IFLR Southeast Asia Forum 2014- Overview


24 April 2014- Hilton Singapore

6.5 CPD/CLE available




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IFLR (International Financial Law Review) launched the IFLR Southeast Asia Forum in Singapore on 24 April 2014. This new event for IFLR brought together in-house counsel from top Asian corporate (public and private) and Singapore-based banks to discuss matters relating to financial law, including M&A, capital markets, regulation and disputes. It offered rational solutions to key concerns facing in-house counsel in Southeast Asia.

The event came off the back of the successful IFLR Asia Capital Markets Forum and the IFLR Asia M&A Forum. Both events are in Hong Kong and have been running for over nine years. The IFLR Southeast Asia Forum 2014 was free to attend for corporate counsel and bankers’ counsel and offered a place for building your network and interacting with key people who are directly involved in the biggest deals.


KEY TAKEAWAYS


M&A and private equity developments in Southeast Asia

  • There was been a pronounced uptick in M&A in the first quarter of 2014. This is likely because companies must return stockpiled cash to shareholders or spend it
  • Merger clearance is becoming an issue in Southeast Asia, with jurisdictions such as Singapore, Vietnam and Indonesia developing antitrust regulations
  • Soft diligence, particularly sitting down with management and creating a connection, is especially important for investing in the region
  • At the same time, investors should insist on taking at least one board seat to maintain control over their investments
  • Some companies structure nominee arrangements to circumvent FDI restrictions, but panelists agreed that these were very risky and alternate structures were preferable

Why compliance adds value

  • The development of local anti-bribery regimes means that anti-corruption is not only an issue imposed by the US and UK. It’s now a domestic concern
  • Many compliance issues are business matters rather than legal concerns, and are due to a short-term outlook and corporate culture
  • Having separate or combined compliance and legal departments is an option depending on a company’s resources
  • While junior and mid-level compliance and legal professionals have different roles, skill-sets tend to merge as one moves up an organisation because both departments take on a more advisory role
  • Aside from anti-corruption concerns, other pressure points include data protection regulations (namely Singapore’s new data protection law)

FOCUS: IndiA

  • Investors must take a long-term view in India. Although short-term changes have been an issue for lawyers, its business environment has certainly improved since the early 1990s
  • For example, the disputes environment, albeit slow, has improved. In the early 1990s, it took four to six years to receive a court judgment, while now it might take only two or three years
  • Uncertainty over offshore tax structures has also been an issue. Structures must have substance and must logically be routed through a jurisdiction
  • Investments can be structured through Singapore because arbitration in the jurisdiction is quite advanced and there is a favourable double taxation treaty

Discovering natural resources opportunities

  • Indonesia’s ban on exporting raw materials was implemented in January of this year. Although many investors hope that it will be repealed or weakened, it’s unlikely
  • This conference occurred in the middle of Indonesia’s presidential election. Some foreign investors believe that Joko Widodo (Jokowi), governor of Jakarta, will create better FDI conditions, but it’s unclear whether there’s the political will to make changes
  • No party won a 25% majority in the preliminary election, so they must form coalitions to nominate presidential and vice-presidential candidates. A compromise will likely make FDI reforms harder
  • It’s unclear whether conditions will change (or at least become more certain) until the results for the presidential election are announced in October
  • But FDI regulations in Indonesia have been similar to a pendulum since its independence. In the last five years, it’s swung back towards nationalistic policies, but nothing is likely to change until negative effects from these policies become evident on the ground

Enforcement: techniques for managing your liability

  • Singapore is a regional hub for dispute resolution with the development of the Singapore International Arbitration Centre and the Singapore Mediation Centre
  • Mediation is a newer option in Singapore that might be most useful when a concern is purely financial because three of four processes end in settlement
  • Singapore is also establishing the Singapore International Commercial Court (SICC), which will hear cases with a foreign law element
  • The SICC will admit foreign lawyers, who will be held to a Code of Ethics, and will operate as a bar. But it’s unclear whether the SICC will admit the lawyers that companies want to use, as well as whether judges for certain foreign legal regimes will be available

FOCUS: Vietnam

  • Foreign companies can resolve disputes through the Vietnam International Arbitration Centre and international arbitration elsewhere. Local courts aren’t recommended
  • However it’s easier to be nimble than to go to court. For example, it’s possible to work with partners to renegotiate payment terms that involve staggered and tiered payments
  • The most common dispute for foreign entities in Vietnam relates to labour. Employees in Vietnam can only have two term contracts ranging between one to three years. After two contracts, employees are permanent employees and they cannot be fired unless there is cause
  • Companies need internal labour rules and contracts if you have more than 10 employees in Vietnam. They can be customised to include grounds for immediate dismissal and consequences for certain actions, although it must be approved by the Ministry of Labour

A primer to accessing Asia’s capital markets

  • The US has a disclosure-based regime in which investors are protected because they know everything they need to know, but they must make their own investment call. In Asia, regulators are instead worried about making the market fair for all investors
  • As for listing venues, companies look to list nearby as local investors will likely understand their investment story. An exception is internet companies, which look to the US because their comparables are there
  • Regulatory activism, such as the Hong Kong sponsor regulations and India’s IPO safety net, is increasingly an important trend

A TMT update: Asia’s web of data protection regulations

  • All Asean jurisdictions are working towards having data protection laws in place by 2015. Some members, such as Vietnam, Cambodia, Laos and Myanmar, have an extended timeline and hope to have laws in place by 2020
  • Regulators in the financial services are now more open to allowing their constituents to use cloud computing, but they do include strict conditions
  • Another question is how cloud providers should handle data. Under Singapore’s regime, intermediaries are liable for retention and security requirements but other requirements don’t apply
  • Expect extraterritorial data transfer laws across Southeast Asia (similar to regulations from the US) because it’s difficult to determine jurisdiction in the cloud

Myanmar: the nuts and bolts of deal-making in a frontier market

  • Deals take a long time because of the misconceptions that Myanmar completely lacks the rule of law. That results in lengthy, unwieldy and unnecessarily long documents that parties must negotiate
  • Although Myanmar Investment Commission approval can take months, it’s because the regulator must seek approval from local governments and other related ministries. Environmental assessments are required for certain projects
  • The government is looking to improve the Companies Act (adapted in 1914) by streamlining incorporation procedures and updating the Companies Registry
  • One challenge of doing deals in Myanmar is working with JVs partners and trying to take majority stakes in those arrangements

















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