CHINA Law and Practice Contributed by: Wei Chen, Yue Zhang, Hao Peng and Yi Sun, JunHe LLP
• Daily transaction of foreign invested company if certain settlement or purchase of foreign currency are involved. • The remittance of funds out of China as a result of liquidation, dividends or withdrawal of investment. Generally speaking, transactions involved with foreign exchange are tightly scrutinised but will be permitted as long as they have a true and reasonable basis and comply with the foreign exchange control requirements and procedures. 8. Recent Legal Developments 8.1 Significant Court Decisions or Legal Developments In April 2024, the Ministry of Industry and Infor- mation Technology (the main PRC authority governing the technology, automobile and tel- ecommunications industry) announced a pilot policy to lift foreign investment controls in some of the value-added telecommunication services (the “VATS”) sectors in Beijing, Shanghai, Hainan and Shenzhen. The pilot policy marks one of the most significant legal developments in China in the last few years in terms of the foreign invest- ment in the technology industry. The VATS which benefited from the pilot policy included internet data centres (IDCs), content delivery networks (CDNs), internet service pro- viders (ISPs), e-commerce (EDI) and internet content providers (ICPs). Before the pilot policy, these sectors were either completely closed to foreign investors or open to foreign investors with limited foreign shareholdings of no more than 50%. Following the introduction of the pilot policy, most of these VATS sectors are now open to
100% foreign shareholding. This means foreign investors may generally enjoy the same treat- ment as domestic investors do in the pilot cities, assuming they meet all the conditions listed in the pilot policy. 9. Due Diligence/Data Privacy 9.1 Technology Company Due Diligence A public company in China is generally allowed to provide due diligence information to bidders with regard to its operations and other relevant matters. The provision of the information would be subject to the public disclosure rules of the listed company and internal authorisations under its articles of association. If it is a public bid, the public company will gen- erally provide the same information to all bid- ders. The public company may allow for a reasonable level of technology due diligence depending on the specific requirements of the bidders and the negotiations between the parties. 9.2 Data Privacy China has data privacy laws and regulations, most notably the Personal Information Protec- tion Law (the “PIPL”). One of the most impor- tant rules established by the PIPL is that the col- lection and processing of individual’s personal information require valid legal bases, which is usually in the form of the data subjects giving prior consent. Technology companies usually possess the per- sonal information of numerous users. For due diligence carried out by a potential buyer of a technology company, it is not possible to obtain prior consent from all of these users. As a result,
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