Zhang Wei, general manager of the legal department of the Industrial and Commercial Bank of China, discusses the evolving role of in-house counsel in a globally expanding Chinese company such as his own

Ever since 2005, when the Industrial and Commercial Bank of China (ICBC) was preparing for its history-making IPO and the dual listing in Hong Kong and Shanghai, Zhang Wei's plate has been overflowing.

As an integral part of the IPO team, Zhang led the legal department at ICBC's headquarters, which then consisted of fewer than 20 staff; he worked around the clock to ensure every part of the IPO process was completed within the timeframe.

The country's largest bank going public marked an important milestone in the reform of the financial sector and was an intricately structured project on a vast scale. Zhang recalled that the paper documents in the data room for the due diligence,
restructuring and IPO could easily have weighed more than 80 tons.

All the professional service providers in the IPO team, including investment banks, financial advisers and legal counsel, had to be prudently appointed by a selection panel headed by the now ICBC president Yang Kaisheng, given the magnitude of the task in hand.

Six firms with strong capital markets practice stood out from the rest and were given the privilege of working on the IPO. King & Wood, Herbert Smith and Davis Polk advised ICBC on PRC law, Hong Kong law and the US law respectively, while Shearman & Sterling, Freshfields and Haiwen & Partners acted for the underwriters.  ICBC's IPO is a success on multiple levels.

With US$21.9bn raised, it is the largest IPO in the world to date, and was the first simultaneous A-share and H-share offering, setting a precedent for future offerings of this kind. More importantly, becoming a publicly listed company has broadened ICBC's international shareholder base, brought a wealth of opportunity for international expansion and brought about fundamental changes to its inhouse legal department.

"The renowned success of the listing was the best reward possible for everyone in the team, who put in a great effort and worked very hard," said Zhang. "It also marked a turning point for the legal department. Since the company went public, the size of the department has doubled and its standing in the company has been elevated substantially."

Zhang now manages the legal department of ICBC's head office, which consists of 40 legal staff in six teams that are responsible for different legal duties. He also oversees the legal departments in 38 provincial-level branches and many subsidiaries. In total, there are over 1,400 legal staff in ICBC, but the number seems not to be enough in a bank with total assets of US$1.3trn that has over 20,000 outlets at home and abroad, offers 3,000 products to both individual and corporate clients, and employs more than 360,000 staff.

"The volume of work at the legal department grows by 40-50% each year, but the headcount of our department hasn't increased at the same pace. We feel a strong need to continue strengthening our team and upgrading the quality of legal staff," said Zhang.

Similar to the changes in the volume of work, the quality of work is also increasing. He noted that his team is actively involved in board meetings, the decision-making process, risk management and strategic planning.  "Our in-house legal function faces new responsibilities, heightened expectations and unprecedented challenges in the increasingly sophisticated legal and business environment. We are also expected to make a value-added contribution to the business," said Zhang.

However, to meet the giant company's legal needs, Zhang has come to realise that a good mix of in-house and external resources is essential.  "We are considering additional outsourcing, especially certain types of routine legal work. The cost and value differentials between in-house and external counsel are most effectively managed through outsourcing packages for routine, repetitive legal services that don't require a deep knowledge of the industry, business operations, culture and strategy," he said.

Outsourcing clearly frees up in-house teams to devote more time to sophisticated, business-critical legal work.

However, external counsel are preferred when cutting-edge legal knowledge and a broader market perspective are required. Some examples include complex litigations, investigations, transactional work and international work where the legal department lacks a presence in or knowledge of the local jurisdiction.

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