JC Master Legal News Issue 1198

Key Takeaways for This Issue

The China Securities Regulatory Commission convened a symposium on the “15th Five-Year Plan” for foreign-invested institutions in the capital market.
On February 27, the China Securities Regulatory Commission convened a symposium on the “15th Five-Year Plan” for the capital market, with participation from foreign-invested institutions.
The China Securities Regulatory Commission has issued the Regulations on the Supervision of Information Disclosure by Private Equity Funds.
On February 24, the China Securities Regulatory Commission (CSRC) promulgated the Measures for the Supervision and Administration of Information Disclosure by Private Investment Funds (CSRC Order No. 233), which will take effect on September 1, 2026.
The State Taxation Administration has issued a positive and negative list of criteria for determining “reasonable commercial purpose” in tax matters.
In the course of tax administration, tax authorities have observed that some taxpayers artificially split their income to remain classified as “small and micro enterprises,” thereby continuing to benefit from tax incentives. Recently, the Policy and Regulations Department of the State Taxation Administration issued a Q&A document addressing this issue, titled “Q&A on the Issue of Small and Micro Enterprises Abusing Tax Preferential Policies.”

Finance and Capital Markets

FINANCE &CAPITAL MARKETS

The Supreme People’s Court plans to issue an interpretation on civil compensation for insider trading and market manipulation.
Recently, at a press conference on “The People’s Courts’ Role in Providing Judicial Support for High-Quality Economic and Social Development in Civil and Commercial Cases,” the Supreme People’s Court announced its intention to advance the drafting of judicial interpretations on civil liability for insider trading and market manipulation in the securities market.
The Supreme People’s Court disclosed that, by 2025, courts nationwide will have concluded 25,000 cases involving the securities, futures, and fund markets, a year-on-year increase of 53.6%; among these, disputes over liability for false statements in securities accounted for 96.3% of all securities-related cases. The Supreme People’s Court’s next steps include: formulating judicial interpretations on civil compensation for insider trading and market manipulation in the securities market; expediting the issuance of supporting judicial interpretations to the new Company Law; studying judicial responses to emerging financial matters such as private equity funds and virtual currencies; prudently managing risks in key areas, advancing the establishment of bankruptcy tribunals and improving bankruptcy adjudication mechanisms; and strengthening diversified, substantive dispute resolution and collaborative judicial governance, among other measures.
The central bank supports the conduct of cross-border interbank RMB financing activities.
On February 26, the People’s Bank of China issued the “Notice on Matters Concerning RMB Cross-Border Interbank Financing by Banking Financial Institutions” (hereinafter referred to as the “Notice”), which supports domestic banking financial institutions in conducting RMB cross-border interbank financing with overseas entities in a standardized manner.
The Notice covers all types of cross-border RMB interbank financing activities, linking the net outward balance of such financing by banking financial institutions to their capital adequacy and funding strength, thereby promoting the sound and prudent conduct of these operations. It establishes macroprudential management parameters and implements countercyclical adjustments in response to market conditions. These parameters have been carefully calibrated to take into account both market demand and the operational performance of banking financial institutions, helping to ensure stable liquidity in the offshore RMB market and fostering the cross-border use of the RMB.
The Notice shall take effect from the date of its issuance.
The central bank has lowered the foreign-exchange risk reserve ratio for forward sales of foreign exchange to 0.
To promote the development of the foreign exchange market and help enterprises manage exchange rate risks, the People’s Bank of China has decided, effective March 2, 2026, to reduce the foreign exchange risk reserve ratio for forward sales of foreign currency from 20% to 0.
Going forward, the People’s Bank of China will continue to guide financial institutions in enhancing their foreign-exchange hedging services for enterprises, thereby maintaining the basic stability of the RMB exchange rate at an appropriate and balanced level.
The China Securities Regulatory Commission convened a symposium on the “15th Five-Year Plan” for foreign-invested institutions in the capital market.
On February 27, the China Securities Regulatory Commission convened a symposium on the “15th Five-Year Plan” for the capital market, with participation from foreign-invested institutions.
The meeting was chaired in Beijing by Wu Qing, Secretary of the CPC Committee and Chairman of the China Securities Regulatory Commission, during which he engaged with representatives from eight foreign‑owned securities, fund, and futures institutions operating in China, soliciting their views on the capital market’s 15th Five‑Year Plan. The foreign institutions put forward several recommendations, including: enhancing the alignment and reach of services to the real economy while bolstering policy continuity and predictability; elevating the investment value of listed companies and strengthening investor protection and corporate governance; facilitating cross‑border investment and financing and aligning domestic practices with international standards and regulatory frameworks; and advancing two‑way opening-up—both “bringing in” and “going out”—to support differentiated development among foreign‑invested offices and enhance the global resource‑allocation capabilities of domestic institutions. The CSRC stated that it will remain focused on risk prevention, robust regulation, and high‑quality development, adhering to a market‑oriented, law‑based, and internationally aligned approach. Leveraging reforms of the STAR Market and the ChiNext Board as key levers, it will deepen comprehensive reforms in investment and financing, refine its institutional, product, and service frameworks, and promote further opening up while fostering a transparent, stable, and predictable market environment.
The China Securities Regulatory Commission has issued the Regulations on the Supervision of Information Disclosure by Private Equity Funds.
On February 24, the China Securities Regulatory Commission (CSRC) promulgated the Measures for the Supervision and Administration of Information Disclosure by Private Investment Funds (CSRC Order No. 233), which will take effect on September 1, 2026.
The Measures comprise seven chapters and forty-four articles, applying to information disclosure by private fund managers and custodians to investors, as well as to disclosure entrusted to sales agencies. They stipulate that disclosures must be truthful, accurate, complete, and timely, conducted through non‑public channels, with consistent dissemination across multiple channels for the same information. A manager’s entrustment of a sales agency to disclose does not relieve the manager of its own obligations, and the sales agency may not alter or tamper with the disclosed information. The Measures establish “look‑through” disclosure rules: when investments are made in other private funds, asset management products (excluding public offerings), or via special purpose vehicles, the investee entities shall cooperate. They also prohibit false statements, performance forecasts, guarantees of principal or returns, and any form of public or disguised public disclosure. With respect to periodic reporting: private securities funds must disclose net asset values, with open‑ended funds required to report at least as frequently as their redemption frequency, and closed‑ended funds at least quarterly; quarterly reports must be filed within one month after the end of the quarter, and annual reports within four months after year‑end. In specified circumstances, annual financial statements must be audited by an accounting office compliant with the Securities Law. Private equity funds must submit semi‑annual reports within two months after the half‑year mark and annual reports within six months after year‑end, with annual financial statements subject to audit. Material events must be disclosed promptly within five business days, and the Measures further provide for the publication of liquidation notices and reports, the establishment of an information disclosure regime and management of non‑public information, the retention of relevant records for twenty years, as well as regulatory measures and penalties.

Taxation

TAXATION

Three departments have introduced preferential import tax policies for the national integrated fire and rescue teams during the 15th Five-Year Plan period.
To support the development of the national integrated fire and rescue force, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration recently jointly issued the “Notice on Preferential Import Tax Policies for the National Integrated Fire and Rescue Force during the 15th Five-Year Plan Period.”
The Notice stipulates that, from January 1, 2026, to December 31, 2030, import duties, value-added tax at the import stage, and consumption tax shall be exempted on fire-fighting and rescue equipment imported by the national integrated fire-fighting and rescue teams when such equipment is either not produced domestically or fails to meet domestic performance requirements.
Seven departments have revised the “Catalogue of Services Encouraged for Import.”
On the 25th, the Ministry of Commerce and six other departments released a new edition of the “Catalogue of Services Encouraged for Import,” which comprises six major sectors: research and development and design services, energy-saving and environmental protection services, environmental services, consulting services, other professional services, and medical and health services.
The most noticeable change in this update is the addition of two new categories: “Other Professional Services” and “Medical and Health Services.” Another adjustment involves refining and optimizing certain service items that are encouraged for import, while removing those that no longer warrant such encouragement. Key entries—including “Digital Technology Development Services,” “Technical Testing and Analysis Services,” and “Resource‑Recovery Services”—have been streamlined. As domestic service‑provision capabilities continue to improve, imports of services—such as those specifically aimed at addressing air pollution—are no longer prioritized.
The State Taxation Administration has issued a positive and negative list of criteria for determining “reasonable commercial purpose” in tax matters.
In the course of tax administration, tax authorities have observed that some taxpayers artificially split their income to remain classified as “small and micro enterprises,” thereby continuing to benefit from tax incentives. Recently, the Policy and Regulations Department of the State Taxation Administration issued a Q&A document addressing this issue, titled “Q&A on the Issue of Small and Micro Enterprises Abusing Tax Preferential Policies.”
In summary, the criteria for determining whether revenue has been unreasonably disaggregated generally encompass the following three aspects: first, assessing whether the underlying motive is reasonable; second, verifying the genuineness of the business activities; and third, evaluating whether the transactions are conducted on an arm’s‑length basis.
The Policy and Regulations Department of the State Taxation Administration has also issued a positive‑and‑negative checklist of criteria for determining “reasonable commercial purpose” for taxpayers’ reference.

Litigation and Arbitration

LITIGATION & ARBITRATION
The Supreme People’s Court has released typical cases from civil and commercial trials for 2025.
Recently, the Supreme People’s Court released its list of typical civil and commercial cases for 2025.
The typical cases cover corporate governance, equity transfers, insurance claims, false statements in securities matters, and the reorganization of real estate groups. In a corporate liquidation case, the court facilitated, through mediation, an amendment to the articles of association to extend the company’s operating term and enabled shareholders to exit via equity transfers, thereby obviating the need for compulsory liquidation. During the retrial review of an equity‑transfer dispute, mediation was used to clarify adjustments to the purchase price and installment payments, while simultaneously resolving related issues such as outstanding receivables and liabilities. In a group critical‑illness insurance dispute, where the exclusion clause for pre-existing conditions did not clearly define “disease,” the insurer bore the burden of proof to demonstrate that nodules constituted a disease before denying coverage. In securities disputes, a “model judgment plus class‑action mediation” approach was employed to collectively resolve 403 liability disputes arising from false statements. In bankruptcy reorganization proceedings, coordinated restructuring was implemented between the parent and subsidiary companies of a listed real estate developer, with 1,031 affiliated enterprises categorized and handled under a “four‑batch” framework.
The Supreme People’s Court has released the 2025 Annual Report on Civil and Commercial Trials.
Recently, the Supreme People’s Court released the “Annual Report on Civil and Commercial Trials of the People’s Courts (2025).”
The report reveals that in 2025, courts nationwide accepted 6.791 million first-instance civil and commercial cases and concluded 6.536 million; the mediation‑withdrawal rate stood at 42.33%, the appeal rate at 2.88%, and the average trial duration was 48 days. In first-instance corporate disputes, 175,300 cases were filed, with notable increases in matters involving shareholder capital contributions and harm to the interests of the company’s creditors. The report clarifies that fictitious circular trade and chain‑sale contracts may be deemed invalid under Article 146 of the Civil Code and recharacterized as loan agreements. Financial adjudication emphasizes regulating disguised fees such as “fees for loans,” with a landmark ruling holding that “financing commitment fees” must be deducted from the principal in accordance with the “front‑end interest” rule, while also imposing limits on early maturity of loans in cases of minor defaults. In bankruptcy proceedings, 36,900 cases were accepted and 31,900 were concluded, including 1,492 reorganization cases; efforts were advanced to strengthen coordination between government authorities and the courts, enhance tax and fee collection management, and foster cross‑border insolvency cooperation.
The Supreme People’s Court has released the 49th batch of intellectual property guidance cases on technological innovation.
On February 28, the Supreme People’s Court held a press conference to release a set of guiding cases on “Strengthening Judicial Protection of Intellectual Property in the Field of Scientific and Technological Innovation.”
This batch comprises the 49th set of guiding cases, totaling seven, covering plant variety rights, invention and utility‑model patents, trade secrets, software copyright, and malicious litigation, among other areas. First, where technical personnel leave their positions in a short, concentrated period and the defendant produces the relevant product within a timeframe markedly shorter than a reasonable research‑and‑development cycle, a presumption of trade‑secret infringement may be drawn, with detailed provisions on the manner of ceasing the infringement. Second, the scope and liability for “promised sales” of infringing products are clarified, and compensation is not contingent upon actual sales having occurred. Third, the concept of “organized sales” of seeds is construed expansively: anyone who substantially controls the terms of the transaction may be deemed to have engaged in direct sales. Fourth, the applicable scope of the “reasonable expectation of success” criterion under the three‑step test for inventive step in chemical and biological patents is specified. Fifth, when physical evidence is difficult to obtain, technical comparison may be conducted using drawings that closely correspond to the physical item. Sixth, filing a patent lawsuit despite knowing there is no valid legal basis constitutes malicious litigation and entails corresponding liability. Seventh, in software‑related infringement cases, code comparison may be waived where the distinctive information is identical or the user interfaces are highly similar, and an adverse inference may be drawn against any party that obstructs the preservation of evidence.

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