Su Yanan, the legal director of Chinalife Capital, previously worked at King & Wood Mallesons. What made her change her career direction to corporate counsel in a state-owned enterprise, and what are her observations since that change? Here she shares her experiences with China Business Law Journal
CBLJ: What contributed to your decision to change from a lawyer at King & Wood Mallesons to a corporate counsel in Chinalife Capital, and what do you see as the main differences between the two roles?
Su Yanan: My career planning in the past was to work in the law firm and become a partner. In fact, the process was relatively smooth. The reason for this change is that, with the improvement of professional ability, I found that the lawyers’ scope of work in a whole transaction is still relatively narrow.
Although as a commercial lawyer I tried to understand the market practices and clients’ business demands as much as possible, lawyers are still unable to know many things [if they do not work] in the companies of the trading parties. These considerations often determine the direction and the final landing of the transactions. In addition, in an M&A transaction, for which I was responsible as a lawyer at the beginning of 2017, the seller finally decided to abandon the transaction after the negotiations lasted more than a year, which made me feel the powerlessness of being a professional.
At the same time, as a client of King & Wood Mallesons, Chinalife had given me the opportunity to work with its team. Its market sensitivity and professional ability have changed my impression of traditional state-owned enterprises (SOEs). Chinalife has also completed many M&A transactions influencing the market. Therefore, I finally decided to transform from a lawyer to a corporate counsel.
A corporate counsel is very different from a professional lawyer. The obvious difference is the broader scope of work. For example, in addition to legal work, my current department also assumes the functions of compliance, internal control and risk management. Therefore, I am responsible for the construction of new work modules and content in addition to the work of my previous profession.
A deeper difference is that corporate legal affairs require a higher ability to comprehensively analyze and deal with problems. Clients usually specify the background and focus, and sometimes list each legal issue to be understood, in their work instructions for lawyers.
However, a corporate counsel needs to fully understand not only the conditions and investment strategy, and preferences of the company, supervision received, team work habits, etc., but also the above matters of the fund LP, so as to conduct an analysis for each transaction, from which to extract the legal issues that need to be resolved. Sometimes a seemingly weak related factor may have a significant impact on a transaction. Of course, if we acquire the above-mentioned capabilities, they will also help facilitate transactions, and investment teams will have more trust and dependence on you.
CBLJ: Compliance has increasingly become the focus of SOEs in recent years. What challenges do you and your team face?
Su Yanan: It not only is an SOE, but also belongs to the whole financial industry. Compliance and risk management have always been Chinalife’s concern, and have become more important in the past two years. The department that I am responsible for needs to apply more stringent compliance control on new investment projects.
With the introduction of a series of new regulatory policies, such as the Guidance on Regulating the Asset Management Business of Financial Institutions (New Regulations of Asset Management), the team needs to closely follow, study and pre-judge the regulatory policies. At the same time, the market environment and investors’ demands are changing. Many common transaction structures can no longer be implemented. There is an urgent need to innovate product structures.
Chinalife grants a veto power over investment projects to the director of the compliance risk control centre. The company’s emphasis on compliance gives us more responsibility for the company’s business development, while granting more powers to the compliance department.
Therefore, we must do a good job in monitoring and preventing investment risks, and become a solid foundation for the company’s long-term development. Meanwhile, we must become a booster for the investment business, assist the investment team to find solutions, and complete the final landing of investment projects, so as to promote the company’s business development and achieve a better balance between compliance and risk management.
CBLJ: What experiences have you accumulated in managing a legal team, and what have you learned about training team members?
Su Yanan: As far as the legal team management experience in the investment field is concerned, we must monitor and prevent investment risks and become a solid foundation for the company’s long-term development. Meanwhile, we must become the whole-process booster of the investment business and help investment teams complete the final landing and post-investment management of investment projects with respect to project assessment, due diligence, structuring, transaction documents and negotiation, etc., thus achieving a better balance between promoting the company’s business and protecting the company’s interests.
Especially in terms of boosting investment, we are committed to working side by side with the investment teams, not as just a risk reminder or project blocker. When facing potential risk points in investment projects, we will be guided by results and solutions, take a global perspective for project advancement, combine the characteristics of each project, design risk control measures from the perspective of transaction structure and terms setting, give different solutions, and analyze the advantages and disadvantages of different solutions based on law and practice, in order to facilitate the investment teams in solution selection and project promotion.
With respect to team training, it is necessary to focus on the growth of team members in legal knowledge and business sense. Only by actively updating legal knowledge and practical experience, in the face of continuous innovations in laws and regulations and practical operations, can we propose solutions that are more in line with practical operations in investment projects.
At the same time, along with the ups and downs of market changes and fleeting investment opportunities, the cultivation of business awareness and the accumulation of industry experience can help team members understand complex new business in the market, and fully communicate with business teams with excellent business understanding, accordingly providing creative guidance, tracking post-investment management development, and solving risk management problems.
CBLJ: The quality of Chinese lawyers and law firms has improved greatly in recent years. At what stage would you describe their development?
Su Yanan: In terms of non-contentious transactions that I am familiar with, Chinese lawyers in recent years have risen along with the vigorous development of China’s economy. Like all aspects of the economy, they have experienced the development stages from “learning and imitation” to “independent innovation”.
Many of the systems involved in modern commercial transactions are mature in the West. Western lawyers have continually optimized different systems and rules for hundreds of years, which have become the commercial system that is commonly followed under global integration. Chinese lawyers in this context gradually began to learn about such a complex and sophisticated business system after China’s reform and opening up. Thanks to more and more diligent Chinese lawyers who graduate from famous law schools at home and abroad, and who grow up in well-known domestic and international law firms, they have gradually become professional lawyers who can work independently from imitating their Western counterparts at every step in the past few decades. Chinese lawyers and foreign lawyers have become important participants in many domestic investment business fields and overseas transactions.
Chinese lawyers have been continually designing innovative transaction structures that conform to Chinese laws and satisfy client demands, especially in domestic-related transactions, by virtue of their familiarity with domestic legal policies and business environment, which has become an irreplaceable advantage for them.
CBLJ: What roles do external law firms play in the legal work of your team, and what are your criteria for choosing them?
Su Yanan: The support given to us by external law firms is very important. As a private equity fund manager, Chinalife Capital had more than RMB75 billion (US$10.84 billion) of assets under management at the end of 2018. The company reserves, demonstrates and invests in large-scale real estate and infrastructure projects every year.
Most of these projects need to hire external lawyers to assist in due diligence, issuance of due diligence reports, revision of transaction documents, and issuance of legal opinions. Independent advice from third-party consultants is required based on regulatory requirements. Also, it is impossible for the internal legal team to complete such a large amount of work.
The criteria for selecting external lawyers and law firms are mainly professional competence and professional attitude. We hope that the lawyers who co-operate with us are also experts in related fields. In addition, it is best that partners or senior lawyers can closely follow the projects and provide timely feedback. Of course, sometimes this is also a two-way selection process. We hope to have long-term co-operation, mutual understanding and respect with professional lawyers.
CBLJ: What trends and topical issues have you observed in your work recently?
Su Yanan: As a private equity investment platform for real estate, infrastructure and other alternative assets under
Chinalife Insurance, Chinalife Capital funds under management in core property, urban renewal, logistics and other fields. It also has three major attributes including private equity funds, insurance fund utilization and real estate investment. I would like to talk about the trends and hot spots we are facing recently from these three areas.
The first is the impact of the New Regulations of Asset Management on the field of private equity funds. The new regulations and supporting rules were successively launched in 2018. They focused on setting unified regulatory standards for various asset management products in the asset management business. Private equity funds are an important part of the asset management industry. The application of the new regulations to the private equity fund sector will continue to deepen the standardized development of private equity funds.
At the same time, we also need to pay great attention to the provisions of the new regulations with respect to fundraising and investment structuring of private equity products, such as product grading, liability requirements, qualified investors and other details. However, the impact of the above-mentioned regulatory content is subject to further clarification by the regulatory body and market validation, in terms of the practice of private equity funds.
Second, compared with other funds, the investment and application of insurance funds always have special requirements and characteristics in terms of investment supervision and risk management. There are even many detailed requirements on investment management. For example, the new accounting requirements system has far-reaching impact on the income requirements of insurance fund investment projects, large-scale asset allocation, term structure, transaction structure and risk dispersion, which requires us to consider asset allocation from a multi-dimensional perspective at the portfolio level, so that we can seek a better balance between standardization and marketization in insurance fund investment.
Third, it should be noted in the field of real estate investment that the real estate market in China has undergone rapid development and changes in the past 20 years. The traditional real estate investment market has been shrinking and slowing down. The real estate investment market changed from the incremental era, which focused on development and high turnover, to the stock era, which focuses on operation and high quality.
Along with the slowdown in China’s urbanization, the industry has reached a consensus that the real estate market has entered the stock era of “from increment to stock”, “from financing to investment”, “from residential projects to integrated projects”, and “from development to operation”. How to revitalize these “stock assets” that are inefficient and lack contents is an important issue for real estate investors. Urban renewal, logistics and other subdivided fields in the stock era will become important for many investment opportunities in real estate.
CBLJ: What do you think of the application of technologies in the legal profession, and in your company?
Su Yanan: I personally welcome the application of new technologies in the legal profession. Regardless of legislation, justice, legal services and legal education, legal work can be divided into two major parts, including accumulation and sorting of past information, and use of such information for reference and innovation.
New technologies have incomparable advantages to humans in the fields of accumulation, sorting and retrieval of massive information. I believe that once new technologies make breakthroughs in these areas, the legal community will be freed from boring information processing, thus releasing more vitality and creativity in the innovation level of legal service solutions.