DeHeng Advised on Free Fransfer of State-owned Assets

Between Dongfeng Group and Beijing Capital Group

2018-3-01

Recently, Dongfeng Motor Group Co., Ltd. ("Dongfeng Group"), a central state-owned enterprise, transferred gratuitously its water company ("Dongfeng Water Company") to Beijing Capital Group Co., Ltd. ("Beijing Capital Group"), a wholly state-owned enterprise in Beijing. The transfer has been approved by the State-owned Assets Supervision and Administration Commission of the State Council. DeHeng provided a full range of services for the project.

On June 11, 2016, the General Office of the State Council forwarded the Guiding Opinions on the Separation and Transfer of "Water Supply, Electricity, and Heating and Property Management" for the Residence Zones of Families of State-owned Enterprises' Employees" by the State-owned Assets Supervision and Administration Commission and the Ministry of Finance, which requires that the separation and transfer work be fully implemented nationwide as from 2016 at state-owned enterprises (including central SOEs and local SOEs), and necessary maintenance and transformation of relevant facilities should be carried out so that it reaches the average level of urban infrastructure, and the meters are installed in each household for fee calculation, and the services are undertaken by specialized companies or institutions for social management. It shall be basically completed by the end of 2018. Starting from 2019, state-owned enterprises will no longer bear related expenses for the aforesaid fees in any form. According to the above regulations, the separation and transfer were carried out in the form of gratuitous transfer. Dongfeng Group separates the business, assets, liabilities, and personnel of Dongfeng Water Company (a branch of ownership by the whole people under Dongfeng Motor Group Co., Ltd.) from the water supply business and asset of the residence area of employees' families in Shiyan Base, and transfers these to Beijing Capital Group.

DeHeng formed a project team headed by partner lawyer Bi Xiuli from the Beijing office, with lawyers Zhao Huailiang, Wang He and Wu Lei as the project team members. The team provided legal services for Beijing Capital Group to receive water assets transferred by Dongfeng Group, mainly including the review of gratuitous transfer agreements, negotiation with counterparties, evaluation of legal risks, drafting and review of relevant legal documents, etc. The legal services provide legal protection for Beijing Capital Group in their layout and extension of tap water business in Hubei Province. Meanwhile, the transfer plays an important role in Dongfeng Group taking the lead in divesting the functions of enterprises burdened with social responsibilities, promoting the professional, intensive, market-oriented management and operation of urban public services, and promoting the integration of water business of Dongfeng Shiyan base into the industry.