Tencent, one of the world’s most valuable technology conglomerates, looks to its Compliance and Transactions Department (CTD) to help it overcome legal and regulatory obstacles as the company rapidly expands overseas. The 50-lawyer CTD is split into four teams, and in this feature, each team talks about challenges in the past year, the team’s recent achievements and what the future is expected to bring.
In the past year, what have been some of the challenges and obstacles (from a legal perspective) that Tencent has faced? How did your team help the company tackle these challenges?
M&A Legal Team: The year 2018 was one with ebb and flow. We saw China’s economy slowing down, the ongoing U.S.-China trade war, turmoil in the global stock markets and more. All these created significant new challenges for our work. For instance, we had to pay extra attention to the various new regulatory developments that affect our transactions, we needed to be prudent in order to tackle the risk of stock price fluctuations in public deals and we also had to be wary about the rise of populism around the world. All these came up or became major factors in 2018, as we witnessed a very active year in terms of the company’s investments.
Asset Management Legal Team: The expansion in investments and diversification of transaction types have brought new challenges to our daily work. Tencent’s investments have spread globally, with increasing diversity, differentiation and standards in the transaction types, demanding high- quality and timely legal services. To keep up with these developments, our team needs to get out of our comfort zone, stay curious and humble, keep learning, gain insight into the current trends, constantly reflect and apply our knowledge, so that we can be better prepared for new challenges in each and every transaction.
Commercial and Technology Transactions Legal Team: Regulatory changes and cross-border trade tensions have increased uncertainty. This has impacted business and created legal complexity. Games, media, cloud, and general technology licenses have all been impacted. Our team worked closely with business teams to structure deals to address uncertainty and avoid regulatory risk. In particular, we had to push ourselves to embrace the international market and explore the unknown fields.
Corporate Legal Team: The law is evolving at a rapid pace, especially in areas such as payments, FinTech, privacy and corporate governance. Therefore, one of the major challenges is to keep abreast of all legal developments around the world to ensure that Tencent complies with the laws and regulations of the countries it operates in. To tackle this challenge, we spend time researching changes in the international legal and regulatory landscape and monitoring industry practices, to ensure we have an in-depth and nuanced understanding, which allows us to deliver informed, practical and up-to-date legal advice to our internal clients.
What have been some of the key achievements of the team in the past year?
M&A Legal Team: We completed or participated in several milestone deals in the last year.
On one hand, Tencent has been trying to strengthen its leading position in areas where we have traditionally been strong, like gaming, content and so on. We initiated angel investments in the gaming industry globally back in 2017, and there have been some very successful cases this year as well. We also helped China Literature acquire a top film and TV studio in China.
On the other hand, as Tencent’s investments have always led the trend of the “new economy” in China, our team’s work also stretched into new business areas, like smart retail, cloud services and more. There were several cases in A-share market in China where we formed close partnerships with local retailers as well as cloud service providers. We also partnered with institutions, organizations and public services at various levels to improve their services to the public.
We are very proud of our achievements in the past year.
Asset Management Legal Team: One is the listing of Tencent Music Entertainment Group (TME) on the New York Stock Exchange on Dec. 12, 2018. The CTD provided full legal support to TME to help close the IPO successfully. We allocated in-house resources to TME and assisted TME in solving legal issues during the IPO process. Working closely and effectively with the professional teams, we helped TME complete the IPO in seven months from the official kick-off meeting. Our dedicated efforts and value-adding input earned recognition from TME. The success of the TME IPO equipped us with valuable experience and knowledge for future spin-offs of other Tencent units.
Another is “Tencent Legal Value- Added Services” that we provide to our portfolio companies, based on our knowledge of the industry, and using our experience and domestic and overseas resources. By integrating our practices and experience in risk management, government relations, and legal resources, we offer offline services including hosting seminars and forums, assisting in communication with regulators, as well as online services through an online platform we built named as “Qi’E Wen Dao” (meaning “Ask the Penguin for Advice”), which provides interactive consulting services, research reports and templates of various legal documents. Our services cover a wide range of areas such as cross-border M&A, PE&VC, capital markets, intellectual property right protection, risk management, dispute resolution, legal and policy research, and corporate governance and compliance. These help our portfolio companies improve their capability to handle legal affairs, react to the development of laws as well as industry regulations, and enhance their influence.
In the past year, we held a sub-forum called “Grow Together IPO” during Tencent Global Partner Conference, discussing “the approaches and rules of going public in Mainland China, Hong Kong and the U.S.” Its deep insight into those capital markets gained wide appreciation from the participants.
Commercial and Technology Transactions Legal Team: International expansion has been a focus.
In addition to handling commercial deals to support Tencent products outside of China, this year we’ve initiated a full-spectrum compliance procedure for Tencent Game’s global publishing business and have been working closely with our game studios and business teams to seek opportunities and monetization in the global market. Our valuable input on legal compliance, and implications for culture and religion have been positively recognized by the management. The success of PUBG Mobile is the best illustration of our great work. This game is a global phenomenon, being #1 rated in both Apple App Store and Google Play and winning three Google Awards (Best Game, Most Competitive Title and Fan Favorite).
In respect of the entertainment industry, our team has also been providing tremendous legal support in assisting Tencent Pictures’ continuous expansion in Hollywood. From the very first investment deal, “Warcraft”, to the recent blockbuster Marvel movie “Venom,” and the first co-investment and distribution deal (the new “Terminator”), our team has greatly helped Tencent Pictures build its well-recognized reputation in Hollywood.
Corporate Legal Team: It has been a year of many achievements for the team and therefore it is difficult to name only a few key achievements. Some of our most memorable “wins” from the past year would include the successful spin-off of Tencent Music Entertainment on NYSE, the highly-challenging international data protection and privacy compliance work carried out within the company, and the launch of various innovative products for WeChat Pay in Hong Kong and Malaysia.
We are very proud of what the team accomplished on the TME listing with our peer teams, despite difficult market conditions and an innovative business model unfamiliar to U.S. investors.
With regards to the international data protection and privacy compliance work undertaken by the team, we are working hard to show how seriously Tencent respects and protects its users’ privacy. With great support from management, the team has been focusing on raising awareness about international privacy requirements through training within the company and working closely with products teams to ensure compliance in all the markets we operate in.
WeChat Pay is now firmly entrenched in the Hong Kong and Malaysian markets and the team has been providing support to our business teams who are working hard to expand its offerings and refine its services to customers.
Can you talk a bit about how the team has grown and developed so far? How do you expect it will evolve further?
M&A Legal Team: A few years ago, we only had about four or five members in the team. But now our team has more than doubled. We are very happy to see new lawyers, with excellent back- grounds and skills, joining us. They brought us lots of energy and many new ideas, which are crucial to a company like Tencent. Looking into the future, conceivably, we will build a stronger team and continue to support Tencent’s investment business. We also want to maintain our creativity when dealing with difficult issues.
Asset Management Legal Team: Our team was established in 2012 with only two people; along with Tencent’s investments taking off, our team also expanded and now we have 13 people. We hope to maintain a small but sharp team, capable of communicating efficiently and responding quickly.
Commercial and Technology Transactions Legal Team: As Tencent’s own products expand into international markets, our team will also grow to address international compliance issues. Businesses, such as our media and entertainment business, or our cloud business, also demand further specialization. We are proud that our team members are not only high- quality lawyers, but they also know the industry well and have keen business sense.
Corporate Legal Team: The size of the legal team will continue to grow as Tencent’s business continues to expand globally. Given the wide variety of legal work that we cover, we encourage all team members to gain exposure to new and different practice areas in order to develop themselves into well-rounded lawyers. Our philosophy is that we must continuously learn and challenge ourselves such that we can reach new heights on both a professional and personal level
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