IFLR Southeast Asia Forum 2015- Overview


April 23 2015- Grand Copthorne Waterfront Hotel, Singapore

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The unpredictable legal environment in Southeast Asia is a key concern for practitioners in the market. Concerted efforts by authorities in the region to streamline practices is evidenced by promising Asean developments. On top, significant regulatory and legal changes have led to global market players to increasingly look into this region as sources of business and of capital.

The second annual IFLR Southeast Asia Forum made a timely return to address major barriers to doing business in the region and tackled issues pertinent to the daily lives of corporate counsel in the region. This year saw over 300 in-house counsel from top corporates, C-suite, regulators and private practice lawyers assemble for an insightful networking opportunity.

Who delegates met on the day:

  • Bankers’ counsel
  • Corporate counsel
  • Investment bankers
  • Regulators
  • Private practice lawyers



IFLR SOUTHEAST ASIA FORUM: KEY TAKEAWAYS

How compliance adds value

  • Companies are encouraged to spend a lot of time doing due diligence on third-party providers in high-risk jurisdictions, but in Asia every jurisdiction is a high-risk jurisdiction outside of Singapore and Hong Kong
  • Due diligence reviews won’t prevent bribery, but are a defence mechanism in an investigation
  • Those reviews are also part of including employees in a larger compliance culture, which emphasises corporate ethics
  • Ultimately companies that pay bribes actually perform worse because it creates internal inefficiencies; there’s a problem of internal fraud when you have an unethical organisation
  • As for whistleblowers and self-reporting to the regulators, companies must consider the scope of the problem and how to solve it

Protecting rights and enforcing obligations in Indonesia

  • It’s impossible to comply with many of the Indonesian regulations, so they have discretion on whether they will take action or not, which makes issues such as corruption and transparency really hit home
  • The language law, which requires translation of contracts with all Indonesian parties to be translated in Bahasa Indonesia, remains a challenge for counsel
  • Judges in the lower courts may have limited training, and it’s important to keep executive summaries short and simple. The quality of judges improves as one moves up to the appeal and Supreme Courts
  • Another crucial clause in Indonesia acknowledges that the party understands the content of the agreement and that it has had the opportunity to seek its own lawyer’s counsel before signing
  • The PKPU regime is similar to Chapter 11 in the US and is a powerful mechanism with a set timeline

Developments in high yield bond markets

  • High yield in Asia has been focused on India, Indonesia and China;
  • Covenant packages in Asia are stronger than they are elsewhere, and Asia’s single-B market is priced at ten to 12% which has limited the development of lower-grade markets such as a CCC market
  • In India the Reserve Bank of India’s Circular 41 on certain bond structures has made investors skittish, but a new report proposing doing away with interest rate ceilings may help
  • In Indonesia practitioners remain concerned about the hedging regulations and how those are implemented. For example, what hedging structures will comply with regulations and how BB- companies will refinance their bonds
  • While Kaisa may affect the market, BB bonds in Asia are already priced at a premium versus Europe and the US; emerging market risk may already be priced in

India: lessons learned and outlook

  • Market practitioners were optimistic about India’s growth throughout the session
  • Sectors of focus include e-commerce and pharmaceuticals and real estate remains an area of interest
  • The Modi administration is looking to make structural change and remove hurdles for investment, including limits on FDI in sectors that aren’t in the national interest
  • General anti-avoidance rules (Gaar) are now deferred for two more years (until April 2017) and the older investments made by corporates will be grandfathered in, granting some tax certainty 

Avoiding data breaches: protecting your company’s reputation and assets

  • Following data breaches at a third-party vendor for a bank in Singapore, there is increasing scrutiny on protections
  • Having a good data-breach plan (incident management plan) is crucial, including whether you’re required to notify regulators and consumers
  • From the business perspective, it’s very important to get the news of data breaches out quickly 
  • Determine how a data breach would play out internally as well. For example, the communications team would need to be involved as a data breach may play out through comments on a company’s Facebook page rather than through official news sources
  • Data privacy regulations need to mature, but there is a lot of experience in dealing with fragmented regulations in many areas; there will likely be a common denominator of 80% and then 20% in individual jurisdictions 

New wave of investment in Vietnam

  • Counsel were generally positive about the new foreign investment law in Vietnam, but are waiting for implementing regulations
  • There have also been changes to the law on real estate which will take effect from July of this year. They now allow foreign investors to buy land in the country
  • Any action that the government has taken from reducing the opacity of the investment process help sway decisions
  • However each sector has its own regulations that can be cumbersome; panelists noted that both Thailand and Cambodia have fewer rules and approvals required

Mitigating risk in M&A and PE transactions

  • Sellers and buyers who wish to get back-to-back warranty and indemnity insurance must do thorough diligence; if not, it will be priced into the coverage
  • The initial valuation is just the anchor point, but a lot of valuation depends on non-commercial terms put forward in the sale and purchase agreement
  • There are several definitions that affect purchase price, including debt, value, net working capital and target net working capital 
  • Completion accounts are more common throughout Southeast Asia than lock-box mechanisms
  • Notify regulators early about big transactions that need their approval early

Managing your cross-border disputes

  • Mediation is an increasingly important option in Singapore, while arbitration remains popular
  • Awareness of mediation is reliant on legal practitioners working in different companies and settings who understand the process and outcomes
  • In a large majority of cases, parties will find that mediation can in fact resolve an issue, but both sides need to be looking for a win-win outcome;
  • The Singapore International Commercial Court (SICC) specifically caters to international commercial disputes, and has a panel of international judges (11 right now) and it fills a gap for to a Asia-based neutral forum that also provides a court-based solution
  • In the SICC, if it’s an offshore case (a case without a substantial connection to Singapore) foreign counsel will be permitted

















 

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