U.S. Executive Order on Investment in Companies Linked to the Chinese Military - Key Takeaways and Considerations for DCM Transactions

On 12 November 2020, President Trump issued a new Executive Order titled “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies” (the “Executive Order”). In this client note, we focus on the key takeaways and considerations for debt capital markets (“DCM”) transactions including answering the following questions:  

1. What is prohibited under the Executive Order?  
2. What is a Communist Chinese military company (“CCMC”)?  
3. Are subsidiaries or affiliates of the 31 CCMCs automatically caught by the Executive Order?  
4. Are bonds in DCM transactions considered to be restricted securities?  
5. What is a U.S. person? Does the Executive Order cover both offshore and onshore U.S. investors? What about third-party funds run by U.S. persons?
6. What impact does the Executive Order have on DCM transactions? In particular, how does it impact:  

>  representations, warranties and undertakings in subscription agreements?  

>  events of default under the bond terms and conditions?  

>  due diligence and disclosure?  

>  continuing disclosure obligations?  

For more information on the general background to, and analysis of, the Executive Order, please click here.