CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe
ters, compliance with laws, environmental mat - ters, indebtedness and loans, leases and other material contracts, employees, intellectual prop - erty and no pending litigation in respect of the target company. Coverage of Representation and Warranties The coverage of representation and warranties is subject to business negotiations between the parties to a transaction. In general, parties to cross-border transactions are more comfortable with standard broad representation and warran - ties provisions, while domestic players tend to welcome a shorter version of an asset or equity transfer agreement; ie, a more condensed cover - age of representation and warranties. Breach of Representations and Warranties If the seller is in breach of the relevant repre - sentations and warranties, the buyer is gener - ally entitled, in accordance with the contract or relevant PRC laws, to claim for damages, refuse to proceed with the closing or even terminate the contract. A sophisticated seller may insist that the buyer may only refuse to proceed with the closing or terminate the contract when the seller is in breach of fundamental representations and war - ranties, and otherwise only claim for damages in the event of breach of general representations and warranties. The seller’s representations and warranties apply primarily to the facts and circumstances exist - ing at the time of contract execution and are deemed to have been remade on and as of the closing date. A sophisticated seller may insist on adding a time limit for bringing claims for breach of such representations or warranties and cap - ping the seller’s liability for breach of the same. A typical cap for the aggregate of all the claims is
100% of the total contract price, while a sophis - ticated seller generally sets different sub-caps for different categories of claims. Representation and warranty insurance is more often seen in cross-border transactions involv - ing international players, mostly taken out by purchasers in cross-border transactions. Local parties, particularly state-owned enterprises, are becoming increasingly aware of and interested in such insurance. 2.6 Important Areas of Law for Investors See 1.1 Main Sources of Law , 2.2 Laws Appli- cable to Transfer of Title , 2.11 Legal Restric- tions on Foreign Investors and 5.5 Applicable Governance Requirements . 2.7 Soil Pollution or Environmental Contamination The Environmental Protection Law and Soil Pol - lution Prevention and Control Law of provide that the person causing the soil pollution (the “causing person”) is responsible for managing the soil pollution risks and the remediation of the soil pollution it caused. However, if the causing person cannot be identified, the land use right owner (eventually the buyer, unfortunately) is responsible for managing the soil pollution risks and remediation of the same, even if the land use right owner did not cause the pollution or contamination. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A buyer can ascertain the permitted use of a parcel of real estate by viewing the construc - tion land planning permit ( 建设用地规划许可证 in Chinese), land grant contract ( 土地出让合同 in Chi- nese), the construction works planning permit ( 建 设工程规划许可证 in Chinese), other relevant zoning documents and the title certificate. In addition, a
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