As China leads the world in developing and investing in clean energy technologies to curb carbon emissions, Hong Kong-listed GCL-Poly Energy Holdings have established itself as one of the top green energy operators in China and one of the leading polysilicon and wafer suppliers in the world. The company’s in-house legal department has expanded and evolved as the company has grown.

Starting from one person in 2001, the in-house team now consists of 15 lawyers across the Shanghai, Suzhou and Hong Kong offices, handling legal affairs and managing legal risks of a company that owns 21 subsidiary & associated power plants, a solar farm and several polysilicon and wafer facilities. The team has been selected as a finalist for the “Foreign Company In-House Team of the Year” award at the 2010 ALB China Law Awards, for being a first-class advisor to its company and the significant progress it has achieved over recent years.

Susan Wu, the company’s chief legal officer for the power sector, is the founding member of GCL-Poly’s in-house legal team. Previously worked at a Shanghai law firm, she joined as the company’s first in-house lawyer in 2001 and helped build up the in-house team to its current capacity. Wu sees a correlation between her team’s success and the senior management’s respect for the rule of law. “The CEO and senior management team’s commitment to integrity and legal compliance forms a foundation for the in-house legal team to excel,” says Wu. “The team’s legal understanding, business acumen and depth and strength of technical expertise, in turn, are the key factors determining the success.”

Many obstacles and challenges can exist on the road to success. Wu believes her team’s main challenge lies in achieving the right balance between safeguarding the company’s legal compliance and proactively supporting business growth. “For a dynamic company like GCL-Poly, we are constantly seizing exciting opportunities to achieve growth. Naturally one must be alert that every potentially rewarding project comes with commensurate risks,” says Wu. “We work closely with our company’s management, and other functional departments to formulate appropriate business strategy, and assist them in achieving and executing new business goals.”
 
To reach the right balance, Wu says, in-house counsels must strive to be value-adding members to the management teams and not constant alarmists. “In-house counsels, with their particular knowledge of the industry in which their company is engaged in, must be more innovative than external counsels. They should be more able to devise viable solutions for potential projects to move ahead and become successful business units,” she says. 

 
Landmark transactions
Since its inception, GCL-Poly’s in-house team has been involved in a diverse range of projects and investments, supporting the company to expand its green energy portfolio across cogeneration, biomass, incineration, wind and solar power sectors. “The in-house team has always had a strong and close working relationship with the investment department, and has developed a wealth of experience and expertise in legal issues relating to all aspects of the company’s business,” says Wu.

The past four years, in particular, have seen the team playing an instrumental role in the company’s milestone developments, including its IPO on Hong Kong Stock Exchange in November 2007 and US$3.4bn acquisition of Jiangsu Zhongneng Polysilicon Technology Development in July 2009.

“The 2007 IPO marked a significant milestone in the life of GCL-Poly, and it served as a passage for the in-house legal team to reach a higher level of maturity,” says Wu. “The IPO process has really tested our team’s abilities, but we’ve gained a tremendous amount of first-hand knowledge and experience on a wide array of issues and listing-related matters through working on the deal from the very beginning.”

In the 20 months leading to the launch of the IPO, the in-house team was extremely busy. It worked closely with the internal IPO execution team and 15 external advisors and intermediate institutions, including PRC, Cayman Island, Hong Kong and international legal counsels, financial advisors and underwriters, to find solutions for many complicated issues during the preparation process. It played an important role in managing the data room, coordinating due diligence, restructuring, obtaining regulatory approvals, drafting the legal structure for the IPO, negotiating the listing plans and timetable, pre-IPO financing, answering questions raised by all concerned parties and regulators, and reviewing and finalising the prospectus.

“It’s a transformational process. Having been through the challenges and pressures during the IPO process, most of the projects and matters now seem easy to us,” says Wu. “In addition, as the company becomes a public company, it is paying increasing attention to related-party transactions, corporate governance, procedure and compliance, and disclosure issues. As a result, the in-house legal function’s importance within the company has been further elevated.”

Last July, GCL-Poly’s US$3.4bn acquisition of Jiangsu Zhongneng opened another new exciting chapter of the company’s growth. Upon the completion of the acquisition, GCL-Poly has become China’s largest and one of the world’s leading polysilicon producers. The in-house team coordinated a large number of law firms and ensured the successful completion of this highly complex deal, which involved 30 parties and was also the largest M&A deal in Asia in 2009. The deal was awarded “M&A Deal of the Year” at the 2010 ALB China Law Awards.

Other major transactions the team assisted the company to complete recently include US$760m investment by China Investment Corporation’s at the end of 2009 and GCL-Poly’s acquisition of controlling stake in Konca Solar.

Strong leadership of the team
GCL-Poly’s flotation and strategic shift towards the solar power business has meant it would require stronger and more diverse in-house legal support. Thus, immediately after the 2009 acquisition, the company appointed Tong Kay Tak Tom, as its vice president and general counsel in Hong Kong. Tong, a director and vice president in charge of legal affairs of Jiangsu Zongneng before he joined GCL-Poly, is a practising solicitor in Hong Kong. He has brought his extensive experience of international corporate and capital market legal practice to GCL-Poly’s in-house legal department. He is currently joined by another in-house counsel in Hong Kong.

As the solar power unit becomes a dominant part of the company’s business, GCL-Poly has recently named its long-standing in-house counsel Dai Mengyang, who joined in 2003, as the director of the legal department to oversee all legal matters for this new but rapidly expanding business unit. Currently, Dai leads eight in-house legal staff working in Suzhou, while Wu and three other members of the in-house department in Shanghai focus on provision of legal advice and services to the company’s power sector.

Whilst continuing to provide excellent support for the power sector, GCL-Poly’s newly expanded in-house legal team is set to provide full support and advice to the company’s new projects and investments in photovoltaic material production and other solar energy projects at home and abroad.

Wu anticipates continued growth and new challenges in the legal department in the coming years. “Our legal function will have to keep pace with the growth of our company and changing regulatory requirements. As the company expands its business globally, we’ll need to gain knowledge of the relevant law and regulations in overseas jurisdictions where our company operates in,” she says.

Leverage external expertise
Like most other in-house departments, GCL-Poly’s legal department needs to turn to outside firms for support in certain circumstances, and managing external counsels naturally forms part of the team’s responsibility. Wu says that the department will enlist the services of external counsels in three main instances: for transactions in which legal opinions issued by law firms are required, to handle issues and matters that are outside of the in-house team’s expertise, and for complex projects and transactions that require extra resources and manpower. In addition, it calls on a large number of regional local firms across the country for subsidiary related work.

In the past year, the type of work GCL-Poly’s in-house team mostly sought out external counsels for was M&A transactions. Firms it has recently worked with include Jun He’s Shanghai office, Grandall (Beijing), Zhejiang Sunshine, Hong Kong’s Gordon Ng & Co, international firms Milbank Tweed, Hogan & Hartson and Freshfields and offshore firm Conyers Dill & Pearman.

When choosing which firm to engage as external counsel, “expertise in specific areas” is the top criteria cited by Wu. “For most day to day legal matters, external lawyers cannot match the in-house team in terms of understanding of the issues and speed of response,” says Wu. “However, we do value external counsels’ extensive expertise and knowledge in many other areas of the law. Their logistics, know-how, precedents and experience in solving similar legal issues are invaluable to us. The in-house counsels are there to identify and leverage these advantages and design innovative structures and solutions.” 

“Fee levels are of a lesser concern when we select external counsel, what we value most are expertise, expertise and expertise,” she adds.