With offices in California, New York and Singapore, MagStone Law, LLP is a modern law firm dedicated to providing solution-focused, cost-effective, and high quality legal services to our clients. We are all experienced lawyers with backgrounds from the most prominent international law firms.  Our practice covers all aspects of corporate transactional law, including business formation, financing, licensing, corporate governance, mergers & acquisitions and SEC compliance.  We also provide legal services in intellectual property, real estate transactions, tax controversy, litigation and dispute resolution services.  Known for our expertise on U.S.-China cross-border transactions, we have become the go-to law firm for many Chinese companies exploring the U.S. market and U.S. companies entering into the Chinese market.​

CARES ACT CLIENT ALERT

​We want to draw your attention to the newly enacted Coronavirus Aid, Relief, and Economic Security Act (CARES). Many businesses may be able to tap into the Payroll Protection Program (“PPP”) and the COVID-19 Economic Injury Disaster Loan Program (“EIDL”) created under CARES. Both PPP and EIDL loans are made on a first-come, first-served basis.  To assist clients navigating the CARES application process, we have assembled a team of attorneys. If you have any questions, please contact us at CARES@magstonelaw.com. Click here for details. 

News

March 26, 2020: Families First Coronavirus Response Act Signed into Law
On March 18, 2020, President Donald Trump signed into law the Families First Coronavirus Response Act (“FFCRA”), an emergency relief bill that aims to provide financial support to reduce the impact of the 2019 Novel Coronavirus (“COVID-19”) on American families. The FFCRA provides for two sources of ......

March 16, 2020: President Trump Orders Beijing Shiji to Divest Acquisition of StayNTouch
On March 6, 2020, President Trump issued an Executive Order requiring Beijing Shiji Information Technology Co., Ltd., a public company organized under the laws of China (“Shiji”), to divest its acquisition of StayNTouch, Inc. (“StayNTouch”), a US-based hotel property management software company.  The Order is the sixth Executive Order to date prohibiting the acquisition of a U.S. business by a foreign person, pursuant to the authorities that allow the Committee on Foreign Investment in the United States (“CFIUS”) to review...... 

March 9, 2020: SEC Amends Exemptions from Investment Adviser Registration for Advisers to Rural Business Investment Companies
On March 2, 2020, the Securities and Exchange Commission (“SEC”) adopted the amendments to (i) Section 203(l)-1, which defines the term “venture capital fund” for purposes  of the venture capital fund adviser exemption, and (ii) Section 203(m)-1, which defines the term “assets under management” for purposes of the private fund adviser exemption, in each case, under the Investment Advisers Act of 1940 (as amended, the “Advisers Act”), to reflect exemptions from registration for investment advisers who advise rural business investment companies (“RBICs”). Specifically, Section 203(l),...... 

March 3, 2020: CRS Releases Report on CFIUS
On February 26, 2020, the Congressional Research Service (“CRS”), a public policy research think tank of the U.S. Congress, released a report on the Committee on Foreign Investment in the United States (“CFIUS”). The CRS report reviewed ......

February 25, 2020: CFIUS Update V - Critical Technology under FIRRMA
The Final Rules expanded the jurisdiction of the Committee on Foreign Investment in the United States to review certain non-controlling foreign investments in a US business which, among other things, “produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies” involving certain specifically enumerated industries based on North American Industry Classification System (NAICS) codes. The Final Rules defines “critical technology” to include ......

February 18, 2020: CFIUS Update IV - Sensitive Personal Data under FIRRMA
On January 13, 2020, the US Department of Treasury (“Treasury”) issued two final rules (the “Final Rules”) implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”).  The Final Rules expand the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) to review non-controlling foreign investments in a US business involving critical technology, critical infrastructure, or sensitive personal data (a “TID US Business”). Under the Final Rules, CFIUS may review ......
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Hot topic: CFIUS and FIRRMA 

• CFIUS Update Series of 2020 Please click here.

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• January 18, 2020: SEC Proposes to Amend the “Accredited Investor” Definition
  The Securities and Exchange Commission (SEC) has recently proposed to amend the definition of “accredited investor”. Qualifying as an accredited investor may enable an investor to participate in private investment opportunities that are generally not available to the general investment public, such as investments in certain hedge funds and private equity funds. Specifically, the SEC proposes ...
  

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• December 20, 2019: U.S. Department of Commerce Proposes New Rule to Review ICTS Transactions
  On November 27, 2019, the U.S. Department of Commerce proposed a new rule (the “Proposed Rule”) pursuant to an Executive Order of May 15, 2019, entitled “Securing the Information and Communications Technology and Services Supply Chain” (Executive Order 13873). The Proposed Rule sets forth the scope, criteria, process and procedures for reviewing certain information and communications technology and services transactions that would pose an undue or unacceptable risk to the national security of the U.S. or to the safety of U.S. persons. Under the Proposed Rule, ... ​
• October 24, 2019: NVCA Recommends More Clarity on Proposed CFIUS Rules
  On October 17, 2019, the National Venture Capital Association (“NVCA”) submitted to the Committee on Foreign Investment in the United States (“CFIUS”) eleven comments on the Department of the Treasury’s September 17, 2019 proposed final rules (the “Proposed Rules”) for implementing the Foreign Investment Risk Review Modernization Act of 2018 (“FIRMMA”). In its comments, NVCA highlighted the lack of clarity on the scope of the Proposed Rules and is concerned that the vagueness would make the Proposed Rules overbroad and burdensome. Please click here to read more. 
• FIRMMA: On September 17, 2019, the Treasury Department proposed final regulations that would comprehensively implement the Foreign Investment Risk Review Modernization Act of 2018 (“FIRMMA”).  Among other things, the proposed final regulations expand the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) over (i) non-controlling investment in U.S. business that afford a foreign person certain access, rights, or involvement with critical technologies, critical infrastructure, or sensitive personal data ( “TID U.S. business”) and (ii)  certain foreign investments in U.S. real estate.  The proposed regulations would also introduce a mandatory declaration requirement for investment in a TID U.S. Business by certain foreign investors if a foreign government has a substantial interest in that foreign investor.  Comments on the proposed regulations are due by October 17, 2019.  The final regulations will become effective no later than February 13, 2020. 
• ​​​President Trump signed into law the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) on August 13, 2018.​
• On June 27, 2018, President Trump announced that he would back away from an aggressive approach to limit China’s investment in the United States through declaring a national economic emergency. Instead, he would rely on an existing Secretary-led committee to restrict new investments (including Chinese investments) in American technology companies, which is to expand the current CFIUS authorities through the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA).  On June 28, 2018, the House bill of FIRRMA was approved by a margin of 400 to 2. While several differences remain between the House and Senate versions, the overwhelming vote for FIRRMA in the House of Representatives, coupled with the support of President Trump, makes it highly likely that some form of the legislation will be enacted this year.​

Hot topic: business compliance

• December 13, 2019: CA AB51 Bans Mandatory Employment Arbitration
  On October 10, 2019, Governor Gavin Newsom signed Assembly Bill 51 (AB51) into law, which prohibits employers from (a) conditioning employment, continued employment or the receipt of any employment benefit on the applicant or employee waiving rights under California’s Fair Employment and Housing Act (FEHA) or the California Labor Code or (b) threatening, retaliating or discriminating against, or terminating the applicant or employee for refusing to waive employment-relate rights. Notably, AB51 explicitly carves out any written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (FAA). The new law will become effective on January 1, 2020. Although some practitioners...         ​
• ​AB5: On September 18, 2019, Governor Gavin Newsom signed Assembly Bill 5 (AB5) into law, which codifies the “ABC” test for employee versus independent contractor classification in California. The new law will become effective on January 1, 2020.
  Under the “ABC” test, a hiring entity must establish all of the following conditions for a worker to be considered a contractor rather than an employee:
  (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work; and
  (B) The person performs work that is outside the usual course of the hiring entity’s business; and
  (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
  AB5 only requires the use of the “ABC” test for certain employment law areas but not others and there are multiple exemptions from the “ABC” test. California employers should consider classification decisions carefully and should seek legal counsel when the classification is not entirely clear.

         The full scope of AB5 is beyond this alert. If you have any questions       
         regarding AB5 or how it may impact your company, please contact us.​

• CA has become first state in ...: California has become the first state to require public companies to include women on their board of directors. Under California’s newly enacted law, a publicly held corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California, is required to have a minimum of one female director on its board of directors by December 31, 2019.  By the end of 2021, the minimum number of female directors will be further increased for publicly held corporations with five or more directors.  A failure to comply with the law or timely file the directors’ gender information with the California Secretary of State by the specified date could incur $100,000 or more in fine.
• GDPR: The European Union’s General Data Protection Regulation (GDPR) was adopted in 2016 and becomes effective May 25, 2018. It requires businesses to protect the personal data and privacy of EU citizens for transactions that occur within EU member states. GDPR applies any company or organization that collects or processes personal data of an EU citizen, who is residing in the EU, regardless of the location of the company or where the personal data is stored. Companies must be able to show compliance by May 25, 2018. ​
• ​​The new Section 251(h) of the Delaware General Corporation Law eliminates the need to include top-up options or a back-end stockholder vote in most public tender offers for Delaware corporations.
• The SEC has adopted amendments to allow widespread advertising and other forms of “general solicitation” or “general advertising” in private offerings under Rule 506 of Regulation D of the Securities Act of 1933 or under Rule 144A of the Securities Act of 1933, so long as all purchasers of the securities are reasonably believed to be accredited investors or QIBs.

hot topic: import and Export Control

December 2, 2019: USTR Announced Exclusion Procedure for Section 301 Tariff List 4A
The U.S. Trade Representative’s (USTR) issued the procedures for parties adversely affected by the List 4A Section 301 China tariffs to seek an exemption on October 24, 2019. List 4 Section 301 China tariffs (US $300 billion trade action) is the fourth round of tariffs on an estimated $300 billion of Chinese goods the U.S. imposed pursuant to USTR’s investigation and determination under Section 301 of the Trade Act of 1974. Goods from China listed under List 4A are subject to an additional 15% tariff effective on September 1, 2019. Read More...​

​October 17, 2019: 28 China-Based Entities included in BIS List 
The U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) recently issued a rule to amend the Export Administration Regulations (“EAR”) by adding twenty-eight additional entities located in China to the Entity List. The rule became effective on October 9, 2019. A copy of the rule, together with the newly added entities, can be viewed here.
For the entities listed in the Entity List, including those newly listed entities, BIS imposes a license requirement for all items subject to EAR and a license review policy of case-by-case review for items under certain Export Control Classification Numbers. BIS has also adopted a license review policy of presumption of denial for license applications to these entities with limited exceptions.

hot topic: data protection and privacy

January 13, 2020: Software Specially Designed to Automate Analysis of Geospatial Imagery Added to Export Control Classification Number 0Y521 Series 
On January 6, 2020, an interim final rule issued by the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to make certain items subject to the EAR and imposes a license requirement for the export and reexport of certain items to all destinations, except Canada. Specifically, this rule classifies ... ​

​December 6, 2019: California Consumer Privacy Act Set to Become Effective January 1, 2020
California Consumer Privacy Act (“CCPA”), widely applauded to be the most comprehensive consumer privacy legislation in the United States thus far and the US counterpart of the European Union’s General Data Protection Regulation, is set to take effect January 1, 2020. The CCPA covers...

November 4, 2019: Data Protection for Cayman Islands Investment Funds
The Cayman Islands Data Protection Law (the “DPL”) became effective on 30 September, 2019.  The DPL governs how a “data controller” may process, use and retain personal data. Please click here to read more. ​   ​

hot topic: merge and acquisition

November 18, 2019: Otto Bock-Freedom Merger Transaction Ordered to be Unwound
On November 6, 2019, the Federal Trade Commission (“FTC”) ordered to unwind a consummated merger between Otto Bock Healthcare North America Inc. (“Otto Bock”) and FIH Group Holdings, LLC (“Freedom”), the largest and third largest manufacturers of microprocessor-driven prosthetic knees (“MPK”) in the United States by revenue. Please click here to read more. ​

   MagStone Recent Deals

• Represented Estun Automation, a PRC public company, in its $9 million investment in a Boston-based robotics company.
• ​Represented Hong Kong Dewei Advanced Materials International Trading Co., Limited on its $20 million acquisition of the majority equity interest in US FuelCell Corporation and its investment in US Hybrid Corporation
• Represent 70 Chinese investors in an ongoing civil lawsuit filed in the Southern District of New York against Bar Works entities and individuals involving an investment fraud to recoup $7.5 million investment loss.
• Represented Beijing-based Spearhead Integrated Marketing Communication Group (SZSE: 300071) on its acquisition of San Francisco-based Smaato Inc. and Smaato Holding AG, the leading independent global real-time advertising platform for mobile publishers and app developers, for $148 million
• Represented a government backed venture capital fund on its early and late stage investments in more than 20 U.S. startups 
• Represented Genimous on its $252 million acquisition of Spigot, a U.S. company headquartered in San Francisco
• Represented ZQ Capital, a co-lead consortium member, in connection with its $210 million convertible bond investment in Nu Skin Enterprise Inc., a U.S. corporation listed on NYSE
• Represented Xinguodu, a Chinese POS terminal and E-payment technology solution provider, on its acquisition of 100% interest in ExaDigm, a U.S. corporation
• Represented Haiyin Capital on its $50 million investments in various startups in the United States
• Represented a prestigious Chinese venture capital fund on its acquisition of equity interest in a Hong Kong company
• Represented a multi-billion dollar financial institution on its Series E investment in three Silicon Valley companies
• Represented a Shanghai limited liability company on its proposed acquisition of a Nasdaq listed company
• Represented a Chinese public company, a subsidiary of a major Chinese state-owned company on its acquisition of a U.S. flight school
• Represented an entertainment company on its investment in an independent film
• Represented a Nasdaq-listed online game company on its proposed sale of a subsidiary in the United States
• Represented an pre-IPO company on its company restructuring matter
• Represented SV Tech Ventures on its fund formation matter