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2iB Partners goes to Silk Road Summit 2018 in Zhang Jia Jie, China

2iB Partners goes to Silk Road Summit 2018 in Zhang Jia Jie, China

15th Oct, 2018 – 2iB Partners attended the Silk Road Summit Conference in Zhang Jia Jie, China along with some other Singapore delegates.

From left to right: Mr. Dylan Tan, Director of 2iB Partners. Mr. Yang Yen Thaw, Managing Director of 2iB Partners, Dr. Lai Leng Tham, Executive Director of Meinhardt Infrastructure Pte Ltd, Mr George Abraham, Chairman of The GA Group Pte Ltd, Mr. David Chew and Mr. Shawn Toh

The conference was attended by Delegates from more than 80 countries attended the Summit, including former politicians, government leaders, about 40 diplomats, business associations from more than 50 countries, and representatives of international organizations such as UNESCO, UN World Tourism Organization, UN Industrial Development Organization, International Standardization Organization, Black Sea Economic Cooperation, etc.

The event had also attracted great attention from Chinese and foreign media. China Business News of CCTV reported the grand summit; Xinhua News Agency and China News Agency published news release; Phoenix Satellite TV also carried a series of featured reports on the summit. Media including China Global Television Network (CGTN), Philippine News Agency, Asia Pacific Daily, Manila Bulletin and Manila Standard Today (MST) carried out frequent and extensive coverage to the global audience.

The conference was an informative one and gave delegates a better sensing on chinese sentiments towards the One Belt One Road (OBOR) initiative.

Deputy Governor of the Hunan Provincial Government He Baoxiang addressed and announced the opening of the summit. Vice Chairman of China Chamber of International Commerce and former Vice Chairman of China Council for the Promotion of International Trade Zhang Wei, Deputy Director of CPPCC Sub-committee of Social and Legal Affairs and President of China Association for Friendship Chen Zhimin, former Assistant to Minister of the International Department of Central Committee of CPC and Vice President of China NGO Network for International Exchanges Dou Enyong, Deputy to the National People’s Congress of China and Chairman of Silk Road Chamber of International Commerce (SRCIC) Lu Jianzhong, former President of Croatia and SRCIC senior consultant Stjepan Mesić, delivered welcoming speeches at the opening session chaired by Secretary of Zhangjiajie Municipal Party Committee Guo Zhenggui.

Minister of Environmental Agriculture of Georgia Levan Davitashvili, Executive Dean of Chongyang Institute for Financial Studies, Renmin University of China Wang Wen, Chairman of the Board of the Union of Arab Banks Sheikh Mohamed El -Jarrah El- Sabbah, Vice President of China NGO Network for International Exchanges and Chairman of Chinese Culture Promotion  Society Wang Shi, and Commissioner of Korea World Travel Fair Shin Joong Mok delivered keynote speeches.

2iB Partners endeavors to bridge businesses between Singapore and Belt Road countries by fostering good relationships and networks within these countries. To a certain extent, the recent European Union And Singapore Free Trade Agreement (EUSFTA) and European Union And Singapore Investment Protection Agreement (EUSIPA) will help to facilitate many of these relations.

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M&A – The Legal Angle

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M&A – The Legal Angle

The solution and problem in a merger or acquisition is regulatory in nature. In all cross-border deals, there is no go-around to regulations. Laws are enacted to essential protect life and property of its citizens. Therefore, it will always be the aspiration of law to protect them. Understanding this will focus the negotiations in a direction that eases M&A deals.

M&As require a successful combination of businesses, technologies, regulation handling and relationships. A clear vision and strategy must involve a legal approach as well as alternatives to legal problems. Relationships can be managed across cultures. Interchange the players in the M&A. Cultural negotiations should adopt a bottom up approach.

Pricing of the transaction will form part of deal structuring. Whether leveraged, unleveraged, debt, participating debt or JV. The deal structure should be clearly spelt out in that particular document. Focus should not only be on the seller’s RNWs or WNIs, but also on local compliance. Non-compliance can have an effect on the price of acquisition.

Many companies decide to dive in first and solve the problems on the go; or application of the words of Rear Admiral Grace Murray Hopper, a U.S. Naval officer and an early computer programmer in 1986 – it is easier to ask for forgiveness than permission. While quick fix non legal solutions may result in fast action and shortterm benefits, it is a highly expensive and disastrous decision and will result in penalties, fines or even jail by law. This shotgun approach may work well for small companies which can wind up fast, but large and listed companies have much deeper roots to uproot. It is always advisable to be over- and self-regulated.

Pre- and post- M&A legal and tax considerations for different jurisdictions are an important angle and determines most M&A deals. What changes the equation will be matters relating to DTAA – double taxation avoidance agreements between relevant countries, DTAA, dividends, royalties, profits, capital gains, legal issues relating to anti-money laundering and anti-terrorism funding as well as international relations. These considerations need to be applied in detail. Involving the proper international legal minds from inception results in cost savings not cost overruns. Good lawyers also bridge connections between the companies involved as well as the regulators. Different angles of approach, including bringing in legal at the right times, can produce time saving and higher chances of success.

Alternative Legal Recourse

Avoiding litigation in any area of business is preferable. Court litigation requires plenty of time, effort on company representatives in court and is highly expensive. Simple transactions to be settled in court can start from USD 200,000 and grow exponentially. 

 

Mediation

Mediation works only if both parties have a good relationship and require a third party to adjudicate on a fair price. This is because mediation is voluntary. The only place where mediation works is if it has the sanction, implied or express, of the court in a country, which can be neutral. 

 

Arbitration

Arbitration is equally expensive in the initial stages, but since the result can be much faster, it will save in long term costs. However, arbitration provides for a neutral venue as well.

 

Transaction Liability Insurance

Transaction Liability Insurance is available for Buyers covering legal liabilities and is an excellent alternative legal recourse. Where transaction liability insurance for sellers is available, it would form a probable win-win situation for both parties. 

 

Alternative Legal Recourse

Another alternative legal recourse is to engage third parties who can either subrogate claims. For example, litigation and recovery arms of banks and III party litigation funders. These maybe in-house or outsourced. third parties would Since the main or prominent part of their business is litigating on a regular basis, a premium of sorts can be negotiated. This will eliminate the M&A parties from expending too much time, effort and money and they can continue with their business.

A third alternative legal recourse is not so much a direct one, but to quantify the liability or have liquidated damages measured to the closest extent. For instance, convert a negative covenant to a positive on. Instead of vague consequences to breach of a contract, a fixed amount may be agreed between the parties on violation or breach. A party may be permitted to circumvent, compete or solicit provided they pay a fixed amount or fees for the same. Where the certainty of a claim exists, there will be better outcomes for both parties, for good or bad.

2iB Partners in brief

2iB Partners is a specialist M&A and management consultancy firm that has extensive networks with strategic buyers, MNCs, listed companies, investment networks and funds from US, UK, China, Philippines, India, Vietnam, Myanmar, etc.

2iB Partners help companies scale up and internationalize through inorganic growth, joint ventures or management consultancy. Through Singapore as a strategic base, 2iB Partners helps companies outside of Asia gain market access and companies in Asia expand internationally and regionally. 2iB Partners also provide ad-hoc entrenchment of highly qualified professionals and experienced businessmen to solve complex business problems through experience and insight.

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation Chief Operating Officer
Email Dylan@2ibpartners.com

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Why M&As Go Wrong

Acquisitions that are rushed can result in problems and challenges after closing in a transaction:

Some of the reasons why M&As go wrong are:

 

1. Assumption Asymmetry

Leaders and owners may over value a target by making assumptions including over-valuation, over-optimistic assumptions in revenue, cross-selling and cost synergies by the target may create expectations higher than the real value of the business or company. These may be contrary to what a due diligence or post-integration may reveal. If the former address the asymmetry, it will address some issues. But if it occurs post-integration, then it would be too late.

Most legal issues center around disclosures and reps and warranties during and after DD. But some interesting legal questions are whether a buyer should provide his assumptions to the seller or can a party can be held legally responsible if the facts do not match the assumptions. This is what leads to moral hazards where a party to the transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or attempts to earn a profit in a questionable manner. While such legal considerations may be covered in the NDA (and the Overture Documentation – discussed later) signed in the initial stage, actual control over assumptions and facts and enforceability thereto may become sticky issues.

The Parties need to have honest approaches during negotiations in their expectations, disclosures, representations and warranties on both sides to make a successful M&A.

 

2. Having a “take” mentality

M&A is a bi-lateral proposition. Both parties need to be honest and should share equally in the responsibility of making the M&A work. M&A to merely increase share price or increase of income and status of acquirer’s management or professionals can create hurdles and challenges. Such approach reduces shareholder wealth largely over a period of time.
Post-integration, the acquirer should take care to ensure it contributes to the target company and not merely exhaust the latter’s resources.

 

3. Lack of emphasis on post M&A integration

Acquisitions do not end with Closing. It is a continuing process of business building. As part of post-integration will be corporate policies, new HC related contracts, replace as opposed to displace employees, active management alignment and participation. These documents should have corporate sanctions for non-compliance. However, deep consideration should be given to local laws.

Many acquirers slack off once Closing has taken place and leave it to the rank and file to take care of integration. Lack of emphasis or poorly executed steps on post M&A integration will not reap dividends, but create issues that gradually builds up to sure failure. Post M&A integration between the acquirer and target includes not only bringing harmony and coordination, but efficiencies in management, change and cultural integration, application of corporate psychology, adaptation to common vision and equitable distribution of resources. The original leaders and teams of the two companies need to continue work closely together to implement the vision and strategies.

 

Most M&As fail due to a lack of a sound post-integration plan.

4. Shareholder issues

There are two stages. Before and after an M&A. Existing and new shareholders’ expectations need to be brought in alignment to the objective of the M&A in both stages. Some issues would include buying out existing shareholders, reclassification, exchange or combination of shares. The expectations may also need sensitive alignment amongst cross-border shareholders.

5. Employee issues

Analogous to shareholder issues are employee treatment. In an ideal scenario, no employees are displaced, but are successfully reallocated. However, where employees have to be let go despite efforts, clear negotiation objectives need to be in place before the M&A takes place. In addition to this, there will be matters relating to key employee or key management personnel. Negotiations need to cover retention of such persons to ensure successful transition in the acquirer-target combine.

The legal consideration from the seller point of view is whether there has been any effect on the contracts entered into between the main business owner / founder – in particular if there are earn-outs.

6. i-contact

When there is no i-contact – both in terms of seeing eye to eye and discarding egos, the M&A may be doomed at the start; or if it were to sound legalese, mortuus ab initio. In most M&A discussions, getting the parties to agree is a daunting task. There will be differences in terms of valuations, revenues or profits, or potential growth. When the captains of the business come to an understanding, the professionals or advisers will come in with their own set of needs and wants to potentially scuttle the deal. The M&A negotiations should be devoid of emotional baggage. In negotiations, it is not enough to merely have the leaders discuss. The leader should develop a good team that can work in parallel. Personal relationships and persuasive skills between the teams should be balanced. A good legal “team” need not necessarily play bad cop all the time and can assist in diplomacy and righting wrong assumptions.

In addition to the aforegoing, consideration should be given to media attention. The higher the media attention during the negotiations, the larger the variation in price. Smaller deals create more value than bigger deals where expectations are high. Another consideration during negotiations is that even if the M&A goes through despite the above, it can lead to litigation.

2iB Partners in brief

2iB Partners is a specialist M&A and management consultancy firm that has extensive networks with strategic buyers, MNCs, listed companies, investment networks and funds from US, UK, China, Philippines, India, Vietnam, Myanmar, etc.

2iB Partners help companies scale up and internationalize through inorganic growth, joint ventures or management consultancy. Through Singapore as a strategic base, 2iB Partners helps companies outside of Asia gain market access and companies in Asia expand internationally and regionally. 2iB Partners also provide ad-hoc entrenchment of highly qualified professionals and experienced businessmen to solve complex business problems through experience and insight.

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation Chief Operating Officer
Email Dylan@2ibpartners.com

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[Video] 2iB Partners Speaks at Southeast Asian M&A and Corporate Investment Conference 2017

[Video] 2iB Partners Speaks at Southeast Asian M&A and Corporate Investment Conference 2017

In the above video, Managing Director of 2iB Partners, Mr. Yang Yen Thaw delivers a 50 minute speech on Legal issues in cross-border Mergers & Acquisitions (M&A) and a new approach to M&A.

2iB Partners formed part of a repertoire of experts hailing from MNCs, mainstream banks, advisory firms and funds with substantial AUM.

 

 

Speaker line-up included:

Sanjay Mathur Chief Economist – Southeast Asia and India ANZ Bank
Sikh Shamsul Ibrahim Investment Director Malaysian Investment Development Authority (MIDA)
Greg Ohan Director Jones Lang Laselle, Vietnam
Hector Wang Investment Director China-ASEAN Investment Cooperation Fund
Edwin Vanderbruggen Senior Partner VDB Loi Co.,Ltd
Jonathan Fein Vice President BDA Partners
Ryoichi Nishizawa Head of M&A Advisory Mitsubishi Corporation
Yang Yen Thaw Managing Director 2iB Partners
Kevin Murphy Managing Director Andaman Capital Partners

Panelists include:

Kate Holgate Partner and Head Brunswick Singapore
Aaron Howell Managing Director Rothschild
Robert Rosen Co-CEO Kenon Holdings
Kala Anandarajah PBM Head Competition & Anti-trust and Trade Rajah & Tann
Dag Ove Solsvik Head of Group Legal, Middle East and APAC DNV.GL

The room was filled with more than a hundred people representing big listed companies, billion dollar funds and conglomerates from all sectors taking a strategic interest in the Southeast Asian region.

 

Mr. Yang Yen Thaw addressing “Why M&As go Wrong”.

Legal strategy in M&A

Mr. Yang Yen Thaw engaging the audience in an open floor discussion. CoAggregation® in action!

Message from the Director:

2iB Partners continues to build its reputation and broaden international networks with MNCs, strategic buyers, listed companies, funds and networks in US, UK, China, India, Phillipines, who have taken a strategic interest in the Southeast Asian market. We also understand that there are a significant number of small and medium enterprises (SMEs) in the region that are looking to scale up and regionalize in SEA or gain market access into China.

With regards to these 2 different channels of companies, we have the appropriate networks and expertise to assist them with their expansion plans whether through joint ventures, inorganic growth or general business consultancy. We see ourselves in a strategic position to assist these stakeholders in their internationalization and growth plans in or out of the region through Singapore.

From a macroeconomic perspective, the ASEAN story is generally positive and is one of the fastest growing regions with projected 4.9% GDP growth this year compared to projected global growth of 3.5%. Fast growing Myanmar is also projected for a growth of 7.5% next year, though for this country, regulations may slow the advancement of certain sectors. The ASEAN growth is projected to outperform that of global growth rate for the foreseeable future with relative political stability and increased connectivity in terms of both investment and trade.

Global trade has also re-emerged and as a result, Asia, that is the most export dependent has benefited substantially. Indicators suggest that domestic demand is also improving post slow down but it would take awhile before this reaches a steady state. This could suggest investment opportunities in the medium to long term.

Inflation is behaving and the region as a whole is not sitting on any large imbalances. Therefore, with regards to concerns on fed hikes, as long as they are well introduced and earnings growth is faster than the rise in cost of capital, we should sift through the shifts in global monetary conditions.

The ASEAN Economic Community (AEC) blueprint which aims for tax collaboration by 2025 and reduction in trade transaction cost by 2020 also point to significant improvements in opportunities.

-Data from FocusEconomics and World Economic Outlook.

Last but not least, we would like to express our thanks to Mr. Tony Huang and ValueTang LLC and look forward to greater and deeper collaboration in time to come.

 

Dylan Tan

2iB Partners – Director

 

 

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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Panelist Commentary on Fintech in Healthcare: Partnerships & Regulatory Frameworks – 27 October 2017

Panelist Commentary on Fintech in Healthcare: Partnerships & Regulatory Frameworks – 27 October 2017

A commentary by Yang Yen Thaw on his views in the panel discussion on Accelerating Innovation: Partnerships & Regulations on the topic “Fintech in Healthcare”. The panelists were Yang Yen Thaw, Managing Director of 2iB Partners, Astrid S. Tuminez, Regional Director, Corporate, External, and Legal Affairs at Microsoft Southeast Asia, Wayne Chia from Asia P3 Hub and Azmul Haque, Managing Director of Collyer Law.

The Fintech for Health event was organized by ACCESS Health International.

 

Accelerating Solutions: Co Industry Innovation and Public Private Partnerships for Health Regulatory Frame Works for the Integration of Fintech and Digital Health

This commentary deals with the talk on Fintech in Healthcare conducted by ACCESS Health International Southeast Asia Pte Ltd – Accelerating Solutions: Co Industry Innovation and Public Private Partnerships for Health Regulatory Frame Works for the Integration of Fintech and Digital Health. The questions it sought to address were – Co-industry partnerships and public private partnerships are the way forward. How can new partnership models accelerate adoption of new technologies and business models? How does a partnership move from idea stage to execution stage, in a way that is beneficial to all parties involved? What factors increase the likelihood of a successful partnership?

 

Fintech in Healthcare: Introduction

Fintech is basically an intersection of financial services and technology. Fintech aims to deliver a seamless user experience both in terms of anytime access to finance and automated payments through the omnipresent mobile phone. Fintech seeks to address opacity, complexity, lack of competition, poor business culture, or high operational costs. It aims to apply disruptive technology to traditional handling of finance, transfers and payments. Further, new technology like blockchain and crypto/virtual currencies have the potential to reduce the cost of and replace transacting in a financial system. Aggressive enforcement of laws, money transmission and other regulations represents an ongoing threat to FinTech companies.

The future of fintech depends on ability to withstand competition from global banks, adaptability by smaller fintech companies and to regulatory framework.

Healthcare can be addressed in several ways. It covers the maintenance, care and restoration of health of body and mind and the process, procedures and methods thereof. Healthcare seeks to prevent, diagnose and treat health issues. Healthcare varies across countries, groups, and individuals and is influenced by social, economic and regulatory conditions. According to the World Health Organization (WHO), a well-functioning healthcare system requires a robust financing mechanism; a well-trained and adequately paid workforce; reliable information on which to base decisions and policies; and well-maintained health facilities and logistics to deliver quality medicines and technologies.

However, the future on healthcare will also be more focussed on the distinctions between healthcare and sickcare, wellness and fitness, patientcare and doctorcare. Healthcare as a matter of opinion is most often 95% doctor care and 5% treatment. So, while regulation of the 5% can cover technology and healthtech, the 95% should be around post-technology and can be a focus for fintech.

 

Of legal and regulatory matters relating to Fintech

Though there are no specific laws to govern fintech, legal application would be in the form of the individual laws themselves i.e., laws relating to finance and technology respectively. Further, laws that affect fintech are – data security and privacy, consumer protection, AML, ATF, insurance and securities. Complications will further arise when there are cross-border transactions.

The other issues that fintech face are sharing and storing of information. Control of information and its flow on personal mobile devices, coupled with sharing over cloud and other common platforms and storage platforms, may require additional security measures by law. Some countries provide approved cloud storage providers. While these do not solve data and security issues, it does mitigate some of them.

Fintech is proceeding at high speeds. As most laws play catch up as well as regulate established practices, regulating fintech is a very difficult process. Besides, it is not efficient to introduce laws and regulations in an industry where disruptive technologies themselves face danger of becoming obsolete or replaced by newer technologies.

 

Of legal and regulatory matters relating to healthcare

Healthcare policies is influenced by social, economic and regulatory conditions of a country and varies across organizations, groups, and individuals. Whether healthcare is a matter of public or private service is also a factor when determining regulations. In many countries, the issue of regulating indigenous or alternative healthcare play a significant role in addition to regulatory treatment relating to homeopathy and allopathy practices. For instance, traditional Chinese medicine, acupuncture, holistic medicine, Ayurveda are examples some of indigenous and accepted healthcare.

There are various agencies that regulate public and private healthcare at different levels. Private organizations also participate in the regulations by providing accreditation, rankings, certification and additional oversight. Areas covered include practitioners and facilities, information flow, legal compliance, safety and other areas in the healthcare industry. Regulations of other regulatory departments are also pertinent such as regulations relating to food and drugs, disease control and prevention and environment.

All areas of healthcare, including physicians, medical directors, healthcare computer technology companies, healthtech, healthcare facilities and pharmaceutical companies, are subject to regulatory review and compliance.

 

Fintech in Healthcare

Areas where fintech in healthcare, public and private, exist or have possibilities are in finance, funding, payments and other monetary issues in healthcare. In developed countries, healthcare will not be provided unless there is “proof of payability”. In developing and underdeveloped countries, “right to life” does not include passage to good healthcare in the Golden Hour.

There are many ways to tie in fintech to healthcare, but this involves active tri-partite participation between Government, healthcare and finance institutions. A tech product that “talks” to these institutions or provides an appropriate platform will improve and provide a more congenial regulatory environment.

Fintech generally covers the following of which many are applicable to healthcare.

  1. Banking infrastructure
  2. Healthcare lending
  3. Consumer lending
  4. Consumer Payments
  5. Crowdfunding for healthcare projects
  6. Equity financing in healthcare projects
  7. Financial healthcare research and data
  8. Financial transaction security in healthcare
  9. Institutional investing in healthcare
  10. International money transfer
  11. Payments backend and infrastructure
  12. Personal finance, insurance in healthcare
  13. Point of sale payments

Some finance services in healthcare cover:

  1. Lending services
  2. Remittance services
  3. Personal finance services
  4. Litigation financing – for doctors and patients alike (medical negligence)
  5. Banking services
  6. Crypto and virtual currencies (substitute funding and alternate payments)

Some payments in healthcare cover:

  1. Out-patients or walk-ins in clinics (daily basis)
  2. In-patients (depending on duration of stay – predictable)
  3. Critical patients (whose duration of stay – unpredictable)
  4. Operative patients (costs – variable)
  5. Wellness clinics (periodic basis)
  6. Geriatric patients (neglected group)
  7. Road traffic patients (identifiable/Good Samaritan based)
  8. Psychiatric patients (may/may not generate income)
  9. Pathology labs (investigations/reports)
  10. Ambulance services (emergency services)
  11. Medicines (delivered at home)
  12. Home-services (post op dressing/health monitoring)

The other related areas for fintech in healthcare are:

  1. Payroll to ancillary staff such as ambulance drivers
  2. Independent healthcare related professionals – medical representatives
  3. Cost monitoring for medical supplies
  4. Third party private healthcare – nurses, hospices, private nursing
  5. Technologies like Blockchain are also potential platforms that bring fintech and healthcare together
  6. Medical litigation financing
  7. Medical negligence cover
  8. Insurance

Some payment services currently operating in healthcare:

  1. Payment gateway providers
  2. POS payments-point of sale-maybe on premise or cloud based
  3. Credit payments
  4. Services running on credit – via banks
  5. Mobile apps
  6. Integrated mobile and browser apps

Of legal and regulatory matters relating to fintech in healthcare

The objective of both fintech and healthcare regulation is to protect the consumer or end user. In most jurisdictions, there is hardly any government agency to integrate any planning, financing, policy making or drafting any legislation relating to fintech and/or healthcare. Though there are no specific laws to govern fintech and healthcare, legal application would be in the form of the individual laws themselves i.e., laws relating to healthcare, finance and technology.

While consideration of legislation and law-making, life and property are given paramount importance. Therefore, most laws and regulations in these areas are stringent. Given that healthcare and fintech are primarily these areas, one can expect higher compliance and due diligence. In addition to specific laws governing healthcare and fintech, combined issues of personal data on finance, health statistics and privacy of individuals need to be considered. Healthcare privacy would also include right to be or not to be treated.

Regulatory approaches will fail to cope with the rapid pace of innovation in fintech and healthcare due to speed of development. It is not possible for regulations to imagine technological advances and introduce anticipatory laws and if regulations are considered with restrictions on a reactionary basis; that would stifle innovation in fintech and healthcare. In the financial crisis of 2008, the introduction of the Dodd Frank Wall street Reform actually galvanized small fintech companies to innovate and disrupt the financial system. It is much harder to regulate these companies. Big banks, in a bid to limit risk and compliance, many times outsourced financial services to these companies who would find ways to skirt regulation and compliance.

Progress in electronic pricing and trading technologies will enable fintech companies to even weave an inextricable web of derivative transactions in healthcare. It is not difficult to image fintech in healthcare bringing in instruments where medical and healthcare loans could be repackaged into instruments such as healthcare backed securities, collateralized debt obligations, credit default swaps and other second order derivative structures. Regulation challenges would be compounded. Tech companies could take advantage as negative fast and first movers to go into financial and healthcare/healthcare areas where there is no existing regulation. Many such companies also carry a very low asset to equity ratio and since they take advantage of the fact that transactions move at high speeds and low costs, they may even close down at the first hint of regulation with no option of recourse left to the user.

 

Public Private Partnership – Regulatory Possibilities

Fintech in healthcare will have different applications in different countries. In an ideal world, there should be universal laws that are common and govern countries universally. But this is not possible under the current geo-political climate. Each country will have a unique approach towards regulating healthcare and fintech. With borderless and seamless deployment of tech products, cross-border regulation is highly complex.

 

Regulatory Sandbox

The objective of a regulatory sandbox is to construct a well-defined space, for a limited duration, within which companies can experiment with innovative tech solutions in a relaxed regulatory environment and with the support of a national regulator. Rather than preventing failure, a regulatory sandbox seeks to provide appropriate protections to limit impact of failure. Regulatory sandbox itself is an innovation of sorts and have been around only for the past few years. UK FCA reports success in meeting its overall objective of reducing time and cost of getting innovative ideas to market.

Regulatory sandboxes may work well in a country such as Singapore where its citizens and corporates comply with the law. Similarly, the regulatory sandbox can be deployed in states or provinces within a country that have a strict adherence or zero tolerance to legal violations. It will also work well with established companies and big players. In fact, some regulatory sandboxes have a minimum financial entry level requirement. However, in many jurisdictions, individuals and smaller companies may prefer the open market. Some companies may explore loopholes that the current regulatory climate provides and exploit them. There is no assurance that these loopholes will be revealed in a sandbox. Some businessmen will operate on the premise that it is easier to seek forgiveness than permission from regulators. Where the regulatory sandbox is intended to be for toddlers to swim around before entering the ocean, the pool itself may be infested with sharks. A regulatory sandbox prima facie appears to appeal more to the regulators who want to analyse and understand a new environment and therefore prepare regulations and paperwork. The sandbox itself may not provide a live environment or appropriate market size to test the product. Almost like applying what an individual studied in school or college to real life. Plus, there is the perceived danger of a company believing it is on a virtual watchlist if it fails in the sandbox. Further, even if the company passes the sandbox, it may decide against deploying the product in that country.

Having said all that, the advantages of a regulatory sandbox are – equity financing and higher probability of receiving investments due to perceived regulatory compliance, speed to market, more reliable financial innovation to the consumer, understanding a local regulatory climate as well as the process – its ease or difficulty – in obtaining a licence or approval.

 

Self-regulation

Self-regulation by fintech companies in healthcare may be considered as an alternative. However, self-regulation must contain a caveat in that the regulators’ approval need to be obtained before deployment. The difference is operating in a live and an international market as well. Self-regulation can commence with intent of compliance by setting out internal policies, rules and regulations. Government can provide guidelines and principles. This collaboration can bring about corporate policies which may contain:

  • Management and personnel management, training, systems and controls
  • Scope of direct and indirect liability of product and outcomes
  • PR, sales and marketing processes; representations made
  • Standard terms and conditions
  • Statutory and regulatory compliance
  • Systems and control processes periodic review

Consequences of non-regulatory compliance would include regular regulatory scrutiny, criminal penalties and civil sanctions, public announcements.

Many fintech entrepreneurs are seasoned. By not limiting functions of a fintech company within a “sandbox” and without the fear of big brother watching directly, fintech companies can be allowed freedom and innovation. By limiting fast and immediate exposure to the market by the aforementioned collaboration, the regulators can anticipate potential problems with the fintech product. The friendliness of the regulator can be displayed in the approach to the self-regulation.

Private public interaction and collaboration should further focus on the following:

  • Help craft consistent, thoughtful regulation for fair use of products
  • Reduce inconsistencies in the scope and application of local regulations (state, province)
  • Standardization of regulatory and supervisory expectations
  • Advancing policy initiatives
  • Coordination between regulators themselves.
…and last but not least, a mandatory selfie with Astrid S. Tuminez, Regional Director, Corporate, External, and Legal Affairs at Microsoft Southeast Asia, Wayne Chia from Asia P3 Hub and Azmul Haque, Managing Director of Collyer Law!

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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8 Points to consider for an IPO

8 Points to consider for an IPO

In the previous parts, for Preparing your Company for a Liquidity Event, we covered:

For the last installment of the series, we’d like to touch on a little on the supposed “holy grail” of companies – the Initial Public Offering (IPO). It is the dream of many entrepreneurs and business owners to bring their company public whether it is the ASX in Australia, the London Stock Exchange, the Hang Seng, the American NASDAQ, NYSE or the Shanghai A.

However, it is one of 2iB Partner’s common mention that IPO is not the end, it is the start of the new beginning and a new level of maturity, reporting and many other things. Liquidity events require special care in the case of IPOs and listed companies.

Here are 8 IPO points out of a long list that people need to consider:

 

8 IPO Points

 

  1. Due Diligence:
  2. Internal due diligence by in-house counsel or project manager to ensure the process is clearly defined with relevant reporting requirements built in. The DD should also sanitize any outstanding issues.
  3.  
    1. Management Appointment or Change:

    While the MD, CEO, Chairman may remain the same, s/he should ensure capable professionals in finance, law, tax and operations on the board to implement smooth transactions, particularly CFOs. Applies more so in cross-border cases. Some Exchanges may have this as a mandatory requirement.

    1. External:

    Ensure appropriate external service providers such as investment bankers, brokers, underwriters, lead managers, auditors, depositories, certified advisers.

    1. Regulatory:

    Depending upon the extent of shares traded, laws of different countries will need to be adhered to. This not only covers compliance related to trading, but anti-trust (anti-monopoly), employment, local authorities and tax.

    1. Insider Trading & Market Abuse:

    The silver bullet is disclosure. However, the subject matter and timing of disclosure will require the involvement of certified adviser or notified agent or sponsor or the exchange itself.

    1. Valuation:

    If more than one country is involved in any of the liquidity events, the valuation itself and corresponding taxation, will undergo change depending upon that country’s laws.

    1. PR:

    PR agencies that specialize in announcements to the public. Care has to be ensured that announcements need to be in consonance with legal disclosure requirements.

    1. In-house counsel:

    In-house counsel to coordinate with all internal and external compliances and more importantly in coordinating with different law firms, PR agencies, investment bankers, underwriters, certified advisers and other legal authorities as there will be international elements in the liquidity events apart from controlling costs and preparing documentation.

     

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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read more
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