Issue 42

Shanghai Weekly Bulletin

No. 5, April 2024

Shanghai Weekly Bulletin is an information service presented by the Foreign Affairs Office of Shanghai Municipal People's Government in collaboration with Wolters Kluwer to foreign-funded enterprises, foreign-related institutions as well as people from overseas living in Shanghai. Covering major national and Shanghai foreign-related news, event information, policy Q&A and interpretations in the past week, it keeps you up-to-date with the latest foreign-related policies and developments in Shanghai.

 

 

Laws and Regulations

【National】

1. China Issues Document to Support Overseas Investment in Domestic Sci-tech Enterprises

【Keyword: Sci-tech Enterprises】

The Ministry of Commerce (MOFCOM) and other nine government departments recently released the Several Policy Measures on Encouraging Overseas Institutions to Invest in China's Domestic Sci-tech Enterprises. Focusing on the business characteristics of overseas institutions and the needs of Chinese domestic sci-tech enterprises for development, the document Highlights 16 measures in four aspects, including improving management services, enhancing financing support, strengthening exchanges and cooperation, and improving exit mechanisms.

 

Source: MOFCOM

 

2. China Adopts Tariff Law 

【Keyword: Tariff Law】

The Tariff Law of the People's Republic of China, which was adopted at the ninth session of the Standing Committee of the 14th National People's Congress on April 26, will take effect on December 1, 2024.

 

Source: NPC Website

 

3. GACC Introduces More Measures for AEO Enterprises to Increase the Volume and Raise the Quality of Foreign trade 

【Keyword: AEO】

The Circular of the General Administration of Customs of China on Introducing More Facilitation Measures for AEO Enterprises to Increase the Volume and Raise the Quality of Foreign Trade, which was recently published, rolls out a total of 17 measures in four aspects for authorized economic operator (AEO) enterprises.

 

Source: GACC

 

【Shanghai】

 

1. Shanghai Launches Special Action for Patent Conversion and Utilization to Accelerate Transformation of Innovation Results

【Keyword: Patent Conversion】

Shanghai Municipal People's Government issued on April 24, 2024 the Shanghai Plan for the Implementation of the Special Action for Patent Conversion and Utilization. The document identifies 30 specific tasks for carrying out the special action on patent conversion and utilization, including improving the quality of patent supply, strengthening efforts to match patent supply and demand, promoting the industrialization of patents in small and medium-sized enterprises, leveraging patents to strengthen supply chains and increase efficiency of key industries, improving the intellectual property operation system, and enhancing the quality and efficiency of IP-related financial services.

 

Source: Shanghai Municipal People's Government

 

2. Shanghai's Top Market Regulator Sets Key Tasks to Create World-class Business Environment

【Keyword: Market Regulation】

Shanghai Municipal Administration for Market Regulation recently issued the Action Plan for Shanghai Market Regulators to Benchmark Reform Measures and Create World-class Business Environment. The plan proposes a total of 17 key tasks, involving market access, public utilities, tax payment, commercial dispute resolution, market competition, foreign-related services, regulation of new industries, new business formats and new models, quality support, standard guidance and others.

 

Source: Shanghai Municipal Administration for Market Regulation

 

One Week in Shanghai

【Latest News】

1. 2024 Shanghai Global New Product Debut Season Kicks off

【Keywords: New Product; Debut Season】

The 2024 Shanghai Global New Product Debut Season kicked off on April 25. It adopts an "1+7+N" mode, which includes one launch ceremony, seven districts for flagship activities, and many brand-themed events. During the season, nearly 300 Chinese and foreign brands will hold their product debut shows and exhibitions, and more than 200 brands will open their first flagship stores in Shanghai.

 

Source: Shanghai Municipal Commission of Commerce

 

2. Shanghai Unveils 2024 List of Key Unicorn Enterprises

【Keyword: Unicorn Enterprises】

Shanghai revealed its 2024 List of Key Unicorn Enterprises at a press conference held on April 23, and awarded certificates to representatives of listed companies, the combined valuation of which has exceeded 1.2 trillion yuan. 

 

Source: Shanghai Municipal Commission of Economy and Informatization

 

3. Shanghai 12366 Multi-language and Multi-channel Tax & Fee Consulting Service System Goes Online

【Keywords: Multi-language; Tax & Fee Consulting】

The launch ceremony of "Shanghai 12366 Multi-language and Multi-channel Tax & Fee Consulting Service System" and the theme event of the 33rd National Tax Publicity Month were recently held. The system is supported by speech recognition and translation, manual calibration, network interconnection and other technologies. Through online and mobile services, tax and fee-related inquiries can be made and answered in eight languages, including English, Japanese, Korean, French, German, Spanish, Russian and Arabic.

 

Source: Shanghai Municipal Tax Service

 

【Competitive Event】

1. 2024 World Future Industries Competition Opens for Registration

【Keyword: World Future Industries Competition】

The 2024 World Future Industries Competition has been open for registration since April 25. With an international vision and themed on "Leveraging Science and Technology to Win the Future", the competition will focus on the future directions of industrial development, with upgrades in the area of competition, the coverage of venues, evaluation rules, awards, and connections between the competition and product exhibitions. The registration will last until June 30.

 

Source: Shanghai Municipal Commission of Economy and Informatization

 

【Forum & Exhibition】

1. 10th CSITF to Be Held in June at Shanghai World Expo Exhibition & Convention Center

【Keyword: CSITF】

The 10th China (Shanghai) International Technology Fair (CSITF) will be held on June 12-14 at the Shanghai World Expo Exhibition & Convention Center. With the theme "Exploring a Green Future in the Digital Era", the event will feature a number of high-profile conferences and activities, as well as supporting services related to investment and financing, intellectual property, legal and talent services.

 

Source: Yangtze River Delta G60 Sci-tech Innovation Corridor

 

【Culture & Art】

 

1. "Ages of Splendor: A History of Spain in the Museo del Prado" Exhibition Opens 

【Keywords: Museo Nacional del Prado; Mona Lisa】

The "Ages of Splendor: A History of Spain in the Museo del Prado" exhibition opened to the public on April 23, 2024 and runs through September 1, 2024. It features a selection of 70 oil painting masterpieces from the collection of Museo del Prado. 

 

Source: MAPMuseum of Art Pudong

 

2. 2024 Shanghai International Coffee Culture Festival to Kick off on May 1  

【Keyword: International Coffee Culture Festival】

The 2024 Shanghai International Coffee Culture Festival will kick off on May 1. With the theme “Taste the World in Shanghai", the festival will welcome well-known coffee companies, online platforms, cultural venues, and sports organizations. In addition to a coffee fair, the festival will also feature a display of time-honored brands, sports events as well as music performances.

 

Source: Shanghai Release

 

3. 26th Shanghai Reading Festival Kicks off

【Keyword: Reading Festival】

The opening ceremony of the 26th Shanghai Reading Festival and the launch ceremony of the 6th Shanghai Library Reading Season (2024-2025) were held on April 23 at the Shanghai Library East. The 26th Shanghai Reading Festival, with the theme "enjoy reading with the fragrance of books", features six reading programs, including the "Election of the Most Beautiful Reading Space", a reading competition and a training session of reading promoters.

 

Source: Pudong Release

 

【Corporate Activities】

1. Tesla to Break Ground on Megafactory in Shanghai in May

【Keyword: Tesla】

Tesla is scheduled to break ground on its energy storage megafactory in May and go into mass production in the first quarter of 2025. The factory will be dedicated to manufacturing the company's energy storage product Megapack. The product is based on system integration and modular design, and can help power grid operators and utilities companies store and distribute renewable energy more efficiently. It is by far the world's largest electrochemical energy storage device.

 

Source: Pudong Release

 

2. Semiconductors Giant Elmos Settles in Shanghai 

【Keyword: Elmos】

JiWeiCheng Semiconductor (Shanghai) Co Ltd., a branch company of Germany's Elmos Semiconductor SE, recently held an inauguration ceremony to celebrate its settlement in Huangpu District. The branch will help accelerate the development of China's automotive semiconductor industry and inject new vitality into Shanghai's advanced tech sectors.

 

Source: Shanghai Huangpu

 

Q&A

Q1: Officials of Shanghai Intellectual Property Administration answered reporters' questions at a press conference introducing its efforts in driving high-quality development and explaining the special action for patent conversion and application - The newly-revised Detailed Rules for the Implementation of the Patent Law granted authority for municipal intellectual property administrations to rule on patent infringement disputes, how will Shanghai implement the new rules? What actions Shanghai will take this year in terms of intellectual property protection for foreign-invested enterprises?

A1: Administrative ruling on patent infringement disputes is characterized by higher efficiency, lower cost, strong professionalism and simple procedures, which is conducive to the rapid resolution of such disputes. Since the beginning of this year, in accordance with the Detailed Rules for the Implementation of the Patent Law, we have issued special notices to ask district intellectual property offices to perform their statutory duties in patent dispute adjudication. We have also issued circulars to clarify the jurisdiction on cases of patent infringement disputes, and such cases can be accepted through multiple channels so that disputed parties can resolve their disputes via administrative adjudication. At the same time, we continue to strengthen capacity building, compile special work manuals, assign experienced case handlers to provide instructions to district offices, cooperate with the Shanghai Intellectual Property Court to strengthen staff training, and support grassroots case handlers to improve their professional capabilities.

In early April, the Chongming District Intellectual Property Office made its first ruling on patent infringement dispute, and other districts are also speeding up the work. In the next stage, we will continue to promote the establishment of an administrative adjudication system for patent infringement disputes at the urban and municipal levels with sound rule of law, efficient implementation, organic connection, and strong enforcement, so as to realize better and faster protection of the legitimate rights and interests of patent holders.

Foreign-funded enterprises are an important force in Shanghai's economic and social development. We have always been equally protecting the IPRs of Chinese and foreign companies.

First, we will carry out special law enforcement actions to protect foreign-invested enterprises. In the past three years, more than 60 administrative adjudication cases involving foreign-related patent infringement disputes have been handled, more than 1,000 foreign-related cases of trademark infringement have been processed, and nearly 100 foreign corporate trademarks have been added to Shanghai's key trademark protection list.

Second, we would improve the IPR protection mechanism in key areas. We have joined hands with relevant departments to issue policy documents such as "Several Opinions on the Protection of Intellectual Property Rights in E-commerce Sector in Shanghai" and "Implementation Opinions on Strengthening the Protection of Intellectual Property Rights in the Field of Pharmaceutical Procurement in Shanghai", to guide e-commerce platforms to improve intellectual property compliance management, optimize tripartite identification and industry self-discipline. We have also introduced an early resolution mechanism for drug patent disputes and an independent commitment system to strengthen patent protection.

Third, we will increase cross-region and cross-department coordination on IPR protection. To address foreign-invested enterprises' concerns on cross-region IPR protection, we will step up law enforcement cooperation among the twelve provinces and cities and the Yangtze River Delta region, and submit major cases to the National Intellectual Property Administration for final rulings, so that we can form a joint force to crack down on cross-region patent infringements.

In the next stage, Shanghai will continue to improve the IPR protection system, accelerate the construction of an international highland, and create favorable conditions on IPR protection for companies from all over the world to invest and thrive in Shanghai.

 

Source: Shanghai Municipal People's Government Information Office

 

 

Expert Perspective

Several Issues to Be Watched and Addressed by Foreign Businesses under New Company Law

By: He Kan, Chen Leyi, Gao Fangjiao, Liu Zijing, Yang Yanhua (Junhe Law Firm)

[Continuing from the Last Issue]

Q10: The powers and responsibilities of directors, supervisors and senior executives expanded (II)

Article 180 of the New Company Law defines the meaning of the diligent duty that runs through the performance requirements of directors, supervisors and senior executives. "Directors, supervisors, and senior executives have a duty of diligence towards the company to perform their duties. The best interests of the company should be exercised with all reasonable care when they perform job duties."

The fiduciary duty owed by directors to the company is the cornerstone of corporate law in many countries, and the fiduciary duty mainly consists of duty of loyalty and duty of care. Article 147 of the Company Law stipulates that directors, supervisors and senior executives have a duty of loyalty and a duty of care to the company; Articles 147 and 148 list certain behaviors that directors, supervisors and senior executives are not allowed to engage in (i.e. "negative list"), but there has long been a lack of specific and clearly enforceable provisions on the connotation and extended definition of the duty of care. In practice, courts at all levels and localities have ruled many cases related to the issue. However, the reasoning of a considerable number of such cases is not sufficient, and different courts have different views, causing great difficulties in the application of the law.

At this point, the New Company Law attempts to draw on the core concepts of the business judgment rule that is widely used in American case laws. Under the business judgment rule, U.S. courts mainly consider whether directors, supervisors and senior executives have fulfilled their duty of care from three aspects: (1) whether they are in good faith; (2) whether they have fulfilled the duties of reasonable prudence; (3) whether there are reasonable grounds to believe that directors, supervisors and senior executives are acting in the company's best interests. In order to avoid excessive and severe penalties and damaging the enthusiasm of directors, supervisors and senior executives to perform their duties, the burden of proof under U.S. law is in principle borne by the party claiming that directors, supervisors and senior executives violated this rule. The definition of the duty of care in the New Company Law can be regarded as a major step forward, but it still needs to be tested in judicial practice.

While the New Company Law gives directors, supervisors and senior executives more substantive powers (mainly in terms of capital replenishment and company liquidation), it will also lead to an expansion of their responsibilities, which in turn requires them to actively and comprehensively perform their statutory duties and obligations. This change is expected to have some impact on the personnel arrangements or work processes of many foreign-funded companies. According to our observations, the management structure of foreign-funded companies is usually based on regions (such as global, Asia-Pacific, Greater China and China) and business lines, and internal reporting and delegation of authorities are structured based on matrix settings. Under such an organizational structure, senior executives have a duty of loyalty and a duty of care to the company they work for, and on the other hand, they are subject to the management system and restrictions within the entire group structure. In many cases, the two are consistent (or at least not in significant conflict), but in some cases, conflict may be unavoidable. For example, if a foreign-nominated board director approved a major investment according to instructions from the foreign company, and the investment has finally failed and caused losses to the company, whether the director has performed his/her duty of care (or the director is just a "puppet" appointed by the foreign company to the joint venture) will be put for a test. For example, if a foreign-nominated board director approved a major investment according to instructions from the foreign company, and the investment has finally failed and caused losses to the company, whether the director has performed his/her duty of care (or the director is just a "puppet" appointed by the foreign company to the joint venture) will be put for a test. Another common problem among foreign-funded companies is that some directors, supervisors, and senior executives, especially those who are affiliated with the headquarters of foreign-funded companies and have been stationed overseas for a long time, have not substantially participated in the company's day-to-day operations and business decisions due to faraway location of their offices and travel inconveniences. With the gradual clarification of the duty of care under the New Company Law, it is recommended that people who are familiar with the company's business conditions and deeply involved in business operations can be appointed as directors, supervisors and senior executives, so as to reduce their risk of not being able to perform their job duties as stipulated in the New Company Law.

Besides, the New Company Law stipulates that the company's controlling shareholders and actual controllers who do not serve as board directors but actually deal with corporate matters also have a duty of loyalty and a duty of care. In practice, the controlling shareholders and actual controllers appoint directors, supervisors and senior executives to handle day-to-day operations on their behalf.