China: The Haifu Case Review – Interpreting the Supreme People’s Court’s Retrial Judgment and its Implications for PE Investors

Last Updated: 1 January 2013
Article by Qian Yaozhi, Xia Dongxia and Liu Xiangwen

The Haifu Case is the first case in China where a court has denied the validity of an agreement containing a valuation adjustment mechanism ("VAM Agreement"). It has caused drastic reactions in the PE industry, and not surprisingly, the retrial of this case by the Supreme People's Court of China (the "Supreme Court") has also attracted intense public attention. Recently, the Supreme Court has given its retrial judgment, where the Supreme Court (i) corrects the lower courts' decisions that completely deny the validity of the VAM agreement, and (ii) distinguishes VAM agreements between shareholders and the company from that between the shareholders only, and affirms the validity of the latter. This retrial judgment can be expected to have considerable influence on the controversial issue of validity of VAM agreement, and to generate significant implications for PE investors as for how to protect their interest.

I. Case Overview

1. Factual Background

In 2007, Haifu Investment Co., Ltd. of Suzhou Industrial Park ("Haifu"), as investor, entered into a Capital Increase Agreement with Gansu Zhongxing Zinc Industry Co., Ltd. (which subsequently changed its name to Gansu Shiheng Nonferrous Metals Recycling Co., Ltd., "Shiheng"), Hong Kong Diya Co., Ltd. ("Diya") which was the sole shareholder of Shiheng prior to the investment deal, and Mr. Lu Bo who controlled Diya.

In accordance with the Capital Increase Agreement, Haifu invested RMB 20,000,000 in cash to increase Shiheng's capital. Clause 7.2 of the Capital Increase Agreement provided that if in fiscal year 2008, the net profits of Shiheng are lower than RMB 30,000,000, Haifu has the right to claim compensation from Shiheng, or, if Shiheng fails to compensate Haifu, to claim the same from Diya. The formula for calculating the compensation payable was (1 – the actual net profits of 2008 / RMB 30,000,000) × the invested amount.

Further to the above investment arrangement, Haifu and Diya also executed a Joint Venture Agreement ("JV Agreement") and re-formulated Shiheng's Articles of Association. The JV Agreement provided that: the registered capital of Shiheng will be increased from USD 3,480,000 to USD 3,993,800 with Haifu contributing USD 153,800 which was 3.85% of Shiheng's shares, and Diya contributing USD 3,840,000 which was 96.15% of Shiheng's shares; the surplus of the RMB 20,000,000 paid by Haifu over the portion of Shiheng's registered capital subscribed by Haifu became part of Shiheng's capital reserve; and the balance of Shiheng's net profits after paying enterprise income tax and deductions for statutory reserves will be distributed to the shareholders in proportion to their respective shares.

In performance of the JV Agreement, Haifu paid RMB 20,000,000 to Shiheng, RMB 1,147,717 of which formed part of Shiheng's increased registered capital and the remaining RMB 18,852,283 went to Shiheng's capital reserve.

Shiheng's net profits in the fiscal year 2008 were RMB 26,858.13, which failed to satisfy the net profits undertaking in the Capital Increase Agreement. On 30 December 2009, Haifu sued Shiheng, Diya and Mr. Lu Bo, seeking a judgment ordering them to compensate Haifu to the amount of RMB 19,982,095.

2. The Reasoning and Judgments of the Lower Courts

The key issue was whether the cash compensation provision in clause 7.2 of the Capital Increase Agreement is valid under Chinese law. Such provision is commonly known in PE investments as a 'VAM agreement'.

The court of first instance denied the validity of the VAM agreement in its entirety on the basis that the imposition of compensation obligations on Shiheng violates mandatory provisions of law and administrative regulations. That is, the VAM agreement granted Haifu the right to claim compensation from Shiheng merely on the condition that Shiheng's net profits were less than RMB 30,000,000. Whereas Article 8 i of the Sino-Foreign Equity Joint Venture Law provides that the net profits of a joint venture shall be distributed to the shareholders in proportion to their respective shares in the registered capital. Further, The VAM agreement was considered invalid because it was inconsistent with Shiheng's Articles of Association and it impaired the interest of Shiheng and Shiheng's creditors, and so violated Article 20, Paragraph 1 ii of the Company Law. Finally, the Court held that the VAM agreement was inconsistent with the JV Agreement, and according to the law, the provisions of the JV Agreement prevail to the extent of inconsistency. Accordingly, the court of first instance dismissed Haifu's claims.

The court of second instance developed different reasoning on the same issues. On the one hand, it held that the agreement on Shiheng's minimum profit in the fiscal year 2008 is valid because it only concerns the profitability of Shiheng and not profit distribution. Further, if the agreed profits were achieved, this would allow Shiheng and its shareholders to realize their respective distributions in accordance with the Company Law, the JV Agreement and its Articles of Association, as well as, enhance creditors' interest.

On the other hand, the court of second instance held that the agreement allowing Haifu to claim compensation from Shiheng and Diya violated the principle of joint risk sharing in the investment industry because it would enable Haifu, as an investor, to obtain guaranteed profits free of risk and without regard to Shiheng's business performance. By reference to Article 4 (2) iii of the Explanations of the Supreme Court Concerning Several Issues on the Trial of Joint Operation Agreement Dispute, the court of second instance ruled that the VAM agreement in Clause 7.2 of the Capital Increase Agreement was invalid because it violated Article 52 (5) iv of the Contract Law. The court then held that Haifu's investment in Shiheng, other than the sum of RMB 1,147,710 paid as increased registered capital, of RMB 18,852,283 paid as capital reserve, was an unlawful loan. Accordingly, the court of second instance ordered Shiheng and Diya to refund this amount to Haifu together with interest.

II. The Reasoning and Judgment of the Supreme Court

Shiheng and Diya disagreed with the second instance judgment and applied for retrial with the Supreme Court. Recently, the Supreme Court has given the retrial judgment and ruled on the validity of the VAM agreement.

Regarding the validity of the agreement on Haifu's right to claim compensation against Shiheng, that is the VAM agreement between a company and its shareholder, the Supreme Court concluded that: Shiheng became a joint venture company due to Haifu's investment in and joint operation of it with Diya. The Capital Increase Agreement among Shiheng, Haifu, Diya and Mr. Lu Bo provides that if the net profit of Shiheng is lower than RMB 30,000,000, Haifu is entitled to obtain compensation from Shiheng according to the agreed formula. The VAM agreement effectively guaranteed a fixed profit for Haifu's investment isolated from the actual business performance of Shiheng; thus, it impaired the interest of Shiheng and its creditors contrary to Article 20 of the Company Law and Article 8 of Sino-Foreign Equity Joint Venture Law. The lower courts therefore correctly invalidated this part of the VAM agreement.

The Supreme Court also found that the court of second instance had no legal basis for deciding that Haifu's investment of RMB 18,852,283 which formed part of Shiheng's capital reserve was as unlawful loan. As to whether Haifu's investment should be refunded, the Supreme Court explained that: in the beginning of this action, Haifu's key claim was for compensation from Shiheng, Diya and Mr. Lu Do of RMB 19,982,095 in accordance with the Capital Increase Agreement. Haifu has never claimed the refund of its investment. Therefore, the judgment of the second instance court ordering Shiheng and Diya to jointly refund Haifu's investment together with interest is wrong as it exceeded Haifu's claim.

When considering the validity of the VAM agreement between shareholders, the Supreme Court held that: Diya's promise of compensation to Haifu in the Capital Increase Agreement neither jeopardizes the interests of the company or its creditors, nor violated the prohibitive provisions of laws or regulations; such agreement is the parties' true intention and is valid. Diya made an undertaking to Haifu that Shiheng should achieve a certain net profit in 2008 and the parties agreed on the formula for calculating the compensation. Since Shiheng failed to achieve the agreed net profit in 2008, Diya should pay compensation to Haifu in accordance with the agreement. Since Diya did not object to the amount of compensation or the calculation formula claimed by Haifu, such claim should be supported.

Furthermore, the Supreme Court ruled that since the Capital Increase Agreement does not require Lu Bo to compensate Haifu, there was no contractual basis for Haifu to claim compensation against Lu Bo.

In sum, the Supreme Court reversed the judgment of the second instance in part, and ordered Diya to pay compensation of RMB 19,982,095 to Haifu whilst dismissing Haifu's other claims.

III. Analysis of the Retrial Judgment of the Supreme Court

1. The Supreme Court denies the validity of the VAM agreement between the PE investor and the target company.

The retrial judgment crystallized the Supreme Court's attitude towards the validity of the VAM agreement between the PE investor and the target company. That is, such agreement is invalid. In developing its reasoning, the Supreme Court corrected the court of second instance's error in defining Haifu's investment as a loan by applying the Explanations of the Supreme Court Concerning Several Issues on the Trial of Joint Operation Agreement Dispute. Instead, the Supreme Court held that the VAM agreement between the PE investor and the target company substantially jeopardized the interest of the company and its creditors, and violated Article 8 of the PRC Sino-Foreign Equity Joint Venture Law on profit distribution, which is in turn abuse of shareholder's rights prohibited by Article 20 of the Company Law. Hence, the Supreme Court opined that this VAM agreement violated mandatory provisions of laws and regulations and therefore is invalid.

It can be seen from the above that the Supreme Court disagrees with the court of second instance's oversimplified reasoning, namely considering the PE investment as "a loan but in the name of joint operation" merely due to the existence of a VAM agreement. The Supreme Court's approach assures the legality of the PE investment, and takes into account the interest of the company, its creditors and the other shareholders of the company when deciding the validity of the VAM agreement. The Explanations of the Supreme Court Concerning Several Issues on the Trial of Joint Operation Agreement Dispute was promulgated in 1990, when the so-called "joint operation" was the legitimate form of economic association between companies and other entities. Joint operation became less and less common following promulgation of new laws such as the Company Law and the Contract Law. Thus, the court of second instance's interpretation and application of joint operation in a PE investment dispute was inappropriate, and is contrary to the merits of PE investment.

According to the Company Law, the principles of "maintenance of the company's capital" and "independence of the legal entity's property" must be complied with, and during the existence of a company, the shareholders can only obtain property from the company by profit distribution or withdrawal of their investment through capital decreases. Otherwise the shareholders have no right to directly take property from the company. Attempts to obtain company property outside of these means are likely to be regarded as abuse of rights and damaging to the interest of the company and its creditors.

In this case, Article 7.2 of the Capital Increase Agreement provided that Haifu was entitled to request Shiheng to pay compensation when Shiheng failed to achieve a net profit of RMB 30,000,000 in 2008. That provision granted a shareholder the right to directly obtain property from the company without going through the statutory proceeding of profit distribution, and thereby enabled the shareholder to obtain benefits while bearing no risks of the company's operation. Thus, that provision not only injured the interests of the company, its other shareholders and its creditors, but also directly violated Article 8v of the PRC Sino-Foreign Equity Joint Venture Law. For these reasons the Supreme Court ruled the provision invalid.

In view of the above, we believe that shareholders in limited liability companies and companies limited by shares that are not Sino-foreign equity joint venture, should also comply with Articles 35 vi and 167 vii of the Company Law allowing distribution of profits following a shareholder's resolution, payment of taxes, allowance for losses and allocation of a percentage of profits to the statutory surplus reserve. For those companies, if the shareholder and the company reach an agreement obliging the company to pay compensation to the shareholder when the company fails to achieve a minimum profit, such agreement will constitute abuse of shareholder's rights, damaging to the interests of the company and its creditors and thus will be invalid.

2. The Supreme Court confirms the validity of the VAM agreement between the PE investor and other shareholders.

The Supreme Court corrected the lower courts' completely negative attitude towards the VAM agreement, and confirmed that Diya's undertaking (as a shareholder) to compensate Haifu (as PE investor) was the parties' true intention. This agreement neither injures the interest of the company or its creditors, nor violates the mandatory provisions of laws or regulations, thus it is valid.

This part of the Supreme Court's finding confirms the reasonableness and validity of a VAM agreement or valuation estimation clause to a certain extent – when between a PE investor and other shareholders. In part, this decision is based upon contractual parties' autonomy.

In PE investment practice, investors usually use the VAM agreement when they subscribe the target company's shares at a premium price. In these circumstances, the original shareholders share proportionately the beneficial interest in the capital exceeding the original price of their shares before the investment. If the company fails to achieve the target profit, the natural outcome is that the actual share value is much lower than the stipulated one.

In our experience, PE investors and the original shareholders reach a VAM agreement for two purposes. Firstly, to mitigate the risk that the PE investor has over-valued the shares being purchased. Secondly, to encourage yet restrict the original shareholders. For example, if the parties agree that when the target company fails to achieve the target profit, the original shareholders will compensate the PE investor using their own property (usually cash), this agreement does not injure the interests of the company or its other shareholders or creditors, nor does it violate mandatory provisions of law or regulations. Conversely, in these circumstances, through use of a VAM agreement to balance a PE investor's risk of increasing contribution at a premium price against potential compensation in cash from the original shareholders for over-valuation of the shares, the parties can ensure the fairness and reasonableness of the deal.

3. The Supreme Court's recognition of the validity of VAM agreement balances the principle of party autonomy and protection of relevant parties' interest.

VAM agreements have been recognized for a long time by western capital markets and legal regimes, and the respective legal rules thereof are relatively mature. In China, due to the absence of clear statutory rules, direct and simple adoption of the practice of western capital markets is not completely accepted, especially considering China's company law system and strict financial supervision and regulation. Fortunately, rather than uniformly denying the validity of VAM agreements, the Supreme Court comprehensively considered the issues, balancing the principle of party autonomy, the interest of the company, its creditors and shareholders, as well as, maintenance of transaction order and security. The retrial judgment of the Supreme Court indicates a spirit of maximum respect for party autonomy so long as this does not harm third party or public interest. Upon the release of the retrial judgment of the Supreme Court, the media commented that it has the effect of "rectification of name" for the PE industry.

IV. Implications for PE Investors

The Supreme Court's ruling on the nature of PE investment and validity of the VAM agreement will have referential significance for PE dispute resolution in future judicial practice. For PE investors, the principle and spirit of judicial evaluation reflected in the Haifu case should be instrumental in determination of the transaction mode and structure, especially use of a VAM. Based on the implications of the Haifu case and our experience, we consider it advisable for PE investors to keep in mind, among others, the following issues when negotiating a VAM agreement:

1.The VAM agreement must not violate mandatory provisions of Chinese laws and regulations.

According to the Supreme Court's opinion in the Haifu case and the position reflected thereby, PE investors are advised to refrain from violating mandatory provisions of laws and regulations when negotiating a VAM agreement. For instance, if the parties reach an agreement obliging the target company to compensate the shareholder when the company fails to reach certain targets, this agreement will violate the Company Law requirement on profit distribution and is likely to be ruled invalid by a Chinese court. Therefore, it is advisable for investors to achieve the purpose of VAM through other means. For instance, it is better to bet with the management team of the target company (as the case of Morgan Stanley's investment in Mengniu) or the original shareholders of the target company (the founder in most occasions), and not to get the target company involved so as to avoid putting the VAM agreement into danger of invalidation.

2. The VAM agreement should explicitly explain the overall commercial arrangement and safeguard the fairness and reasonableness thereof.

The fairness and reasonableness of the overall commercial arrangement of the VAM was an important factor in the retrial judgment of the Supreme Court. Therefore, it is advisable to explicitly identify the basis for investment pricing on which the PE investor makes the investment decision, such as the target company's operational status, financial statistics and industry forecast etc., commitment to the business performance made by the target company and its shareholders, and to specify the method or formula for determining the investment pricing. This will help the court to comprehensively consider and recognize the fairness and reasonableness of the VAM agreement, and therefore help to mitigate the risk of the VAM agreement being invalidated.

Footnotes

iParagraph 1 of Article 8 of the PRC Sino-foreign Equity Joint Venture Law provides that "After payment of equity joint venture income tax on an enterprise's gross profit, pursuant to the tax laws of the People's Republic of China, and after deductions therefrom as stipulated in its articles of association regarding reserve funds, employee bonus and welfare funds and enterprise development funds, the net profit of an equity joint venture shall be distributed between the equity joint venture partners in proportion to their investment contribution to the enterprise's registered capital."

ii Paragraph 1 of Article 20 of the PRC Company Law provides that "Shareholders of a company shall exercise shareholders' rights in accordance with the provisions of laws and administrative regulations and the articles of association of the company and shall not abuse their shareholders' rights to cause damage to the company or the interests of other shareholders or abuse the independent legal person status of the company and limited liability of the shareholders to cause damage to the interests of the creditors of the company."

iii Article 4(2) of the Explanations of the Supreme Court Concerning Several Issues on the Trial of Joint Operation Agreement Dispute provides that "where the enterprises or other entities, as a member of a joint operation who neither participates with the business operation nor bears any risk of the joint operation's business operation, merely invests in the joint operation and withdraws its investment regularly, or obtains profits regularly, such investment is a loan but in the name of joint operation and violates the relevant financial administrative regulations. This kind of contract shall be void. The investment shall be returned to the investor, the interests which has been paid or has been agreed to be paid to the investor shall be confiscated, and the party who received the loan shall be imposed on penalty equaling to the bank interests".

iv Article 52 of the PRC Contract Law provides that "In any one of the following situations, a contract shall be without effect: (1) one party concludes the contract through the use of fraudulent or coercive means, causing detriment to the interests of the State; (2) the contract involves a malicious conspiracy which is detrimental to the interests of the State, a collective or a third party; (3) illegal intentions are concealed beneath an appearance of legality; (4) there is detriment to social and public interests; or (5) the mandatory provisions of laws and administrative regulations are violated."

v Article 8, Paragraph 1 of the PRC Sino-Foreign Equity Joint Venture Law provides that "After payment of equity joint venture income tax on an enterprise's gross profit, pursuant to the tax laws of the People's Republic of China, and after deductions therefrom as stipulated in its articles of association regarding reserve funds, employee bonus and welfare funds and enterprise development funds, the net profit of an equity joint venture shall be distributed between the equity joint venture partners in proportion to their investment contribution to the enterprise's registered capital."

vi Article 35 of the PRC Company Law provides that "Shareholders shall be entitled to bonus sharing in accordance with the ratio of capital contribution; in the event of an increase in capital, the shareholders shall have pre-emptive right to subscribe to new capital in accordance with the ratio of capital contribution, unless all the shareholders agreed that bonus sharing or subscription to new capital shall not be in accordance with the ratio of capital contribution."

vii Article 167 of the PRC Company Law provides that "Companies shall contribute 10% of the profits into their statutory surplus reserve upon distribution of their post-tax profits of the current year. A company may discontinue the contribution when the aggregate sum of the statutory surplus reserve is more than 50% of its registered capital. Where the balance of the statutory surplus reserve of a company is insufficient to make good its losses in the previous year, the company shall make good such losses using its profits of the current year before making contribution to the statutory surplus reserve in accordance with the provisions of the preceding paragraph. Upon contribution to the statutory surplus reserve using its post-tax profits, a company may make further contribution to the surplus reserve using its post-tax profits in accordance with a resolution of the board of shareholders or a shareholders' general meeting. The provisions of Article 35 shall apply to the limited liability companies for making good of losses and contribution to the surplus reserve using post-tax profits; companies limited by shares shall make contributions based on the shareholding ratio of the shareholders, unless their articles of association provide otherwise. Where the board of shareholders, the shareholders' general meeting or the board of directors violates the provisions of the preceding paragraphs to make profit distribution to the shareholders before making good the losses and contributing to the statutory surplus reserve, the shareholders shall return such distributed profits to the company. Companies which have made a share buyback shall not make profit distributions on bought-back shares."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions