"Ugly" words prompt risks before, and ensure the operation of the project


In 2018, our lawyers accepted the entrustment of an investment management company to provide early-stage legal services for an infrastructure supporting PPP project in Yixing, and reviewed the PPP agreement, shareholders' investment agreement, articles of association and other PPP project documents.

[Key words] infrastructure construction government paid fund manager equity inheritance

[Project information]

This project is a government infrastructure project, which is the key project of infrastructure construction in this area. The investment of the project is estimated to be several billion yuan. In the total cooperation period, the construction period (including construction period) is tentatively 2 years, and the operation period is more than 10 years. The whole project adopts the return mechanism of government payment. The project company is responsible for the investment and financing, construction, operation, maintenance and handover of the project. After the expiration of the cooperation period, the project company will transfer the project facilities and related rights and interests to the implementing agency or the agency designated by the government free of charge.

The client of this project is the fund manager, who will participate in the bidding as the social capital party. After winning the bid and the establishment of the fund, the fund will automatically inherit the shareholder status of the fund manager, so we entrust the exchange to control the risk of its participation in PPP projects in this way.

[Difficulty or novelty of the project]

1. Its novelty lies in:

First, the construction of the project will improve the popularity and influence of the region, and effectively promote the common development of regional economy and important industries.

Second, the construction of the project will effectively meet the local residents' pursuit of high-quality life and promote the improvement of the living standards of the people in the region.

Third, the construction of the project will effectively promote the development of local commerce, culture, entertainment and other industries, increase employment and increase residents' income.

2. The difficulty of the project lies in:

First, one of the successful social capital parties of the project is the fund manager, who hopes that the fund established by him will inherit his rights and obligations in the project company after winning the bid, that is, the equity change after the establishment of the project company. This is in conflict with the requirement of the government that the social capital party shall not change its equity during the construction period of the project. Therefore, our lawyers issue special opinions on "equity lock-in period of social capital side" in order to persuade the government to agree to such practices.

Secondly, the issue of legality and compliance is one of the core issues concerned by customers in this project. Since this project is a government paid project, since the Ministry of Finance issued the notice on standardizing the project database management of PPP comprehensive information platform (CBJ [2017] No. 92) in November 2017, all localities have carried out government paid projects prudently, and some localities even no longer carry out government paid projects. Therefore, whether we can successfully complete the preliminary procedures and obtain the government's financial budget arrangement is the key issue concerned by our clients and lawyers.

[Lawyer response]

In order to complete the project, our lawyers communicated with the client through meetings, e-mail, telephone and other means for many times, and issued five versions of legal opinions on PPP project contract, articles of association of the project company and shareholders agreement according to the client's requirements and opinions of all parties.

In view of the legality and compliance of the project, our lawyers, in strict accordance with the requirements of the notice on standardizing the project database management of the government and social capital cooperation (PPP) comprehensive information platform (CBJ [2017] No. 92), prompt and modify the following problems: first, the government payment should be linked to the performance appraisal; second, the government payment should be paid continuously and smoothly during the project cooperation period, and should not be ignored Third, the project construction cost should participate in the performance appraisal, and the actual performance appraisal results should reach 30%.

[Achievements and summary of legal services]

By the end of 2018, our lawyers have reviewed the PPP contract, shareholders' contribution agreement and articles of association of the project and issued legal opinions. Through the efforts of all parties, the above text has been signed, the client has established the project company as agreed, and the project is in the process of implementation.