Mainland-HK-Macau JV law firm looks to tap into cross-border opportunities
Hengqin is one of the three free trade zones in Guangdong Province that are connected to both Macau and Hong Kong by land. And ZLF Law Office, located in Hengqin Creative Valley, is looking to tap into the opportunities brought by this advantageous location.
What is noteworthy about ZLF, though, is that it is a joint-venture law firm that brings together mainland China, Hong Kong and Macau law offices. The component law firms are Zhong Yin Law Firm, Hong Kong’s Fongs and Macau’s Rato, Ling, Lei & Cortés.
In 2014, the judicial department of Guangdong Province launched the Measures for the Administration of Hong Kong-Macau Joint Venture Law Firms, encouraging the establishment of joint-venture law firms in the free trade zones. After that, 11 joint-venture law firms were set up in the zones, with ZLF becoming the first mainland-Hong Kong-Macau joint venture law firm. Now ZLF is the largest joint-venture firm in the Greater Bay Area, with the largest number of Hong Kong and Macau lawyers, and the most extensive scope of business.
As the Belt and Road initiative continues to make progress, an increasing number of Chinese companies are making plans to do business abroad. According to the prevailing Chinese laws, a licensed Chinese lawyer is not allowed to practice law in different jurisdictions. "The purpose of setting up a joint venture firm is to enable us to provide legal services in three jurisdictions at the same time in one office, so as to facilitate clients in implementing projects under the Belt and Road initiative," Chen Yi, director of ZLF, tells ALB.
ZLF currently has four mainland lawyers and 11 and 17 lawyers from Macau and 17 Hong Kong lawyers. According to the firm's website, these lawyers "can provide one-stop legal services for clients in the mainland, Hong Kong, Macau, Portuguese-speaking countries, English-speaking countries, and French-speaking countries to meet their diversified legal needs, helping clients save time and cost, and facilitating communication between clients and the firm."
"Hong Kong and Macau lawyers are our 'super liaison'," Chen says. "Macau lawyers can easily reach out to people in Portuguese and Spanish-speaking countries, while Hong Kong lawyers can make contacts with people in common law countries. At ZLF, we have lawyers who are licensed to practice law in multiple countries including the U.K., Australia, Singapore, Brazil, Portugal, and East Timor."
Taking into account legislation, international taxation arrangements and foreign exchange control, Hong Kong and Macau serve as the springboard for both China's outbound investments, as well as foreign investments into China. Therefore, "Hong Kong and Macau lawyers play a very important role in cross-border transactions, such as mergers and acquisitions, and financing, which all need to involve those lawyers," Chen says.
Zhong Yin Law Firm has more than 30 offices on the mainland, and they send all their legal needs related to Hong Kong and Macau to ZLF for further handling.
In addition, Hong Kong and Macau lawyers who are licensed to practice law in other jurisdictions can "do even more" in helping clients continue to complete their businesses in the European Union, the UK, Australia, Canada, Singapore, Portugal, Brazil and other regions. "For example, there was a mainland company intending to invest in Britain, so our lawyers accompanied the client to the U.K. to assist him in the merger and acquisition of the local target company," Chen tells ALB.
In addition to cross-border investments and mergers and acquisitions, ZLF provides services in other cross-border business areas as well. Chen shares with us an example. BNU Macau, one of ZLF's clients, has set up a branch in Hengqin, which often deals with the issues of "domestic guarantees for foreign loans" or "foreign guarantees for domestic loans.” In the past, clients having such issues had to find law firms in two jurisdictions to issue legal opinions separately, but now clients can have this issue handled by ZLF. ZLF also makes it easier for individuals in the mainland, Hong Kong and Macau to deal with their personal matters.
CONFLUENCE OF CULTURES
Before working at ZLF, Chen served in a management role in the Shenzhen office of Zhong Yin Law Firm. A joint venture firm and a "local firm operate completely different," Chen admits.
The first factor that he takes into account is cultural differences. "At ZLF, most of the lawyers are from Hong Kong and Macau. They have Chinese faces, but western mentalities. The most important thing is good communication, and a good understanding of Hong Kong and Macau cultures, too. For example, at ZLF, Cantonese and English are our working languages," Chen says.
The second is to take every aspect into consideration and pay attention to the smallest details. "As a manager, I need to know well about our mainland lawyers, as well as our Hong Kong and Macau lawyers, including their expertise, strengths, and even personality," Chen says. It's been five years since ZLF was founded; now the joint venture firm has formed several professional collaboration teams specializing in cross-border mergers and acquisitions, cross-border litigation, and cross-border arbitration.
As the Greater Bay Area opens up to Hong Kong and Macau lawyers, allowing them to practice law in nine mainland cities after they pass a special qualification exam, joint venture firms provide a new development platform for interested Hong Kong and Macau residents. "There are young people from Macau who are working as trainee lawyers in our firm, and they plan to obtain the license to practice law in mainland China," Chen says.
According to Xinhua, ZLF's annual turnover has seen continuous growth since its establishment. But that is not all that the joint venture firm is pursuing, Chen tells ALB.
"Domestic entities going public or issuing bonds in Hong Kong has been a hot topic in recent years. IPOs in Hong Kong will be the key business for Hong Kong lawyers of joint venture firms," Chen says. "If Hong Kong local lawyers desire to grab a slice of the market, they'll need to work closely with mainland lawyers." On the one hand, they can improve customer experience through collaborations with mainland lawyers; on the other hand, through special arrangements of a joint venture firm, an issuer or sponsor no longer needs to appoint a mainland firm and a Hong Kong firm at the same time to serve as its legal advisers, thereby reducing costs.
Another profit point for joint venture firms in the future is cross-border mergers and acquisitions. Given the sustained enthusiasm of mainland enterprises for internationalization, joint venture firms can help their clients to set up offshore companies in Hong Kong and Macau to avoid tax and foreign exchange risks. "The demand in this area is considerably high," Chen points out.
Furthermore, joint venture law firms will continue to leverage the policy dividends of the Greater Bay Area and the free trade zones. In addition to the opportunities brought by the further connection between Hengqin and Macau, ZLF will soon open its first branch office in Shenzhen this year. "We believe that there will be more business opportunities there," Chen says.
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