Learning and Sharing on the "Three Views and Four Steps" of Contract Drafting and Review

Contract review is an essential skill for every lawyer, so what perspective should be taken to handle obtaining a contract? What elements should be considered during the audit? On the afternoon of August 2, 2024, during the Denghu Classroom, my legal assistant Liang Shuying will share with you the learning and sharing of the 'Three Views and Four Steps' for contract drafting and review.

Introduction to 'Three Views and Four Steps'

The 'Three Views and Four Steps' refer to macro, meso, and micro perspectives. To examine the feasibility of the transaction structure of a contract from a macro perspective, we can start from four aspects: contract type, contract subject, contract subject, and contract procedure; At the meso level, it is necessary to examine whether the form and application of this contract are appropriate. For example, in the early stage of the transaction, if a formal contract cannot be signed, it should be changed to a letter of intent document to clearly define the liability for breach of contract; At the micro level, the specific terms of this contract can be examined, starting from the three sections of the contract header, transaction terms, and supporting terms, with a special focus on the extension of rights and obligations and related breach of contract liability clauses.

The four steps refer to: communicating needs, analyzing values, reviewing, and submitting. Firstly, it is necessary to communicate with the client to understand their text or legal opinion requirements for drafting the contract. Then, based on the 'Three Principles Knowledge System', the specific content of the contract should be reviewed, and after the review is completed, it should be reviewed and finally submitted to the client.

The Application of 'Three Views and Four Steps'

Scenario assumption

Customer: Please help review this equity holding agreement.

Step 1: Communicate requirements

Before conducting formal contract review, communicate with the client in advance. It is recommended that the client first consider whether the equity holding is necessary and explain the risks to the parties involved; If it is indeed necessary to carry out equity proxy holding, we should try our best to alert customers to risks and choose the most favorable contract type and terms during the subsequent contract review process.

Step 2: Analysis of Three Perspectives

After clarifying the customer's requirements, the contract review work can begin.

When conducting a macro level transaction structure review, it is important to focus on analyzing the subject qualifications of this equity proxy agreement: whether the nominal shareholder has shareholder status, and whether the equity proxy complies with the provisions of the Company Law and the company's articles of association.

When conducting a mid-level contract form review, it is necessary to select a formal proxy agreement for the client, rather than an intentional agreement.

When conducting a micro level review of contract terms, it is important to pay attention to the following aspects:

1. Clearly state that the actual investor of the equity held on behalf is the nominee. The agreement should clearly state that the previously paid capital and subsequent capital (such as repaying loans) are actually contributed by the nominee.

2. Clearly define the rights and obligations of the proxy holder, and specify the corresponding breach of contract responsibilities.

Step 3: Review

Review the modified parts of the above agreement to ensure that the contract fully covers the customer's needs.

Step 4: Submit

It is suggested that in the process of contract drafting and review in the future, we fully utilize the 'Three Views and Four Steps' to improve the efficiency of our contract drafting and review. With a systematic thinking approach, we can better avoid legal risks for customers and safeguard their legitimate rights and interests.

After listening to the sharing of Lawyer Assistant Liang Shuying, every colleague felt that they had benefited greatly. Thank you very much for the sharing from Lawyer Assistant Liang Shuying today. We look forward to learning more useful knowledge through Denghu Classroom!