King & Wood Mallesons Shanghai capital markets partner Stanley Cha has left the firm amid accusations that he was illegally practising PRC law.
He is being investigated by the Beijing Bureau of Justice after being accused of not disclosing the fact that he is a US rather than Chinese citizen. The law only permits Chinese nationals to qualify as PRC lawyers and practise PRC law.
It was first reported by Chinese publication First Financial Daily in January this year that Cha, who at the time served as an independent director of Chinese company Beijing Enlight Media, had resigned from that position after allegations surfaced that he had hidden his real nationality in the company’s disclosure documents.
Beijing Enlight Media went public on the Shenzhen Stock Exchange in August 2011. In its prospectus, information about the company’s independent directors stated that Cha was a Chinese citizen without permanent residence in any other country and was a partner at King & Wood (now King & Wood Mallesons) in Shanghai.
Cha joined King & Wood from Shanghai firm Llinks in 2006. Prior to Llinks, Cha practised for four years at a couple of New York firms. Before that, he was the general counsel of Chinese internet company Sohu.com, which listed on Nasdaq in 2000. He is dual-qualified in the PRC and New York.
According to local media reports Cha took US citizenship in September 2001. The PRC does not recognise dual nationality for any Chinese national and under the country’s Nationality Law any Chinese national who has taken foreign citizenship of their own free will automatically loses their Chinese nationality.
On 20 March, the Beijing Bureau of Justice, the regulatory body of the capital’s legal profession, initiated an investigation in Cha’s case. The investigation process is currently ongoing. It is understood that Cha’s profile was taken off King & Wood’s website in mid-April.
There is no precedent in China for such cases involving lawyers, but it is possible that Cha could be charged with fraud.
Since taking US citizenship in 2001, Cha has issued a significant number of legal opinions and advised on a large number of Chinese companies’ domestic IPOs and listings. If he is convicted of fraud, it would mean these documents would become invalid, although is unclear how the Chinese government would remedy such a situation.