Tiecheng Yang and Yin Ge of Han Kun Law Offices authored a memorandum on total return swaps ("TRS"), which are often used by non-People's Republic of China ("PRC") investors to gain access to securities listed and traded on PRC exchanges and its interbank bond market.
As explained in their memorandum, non-PRC investors engage in TRS transactions for several reasons, including to address access restriction issues. The attorneys explained the basic structure and essential features of TRS, and detailed legal and regulatory issues in the following areas:
- Legal and beneficial ownership;
- Non-PRC share aggregation limits, disclosure of interests and the short-swing profit rule;
- Off-exchange transfer restrictions;
- Quota transfer and lending restrictions; and
- Leverage through unfunded TRS.
Han Kun Law Offices is a Chinese law firm with offices in Beijing, Shanghai, Shenzhen and Hong Kong.
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