2021 ALB China Top 15 TMT Lawyers
In spite the challenges of 2020, the practitioners named in the 2021 ALB China Top 15 TMT Lawyers list recorded outstanding achievements – taking advantages of favorable conditions to help companies grasp good opportunities for investment and financing, constantly observing TMT industry regulatory trends with a forward-looking perspective, and providing companies with legal services and solutions that are in tune with the times. We spoke with some of the ranked lawyers to hear their observations and thoughts on the TMT industry.
China's TMT industry has entered a "golden period" of rapid development in recent years. Despite the great impact by the COVID-19 pandemic in the first quarter of 2020, the TMT industry has quickly rebounded and regained momentum since the beginning of the second quarter as the pandemic gradually came under control and the authorities introduced various support policies. According to the data released by PricewaterhouseCoopers on initial public offerings (IPOs) of Chinese TMT companies in the second half of 2020, the number of IPOs of mainland TMT companies totaled 164 in 2020, which is nearly 58 percent higher than that in 2019, and the total amount of financing is about 346.8 billion yuan ($53 billion), which nearly doubles that of 2019. The TMT industry regulation has also been further intensified at an expedited speed amid the rapid growth of the industry. "Speaking of regulation, the TMT industry is entering the 'deep-water' zone, where regulation and opening-up are equally emphasized with a view to ensuring the orderly operation and health development of the industry and better serving the national economy and market demand," Han Wu, partner at King & Wood Mallesons (KWM), tells ALB.
"The TMT industry regulatory environment sees a trend of objective changes, featuring multiple perspectives, dimensions and levels," Wu says. First, the TMT industry regulation is no longer the regulation in the traditional sense, which is limited to the basic matters such as checking enterprise qualification certificates, anti-trust and anti-unfair competition review, and personal information protection. With the continuous technological advancement of cloud computing, 5G, and artificial intelligence, complex internal business linkages are the new feature of the production and operation activities of TMT companies. Given that, the TMT industry regulation has gradually penetrated the multi-dimensional compliance of the overall product or service model.
Secondly, the regulatory authorities use more diversified means and "toolbox" in the TMT industry regulation. With the promulgation and implementation of the Data Security Law, the Personal Information Protection Law, the Measures for the Supervision and Administration of Online Transactions, and several other related laws or draft regulations since last years, regulatory bodies are further empowered and equipped with more diversified regulatory measures. Meanwhile, given that the specialized echelons have been formed at the main regulatory bodies including market supervision and administration departments, cybersecurity and informatization departments, industry and information departments, and competent departments of industries, TMT companies are faced with the compliance risks with a hierarchical characteristics.
And finally, the authorities endeavor to accelerate the process of bringing TMT industry regulation in line with international standards. "As the TMT industry regulation has been a main concern of the international community which involves different perspectives of matters, and the division of work and cooperation in trade and investment within the TMT industry have been further clarified and strengthened, we observes a trend that China's TMT industry regulatory rules are gradually brought in line with those prevailing TMT trade, investment and data protection rules in the international market," Wu says.
Wu points out that in this context, it is very important for TMT lawyers to keep abreast of and fully understand the current regulatory hot spots, and difficult and pain points, and leverage their expertise and good understanding of the industry regulations and policies to give legal opinions or even provide clients with a complete set of compliance solutions in light of clients' actual operating mechanisms and compliance needs and from the perspective of global market integration.
“Take KWM's legal practices in the areas of cyber security, data compliance and asset governance for example," Wu shares with ALB. "A client approached us and asked us to help them with business model compliance demonstrations and gap rectifications. KWM's team, based on the in-depth understanding of the prevailing industry regulatory trend, actively grasped the rigid legal requirements for Apps concerning personal information protection, provided the legal services with the focus on data subject control and asset legalization management, and fully took into account the hotspot issues concerning the allocation of resources in the data element market and the related policies. By doing so, our team provided the client with customized and industry forward-looking legal and compliance services with an international market development perspective."
TMT INVESTMENT AND FINANCE BECOMING MORE COMPLEX
Talking about the characteristics of TMT investment and financing projects in recent years, Xinyang Zhang, senior partner at Commerce & Finance Law Offices, observes that the transaction projects have undergone remarkable changes – most of the transactions involved anti-trust declaration compliance issues, China Concepts Stocks listed in the U.S. return to Hong Kong for a secondary listing, and Hong Kong listed companies spin off subsidiaries for A-share listing – which involved extremely complex domestic and foreign legal issues, posing great challenges to the legal profession.
"For example, we did a project in which a Hong Kong listed subsidiary of an A-share company intends to list on the A-share market, but there is horizontal competition between the stock issuer and the major shareholders. Given that, we carried out a lot of researches on domestic and overseas regulatory rules and real cases, and then did innovative analysis based on our rich A-share experience and in light of the industry characteristics and the fact that the competitive relationship between the issuer and the major shareholders was formed through their capital participation in a third-party company, and finally we came up with a flexible solution for the client which complies with the listing rules and business development needs. In the context of the ever-changing regulatory environment and capital market, legal professionals need to keep abreast of the latest policy developments and endeavor to gain firsthand experience, so as to quickly respond to or adapt to changes in the capital market and clients' needs, and propose practical and feasible compliance solutions," Zhang says.
Xinrui Wang, senior partner at Anli Partners, leads his team to provide investment and financing related legal services for top technology companies. Wang says that in the past two years, what impressed him the most is that "equity financing transactions have been more difficult to deal with, and investors in general have posed more stringent requirements for startups than before; and meanwhile large project financing has been more concentrated than ever, and the problem of 'the polarization of wealth' among the startups has become quite serious." He believes that for lawyers, whether serving as corporate lawyers or investors' lawyers, they must have an accurate judgment on the 'time window,' otherwise a minor mistake might lead to a major loss.
"We believe that effective communication with clients is an important way to understand the competition landscapes in their niche markets, based on which we can help them prepare more flexible transaction arrangements, and set up a number of interfaces allowing quick and flexible adjustments to the plans. We recently participated in an equity financing case, in which the company originally planned for an overseas financing project, but in the end, it adjusted its plan and completed domestic equity mergers and acquisitions, and then carried out the financing as a whole," Wang says.
Wu observes that the TMT industry sees more and more listings, mergers, and equity investment and financing transactions in recent years. By virtue of algorithm technology and data assets as their core competitiveness, Internet technology companies as well as big data and artificial intelligence innovation companies have gradually become the global capital trading market darling. "Furthermore, the compliance value of corporate client data assets has gradually become one of the major concerns of investors and regulators of listed transactions and free market competition," Wu adds.
These TMT project characteristics are in fact driving the transformation or reform of the legal service mode. KWM assisted a large data-driven company to successfully go public (this year), "from which we learnt that, on the one hand, because of the strict requirements of investment and financing regulatory and compliance review, the compliance issues related to using data as corporate assets and operating resources become increasingly prominent, therefore, how to ensure the legal and compliance operation within the current framework of laws and regulation was our first priority; on the other hand, as one of the legal service teams helping with the successful IPO of the company, we played a 'dual role' – while ensuring the compliance operation, we ought to work together with the client on seeking the legal framework for optimizing the business operation model and ensuring the sustainability of the new technology development and commercialization – so as to give professional advice objectively which is in line with the legal development trend," Wu says.
KNOWLEDGE MANAGEMENT CRITICAL
The TMT industry is undergoing rapid development, including technological innovation, enterprise development, and related legal processes. Therefore, knowledge management is of great significance for TMT lawyers. "To gain better and in-depth understanding of the TMT industry, we need to work together with the industry leaders and learn from them while providing services," Wang says.
While serving their clients, Wang and his team have continuously obtained high-quality information inputs from their clients, such as common problems and needs of the industry, based on which they have been carrying out the related knowledge accumulation, sort-out and outputs.
"Last year alone, we prepared special research reports for our clients with more than a million words," Wang says.
Anli attaches great importance to knowledge management. The firm has a well-established knowledge management system, including more than ten periodically-updated law collections and typical case collections, a dictionary on clients-related issues, and an industry practice database. "Each year, we devote a lot of time and energy to translating various types of overseas guidelines and reports, and then sort them out according to our needs. In addition, I teach part-time at Peking University and Tsinghua University the legal practice-related courses. When preparing the lessons, I sort out the knowledge, information and practices systematically to come up with questions for classroom discussions," Wang shares with us.
Based on years of practices and experiences, KWM has set up a complete knowledge management system covering knowledge and information acquisition and feedback, which can meet the day-to-day needs of clients. Furthermore, the firm continuously updates the system in light of the different needs of different industries to adapt to the changes and development of legal services. By setting up smart platform for knowledge management, KWM provides its practicing lawyers with strong legal technology support covering all its practice areas, enabling the lawyers to greatly improve their work efficiency.
Taking the cyber security, data compliance and asset management teams of KWM for examples, Wu says: "When helping clients solve their problems and serving their legal needs in the day-to-day work, it is necessary to summarize what we have learnt from those experiences, as well as the key knowledge points. At KWM, we regularly have special studies and internal discussions on difficult problems encountered when providing legal services for TMT companies, and come up with solutions in line with the revisions of laws and regulations and the actual changes in regulatory trends, and then include the solutions under different categories of compliance issues in our knowledge system. This system enables us to address clients' potential needs in compliance, and help them to develop feasible and compliance large-scale business solutions. By virtue of this system, KWM has built its unique strength in industry knowledge and information research in areas of data compliance and governance business, and provides legal services with distinctive characteristics."
Cross-border compliance poses challenges to Chinese TMT companies that intend to go global. An in-depth understanding of the regulatory environment at home and abroad and establishing a strong international legal service network have become the key to helping Chinese TMT companies to tackle the challenges. Wang of Commerce & Finance tells ALB that many of their clients mainly target the overseas markets since they have hundreds of millions of users in foreign countries, and some of them need the firm to provide data protection related compliance services involving a number of jurisdictions.
"As we have partners on our team who had years of experiences working at international law firms, and meanwhile we have been working closely with lawyers of foreign firms, some top international law firms would recommend clients to us from time to time. When handling cases involving complex local legal issues of foreign countries, instead of directly referring the clients to foreign firms, we would work closely with those firms, helping Chinese companies to communicate with the foreign firms, and meanwhile helping foreign lawyers to understand the characteristics and business needs of Chinese companies. In addition, we provide our clients with some proven peer practice cases as a reference to help them understand the legal requirements of foreign countries," Wang says.
According to Wu, KWM's data legal service team has built specialized echelons to provide cross-border data compliance services for Chinese companies that are going global, accumulated considerable practical experience in the cross-border operations, and helped State-owned enterprises, central enterprises, and other technology companies to meet the data compliance legal requirements of different jurisdictions in the process of going global. Furthermore, the team provides clients with legal advice and sustainable business solutions from the top-down perspective after the projects have landed and gone into later-stage implementation.
As a comprehensive international law firm with offices in 29 cities around the world, KWM has built a unified global platform to provide its lawyers with strong supports in their practice areas, enabling them to keep abreast of the law updates and policy trends in various jurisdictions in real time, and to make good judgments on the data protection regulatory policy trends in different countries. With the support, KWM lawyers are able to help clients pave the way for "going global" in terms of satisfying the regulatory requirements for the technology sector in a high-standard and practical manner, and identifying and avoiding potential business risks, Wu says.
Regarding the work plan for the next few years, Zhang says that he and his team will continue to keep up with the changes in the regulatory environment and look at issues from a forward-looking perspective, and provide clients with innovative and feasible solutions and legal services in light of enterprises' development characteristics.
"Given the foreseeable legislative process and regulatory trends, we predict that all types of compliance and dispute resolution business in the TMT industry will see explosive growth in the next few years. I hope that we would ride the tailwinds of the rapid development of the TMT industry to make greater achievements. Of course, we need to build solid basic skills first," Wang says.
Wu says that product innovation in the digital economy is the blue ocean of legal services. With a view to tailoring their services to the ecological characteristics of the "digital transformation" in the new economy industry, KWM team will no longer limit their services to providing traditional legal solutions; instead, they will actively seek innovation in the digital economy business areas in terms of service models and service types, and continuously develop new legal service products and seek new business opportunities. In addition, in order to form a systematic digital legal service plan and address legal practice challenges in the field of Internet technology such as data algorithm and artificial intelligence products, KWM team will actively expand the legal protection of innovative products in the digital economy, and provide services such as formulating schemes for the protection of assets such as digital intellectual property rights and trade/technical secrets, and designing anti-unfair competition market strategy.
"The digital era is evolving into the intelligence era, which is the law of the development of human social productive forces. We will endeavor to continuously optimize our services and provide our clients with top solutions for the sustainable development of business technology, so as to help them thrive in the coming new era," Wu says.
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