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Doing Buisness in China - Loose-leaf
Doing Buisness in China - Electronic
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§ 5.3.01 Introduction
This chapter will discuss the regulatory regime and legal framework
affecting foreign-related mergers and acquisitions (“M&A”)
transactions in China. The legal regime governing M&A transactions
in China is still developing and can be a bit confusing. There is no
single comprehensive body of rules to which foreign investors
interested in acquiring Chinese businesses or companies may refer.
Depending on the nature of the entity used by the foreign investor to
make the acquisition and the nature of the target company, different
rules and regulations apply and different regulators are involved. As a
result, the procedures that should be followed to complete the
transaction may vary. Nevertheless, under the current legal regime,
foreign investors may acquire the equity or assets of a domestic
company (including State-owned enterprises (“SOEs”) and privately
owned companies), or an existing foreign-invested enterprise (“FIE”)
either through an overseas vehicle or an existing FIE.
For example, if the target company is listed in China, foreign
investors may either buy unlisted shares of the target or listed B
shares.1 In addition, China has begun to open it’s A share market to
foreign investors by allowing qualified foreign institutional investors
(“QFII”) directly to acquire Renminbi-denominated shares. This
permits foreign investors to acquire A shares indirectly by buying
investment products offered by QFIIs.2
When China reopened to foreign investment in the 1980s, almost all
such investment came in the form of joint ventures that established
greenfield infrastructure projects or manufacturing facilities. With the
passage of time, foreign investors were permitted to invest in existing
businesses and assets held by domestic companies, including Stateowned
enterprises. A typical structure would involve the foreign
investor setting up a wholly foreign-owned enterprise (“WFOE”) or a
joint venture (“JV”), though which the foreign investor would merge
the target entity or acquire desired assets of the Chinese business. On
March 7, 2003, with the frequency and amount of foreign investor
acquiring domestic businesses increasing, the Chinese government first
Jingzhou Tao is a partner with Jones Day in Beijing. Mr. Tao received his LLB from Peking University, a DEA degree from the Université de Paris 1 (Panthéon-Sorbonne), and is admitted to practice in both the People’s Republic of China and Paris. He specializes in merger and acquisition and international arbitration. He is a Member of ICC Court of International Arbitration and of LCIA. He sits on the Advisory Board of the China International Economic and Trade Arbitration Commission (“CIETAC”). Mr. Tao is also an adjunct professor of law at Peking University.
Jane Yang is an associate with Jones Day in Beijing. Ms. Yang received her J.D. from Boston University School of Law and is admitted in New York. She regularly advises multinational companies on M&A, foreign direct investment, general corporate, real estate, employment, and tax-related matters.
