In March 2023, a leading European technology firm specializing in cybersecurity solutions sought to expand its footprint into China’s rapidly growing IT sector. The client aimed to form a joint venture (JV) with a prominent Chinese software development company to access the local market while complying with China’s strict regulatory environment.

The client faced several legal and operational challenges in forming the joint venture, including:

Our legal team provided guidance on structuring the JV in compliance with Chinese foreign investment laws, ensuring the client maintained significant operational control while adhering to local ownership rules. We assisted with securing approval from the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC), ensuring that the partnership was legally recognized and compliant.
The registration process was expedited with correct documentation submission, ensuring compliance by the deadline in June 2023. We drafted bilingual contracts to mitigate any potential misinterpretations during the negotiation process.

To safeguard the client’s proprietary technology, we drafted robust IP protection clauses in the joint venture agreement, including provisions on technology transfer, licensing arrangements, and protection against IP theft.
We assisted the client in registering their key patents, trademarks, and copyrights in China in April 2023, ensuring comprehensive legal protection before the joint venture operations commenced.

Given the cybersecurity focus of the client’s business, we advised on China’s Cybersecurity Law, ensuring the client was fully aware of the legal requirements regarding data localization, security assessments, and personal data protection.

By July 2023, we developed a compliance framework for the joint venture, including protocols for data storage and cross-border data transfers that adhered to China’s cybersecurity regulations while still meeting the client’s operational needs.

Our team facilitated negotiations in May 2023, ensuring key terms like profit-sharing, decision-making authority, and exit strategies were mutually agreed upon. This included drafting comprehensive agreements for conflict resolution.
We also worked with both parties on addressing sensitive cultural issues, ensuring smooth collaboration between the European and Chinese teams during the negotiation and operational phases

We provided tax planning advice in June 2023 to optimize the financial structure of the joint venture, ensuring that the company could repatriate profits efficiently while minimizing tax liabilities under China’s tax laws and relevant international tax treaties.

We also ensured compliance with China’s foreign exchange regulations and established financial reporting systems for the joint venture in accordance with Chinese and international accounting standards.

Successful Joint Venture Formation: By August 2023, the joint venture was successfully formed, with all necessary regulatory approvals in place. The client held a 51% majority stake, maintaining significant operational control, while the Chinese partner provided local market expertise and government connections.

Protected IP: The client’s IP was fully protected through a combination of local registrations and strong contractual safeguards, mitigating the risk of IP theft or misuse.

Regulatory Compliance: The joint venture operated in full compliance with China’s Cybersecurity Law and other relevant regulations, allowing the client to handle sensitive data securely and legally.

Operational Success: By the end of 2023, the joint venture gained significant market share in China’s cybersecurity sector, positioning the client as a leading provider of innovative cybersecurity solutions in the local market.