Investing across borders: protecting, structuring and realising the value of your investments
Speakers: Withers LLP: Eric Roose (US / ASIA), Sharon Whitehouse (EU), David Guin (US), Mabel Lui (ASIA), Farhana Siddiqui (ASIA)
Q: For someone who has never invested in Asia, but is interested, what would be your advice of how to begin?
A: Identify the sector you wish to invest into, why and the type of return you are looking for eg short term, long term, dividends, interest, capital gains. Then pick up the phone and call your friendly lawyer who will then ask you the relevant questions to work with you to identify (i) where to set up (ii) the type of structure eg a company, a branch, a representative office and (iii) any specific tax and regulatory requirements you need to be aware of.
Q: What sectors have you seen an increase of investment in recently? Any surprises?
A: We have seen an increase in tech companies, transport, blockchain and initial coin/token offerings. No real surprises there. The traditional sectors such as real estate continues to remain of interest.
Q: Is Hong Kong always the best point of entry to China?
A: Yes, Hong Kong is always the best point of entry into China for various reasons – a Hong Kong company serves well as the holder of China investment as in addition to Hong Kong as a jurisdiction offering the benefits of low tax regime, common law governance and political stability , Hong Kong and Macau investors enjoy additional benefits provided by the Chinese government in certain areas. In terms of operational benefits, Hong Kong’s geographical proximity to China, its robust financial and legal infrastructures and the people’s knowledge and intimacy with Chinese cultures are second to none.
Q: What’s the greatest challenge for private investments? What should investors be wary of?
A: Investors really need to understand in-depth who and what they are investing in, and how they can monitor their investment on an ongoing basis. It sounds obvious but it often causes things to unravel. Good financial advice is key, and then careful thinking through of the practicalities as part of the negotiation of the legal documents. A lot of issues can emerge – and be dealt with – during this process. The documents aren’t just there as a formality. They should help make things work.
Q: Do club investments work? Who decides when to sell and what happens when additional capital is needed? Who has control?
A: Yes, absolutely. Club investment structure is used to acquire major assets in the market, such as large commercial buildings and portfolios of real estate. It is also commonly used by sponsors who bring together a small group of institutional and sophisticated private investors to acquire a specific assets or implement a specific investment strategy. The decision making for the club is often vested in an investment committee, comprised of representatives of the large investor in the club and the sponsor. Smaller investors in the club may not win a seat on the IC, but are often granted advisor rights, so their voice can be considered by the IC members, and the right to observe the IC meetings. Governance of the IC for making an investment can be by majority vote, but it is not unusual for large investments that super majority vote or unanimity is require to make the investment. To sell the investment, majority vote is more common, so you do not have a club member creating a holdout situation where the asset cannot be disposed of.