International Law Expert John J. Maalouf Part I: Investment Practices in the Chinese Market

  • Home » Interviews » International Law Expert John J. Maalouf Part I: Investment Practices in the Chinese Market
  • Last Updated: July 23, 2010

  • First Posted: May 28, 2009  by The Venture Hype Team

johnmaalouf International Law Expert John J. Maalouf Part I: Investment Practices in the Chinese MarketRecently, Venture Hype caught up with John J. Maalouf, a globally recognized legal expert who’s been ranked by the United States Lawyer Rankings as one of the “Nation’s Top 10 International Trade & Finance Lawyers” – four years in a row in 2006, 2007, 2008 and 2009. Maalouf has also received the highest recognition for legal ability and ethical standards from The Martindale-Hubbell Peer Review Ratings. Both Maalouf and his cases have been featured on American news programs 60 Minutes, 20/20, CNN and Wall Street Journal.

Maalouf’s firm, Maalouf Ashford & Talbot, LLP, regularly advises clients ranging from startups and international investors to multinational corporations. Areas of practice include entrepreneurial services, venture capital, private equity investments, private placements, IPO’s, M&A’s, international finance, and foreign investment in China and the Middle East.

* Edited Interview

VH: John, can you tell us about Maalouf Ashford & Talbot and the type of services it offers to early-stage investors?

JM: Maalouf Ashford & Talbot has a worldwide reputation for quality of advice and breadth of expertise. Our attorneys are highly experienced in business law, corporate, partnership and limited liability company matters, in addition to taxation, real estate, intellectual property, and litigation. They’re ranked among the Top 10 in the entire United States in the areas of International Trade & Finance Law.

In order to protect the assets of our early-stage investor clients and to maximize their profits, we structure companies properly from the beginning. The first step is to analyze the business plan, and then advice the type of corporate entity that best fits that particular business. We then draft the corporate governance documents, provide guidance on tax minimization strategies, and negotiate and structure agreements with service providers or joint venture partners.

VH:  Besides New York, London and Boston, you also have offices in Hong Kong and Shanghai. What are the major differences you see in the current investment climate between Hong Kong and Shanghai?

JM: Both Hong Kong and Shanghai are world financial capitals and will only continue to grow in economic power and prominence over the next 5 to 10 years. China’s relationship to Hong Kong is unique in many ways in that China is one country with essentially two legal systems.

Hong Kong is considered a “special administrative region” (SAR). Depending on the specific goals and strategy of a business, Hong Kong’s legal system may be more suited to a particular company than the rules currently prevailing in mainland China. Therefore, we often recommend clients to set up operations in Hong Kong.

Mainland China, however, has been moving very quickly to enact new legislation that’s increasingly friendly toward foreign investment. These changes will make Shanghai, the largest financial center in mainland China, even more attractive to foreign investors.

VH: With your help, a technology startup was able to complete private placements and acquire two competitors. Can you briefly define private placements and mergers and acquisitions? How are the processes different in China?

JM: Initial public offering, or IPO, is the first time a company sells shares of its stock to the public to raise money. In most countries, going public requires registration with a governmental agency, such as the SEC (Securities and Exchange Commission) in the United States. This is a lengthy and expensive process; many smaller companies can’t spare the funds necessary to take this route.

With “private placement,” we can take advantage of certain rules, regulations and legal loopholes that provide exemptions from registration, which allows the company to legally sell stock to investors without the expense of an IPO. Private placements then, can be fruitful for startups.

“Mergers and Acquisitions,” or M&A’s, are transactions where one company takes over another company, either because it’s larger and more financially stable or because it’s been able to structure a clever strategy to gain control over the competitor company. The deals can be very complex, but if done properly, a company can take over a major competitor and double its size and revenue stream almost overnight.

For many years, China has placed certain restrictions on the acquisition of Chinese companies by foreign entities. New legislation, however, has been drafted recently, which will allow cross border M&A’s of Chinese companies.

The most important distinction between the U.S. and China is that China has a far more stringent regulatory approval process. We have excellent relationships with the Chinese Ministry of Commerce and can frequently expedite the regulatory approval process.

Join Venture Hype tomorrow as Maalouf tells us some of the provisions investors should consider when investing in Chinese startups.

Link:

* For series, references are published in the last installment of the series.

 

  • http://happyfic.blogspot.com/ Orrymain

    I have to admit that I'm very cautious about anything dealing with China. I would be hesitant because of all the problems we've had with products and foods manufactured/made in China. It just seems like something has to give, and I'm not sure my investing dollars should go towards anything China-based. Quite honestly, I'd be leery of anything associated with the country right now.

  • http://venturehype.com The Hyper Team @ Venture Hype

    China has come a long way. Professional investors are optimistic about China's huge market potential and high-growth industries, despite the financial crisis. China has slowed its pace but it's doing much better than other countries, many of which are suffering from negative growth. Seasoned investors often invest during recessions when company valuations are low, so they can generate a handsome return on investment when the market recovers. Of course, for those who want to play in China, finding a reliable legal partner is a must.

  • kyrious

    You seems to have the best business package plan for start up investors I especially like this “private placement”as a start up investor myself I'm always on a look for some business idea and that particular plan is great news to start up investor,is the plan only available to Hongkong and China

  • http://freemoneyhub.blogspot.com/ freemoneysite

    By providing your client the best option and business advice if there are investing with China I think you deserve to be on top of the list of International Trade and Finance Lawyers your client and would be client are in good hands

  • dharwana

    If there's one country that benefited from free trade and open economy it's none other than China,it's one product per province is probably the best policy any country have implemented that's why China is taking the lead in the manufacturing industry

  • liu chung

    I think China is a little bit of everything you'll want to invest with they've got stringent regulatory approval process. and their two legal system seems to provide a very good “investment climate”

  • JB

    Hong Kong offers an efficient legal system, a well-established financial market, and a healthy network of high-caliber professionals. It continues to act as an effective bridge to China. Hence, as you read in the interview above, John often recommends clients to set up operations in Hong Kong if they were to conduct business in China.

    In an angel investor's perspective, you might be interested in “Hong Kong’s Vibrant Venture Capital Industry = Innovative Opportunity for Angel Investors.”

  • http://venturehype.com The Hyper Team @ Venture Hype

    Hong Kong offers an efficient legal system, a well-established financial market, and a healthy network of high-caliber professionals. It continues to act as an effective bridge to China. Hence, as you read in the interview above, John often recommends clients to set up operations in Hong Kong if they were to conduct business in China.

    In an angel investor's perspective, you might be interested in “Hong Kong’s Vibrant Venture Capital Industry = Innovative Opportunity for Angel Investors.”

  • JB

    A talented and fine looking man!

  • http://venturehype.com The Hyper Team @ Venture Hype

    We agree :-)

  • Jacqueline

    This now the global trend big name companies merged and pool their resources to acquire greater market shares ,well if you can't beat 'em then join 'em ,that's seems to be the theory

  • andrew25

    It is true that China had come across so much of difficulties to enjoy its growing economic position. Further the increasing economic boom with the introduction of special economic zones like Shenzhen made China much richer in its manufacturing sectors. It is also important to notice the large dissimilarities between the legal systems in Mainland and SAR means ample opportunities for legal law and consulting firms.

  • andrew25

    It is true that China had became the economic engine of the world. And that it would requires more legal services along with country to country legal advices on specific matters. These things coupling together with other stuffs would certainly make it as a favorite destination for legal companies and the demand for such stuffs would ever increase as the time progresses.

  • http://vladadrugstore.blogspot.com/ vlada

    All the financial experts constantly notes the strong increasing of the rates of growth of the Chinese economy. There are problems with the quality of the Chinese goods sometimes but the prices of the Chinese goods are “unconquerable”. I'm sure that we shall be the witnesses of the further increasing of the foreign investments to the Chinese economy.

  • http://vladadrugstore.blogspot.com/ vlada

    All the financial experts constantly notes the strong increasing of the rates of growth of the Chinese economy. There are problems with the quality of the Chinese goods sometimes but the prices of the Chinese goods are “unconquerable”. I'm sure that we shall be the witnesses of the further increasing of the foreign investments to the Chinese economy.

  • http://venturehype.com/interview-with-international-law-expert-john-j-maalouf-part-ii-early-stage-investing-in-china/ International Law Expert John J. Maalouf Part II: Early-Stage Investing in China | Venture Hype

    [...] to our RSS feed. Thanks for visiting!Yesterday, globally recognized legal expert John J. Maalouf shared his views on current investment practices in the Chinese market. Today, we tap into John’s insights on early-stage investing in [...]

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