent payment transactions for services and sales. The other one is the capital account which is meant to cover capital transactions for real estate, shares (stocks), bonds, securities and savings deposits.

For current account transactions, companies need to go to the Tax office first to pay and file all related tax like VAT and Corporate Income Tax. Then companies need to show all required documents including tax clearance certificate, contracts, invoices at the bank’s counter when completing the forex transaction – as PRC banks are authorized to check and approve the currency exchange on behalf of SAFE as their front office and only consult SAFE if they are unsure about the rule or its execution.

Currency exchange under capital account need approval from both the PRC Ministry of Commerce (“Mofcom”) and SAFE. A loan for example, is only allowed for intra-group lending to foreign subsidiaries or affiliates (daughter or sister companies). Although there is no formal (published) need, SAFE does check the controlling power of the shareholder. Getting your money out of China therefore may require a more creative approach. There are several options available to this end.

Wintertaling China Desk is ready to figure out and assist you in finding the most suitable approach for you.

European Market is more attractive for Chinese investors: New rules on the review of foreign investment in the United States are in place

by Xuehan Yang

Background

After hitting a record high in 2016, China’s overseas M&A activity has entered a “pressure period”, which can be said to be squeezed by internal and external supervision. The first wave of pressure from the foreign investment since the end of 2016 domestic tightening regulation, the second wave of the pressure from the United States, since 2017, the U.S. national security review of foreign investment heavily regulated, strengthen the Foreign Investment Risk Review Modernization Act (FIRRMA) by the national security review subject departments namely Committee on foreign investment in the United States (CFIUS) in August this year.

On October 10th America’s Treasury, the arm of CFIUS, tightened the rules further by issuing provisional rules on FIRRMA’s pilot programme.

 

27 industries facing scrutiny over new U.S. regulations

The interim rules mainly involve two changes. One is to expand CFIUS’s jurisdiction to cover non-controlling and non-passive investments, such as those in key technology sectors, that are subdivided. Second, for the trade of key technologies in the industry covered by the pilot program, a simple and mandatory declaration procedure must be added. A declaration of no more than 5 pages of basic information about the transaction must be submitted 45 days before the expected completion date of the transaction. Failure to do so could result in fines of up to the value of the transaction.

According to information released by the U.S. Treasury Department, the pilot program covers 27 industries, including aircraft manufacturing, aircraft engine and parts manufacturing, computer storage equipment, radio, television and wireless communication equipment, as well as biotechnology research and development, semiconductor and related equipment manufacturing.

The pilot program is scheduled to start November 10. In a statement, the Treasury Department said CFIUS would take public opinion on the interim rules into account in formulating its final rules. CFIUS is also drafting detailed FIRRMA legislation that will be fully implemented in February 2020.

 

Chinese buyers are looking into new markets in northern and eastern Europe

Chinese investors have been looking to Europe and other unconventional markets for some time amid a tightening regulatory environment in the US.

Germany is a major destination for Chinese investment in the EU, however, the German government is considering further lowering the 25% reporting threshold for non-EU companies buying stakes in German companies to 15% this year, with a need to keep a close eye on key investments in defense, infrastructure and IT.

A similar national-security review framework for foreign investment is also in the pipeline in Britain, amid signs that more Chinese buyers are looking for targets in unconventional markets.

But markets like northern and eastern Europe may not yet have a similar framework. So this might be a good chance for more and more Chinese investors to invest in Netherlands, Finland or other European countries.

 

Investment and Financing under Chinese New Normal – After the Adoption of the Amendment of PRC Company Law in 2018 – regarding repurchase of share capital in listed Chinese companies

By Hanren Xiao

 On the 26th of October 2018 China has adopted a major amendment of its Company Law which is a remarkable symbol that the legislation of the Chinese capital market is gradually becoming mature.

The amendment is for the most part about share repurchase. Share repurchase refers to the situation that a company acquires the issued shares of itself – which is an internationally accepted way to accomplish merger and reorganization, optimize governance structure, and stabilize stock price. It is also the basic institutional arrangement for a company in the capital market.

Article 142 PRC Company Law is amended as follows:

“A company shall not purchase its own shares except under any of the following circumstances:

  1. To decrease the registered capital of the company;
  2. To merger another company holding shares of this company;
  3. To use the shares for employee stock ownership plans or equity incentives;
  4. It is requested by any shareholder to purchase his shares because this shareholder objects to the company’s resolution on merger or split-up made by the assembly of shareholders;
  5. To use the shares for the conversion of corporate bonds issued by listed companies that can be converted into stocks;
  6. For the necessity that listed companies maintain the company’s value and shareholder’s rights.
  • Where a company needs to purchase its own shares for any of the reasons as mentioned in Items (1), (2) of the preceding paragraph, it shall be subject to a resolution of the shareholder’s assembly. Where a company needs to purchase its own shares for any of the reasons as mentioned in Items (3), (5), (6) of the preceding paragraph, it could be subject to article of association or the authorization of shareholder’s assembly and decided by more than 2/3 of the directors present at the board meeting.
  • After the company purchases its own shares pursuant to the provisions of the preceding paragraph, it shall, under the circumstance as mentioned in Item (1), write them off within 10 days after the purchase; while under either circumstance as mentioned in Item (2) or (4), transfer them or write them off within 6 months; while under either circumstance as mentioned in Item(3), (5) or (6), the total number of shares of the company held by itself shall not exceed 10% of the total issued shares of the company and shall transfer them or write them off within 3 years.
  • A listed company that acquires shares of itself shall perform information disclosure obligations in accordance with the provisions of the PRC Security Law. The listed company shall conducted through open and centralized trading while acquiring shares of itself by under either circumstance as mentioned in Item (3), (5) or (6).
  • No company can accept any subject matter taking the stocks of this company as a pledge.”

 

The three main changes in article 142 are : First, it implements the conditions in which a share repurchase is permitted. Second, it simplifies the resolution process of share repurchase, raise the maximum amount of shares held by the company by itself and extend the period in which the company can hold the repurchased shares. Lastly, it adds regulatory rules for listed companies.

This amendment has further consolidated the basic capital market system, and is providing strong legal support for promoting the steady and strong development of the Chinese capital market. Consequences of this amendment is enormous. Firstly, it helps to improve the value of listed companies. Secondly, it helps improving the financial capital management system and further financial reform. Lastly, it is aiding the protection of rights and interests of most small and mid-size investors in China.

The China Securities Regulatory Commission (CSRC) expressed that they will take measures to strictly investigate and penalize the following illegal acts: insider trading by using share repurchase, manipulating the market, and illegal information disclosure.

Giving more possibilities on allowing the company to repurchase its shares could be more flexible to meet the practical requirements of stabilizing the stock price especially when the stock price is generally undervalued, or the price has undergone an irrational decreasing.

 

 

North Technology group takes over MBrands International 

North Technology group takes over MBrands International 

As of the 3rd of January, MBrands BV (Mystic and Magic Marine) and North Technology Group (North Kiteboarding) will unite under one umbrella creating a new dynamic enterprise called North Actionsports Group.

The end of an era is always an intriguing time, especially for a family company. When Max Blom Sr. bought MBrands International (B.V.) in 2007 he never could’ve imagined making this decision. “Back then the happiness of creating and building beautiful brands with my son, and later on also with my daughter, predominated our state of minds. However, a beautiful future lies ahead. By mustering forces with probably the best player in our industry we managed to combine the best of both worlds. A result to most definitely be proud of.” affirms Max Blom Sr. (Owner/CEO MBrands International) positively.

MBrands International is the owner of the worldwide brand registration rights for Mystic, Magic Marine and Maui Magic.

MBrands International was advised by Marein Smits van Wintertaling advocaten en notarissen.