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Acquisition by Agreements
Acquisition of Assets
M&A Vehicles 16 0.0134 65 0.8710
Land Use 35 0.0313 45 1.4085
M&A Defense 12 0.0107 80 0.8560
M&A disputes and its Settlement 31 0.0277 70 1.9390
Assessment Result of Current Chinese M&A Legal Environment 59.9531
Preliminary Conclusion
As shown above, China offers an average M&A legal environment currently, which means M&A is practicable in the nation. But difficulties still exist in the M&A processes, especially in the valuation, price fixation, payment, redundant staff arrangement and state-owned properties management. The related laws and regulations are still vague or even absent, which makes the parties, especially the foreign ones, feel confused in many cases
Section Two
II. Newly Launched Anti-monopoly Rules and its Improvement
Anti-monopoly Rules on Pre-merger Reporting
Most governments demand that large-scale mergers and acquisitions be reported to the relevant antitrust authorities before being accomplished to determine whether the transactions will substantially lessen competition in the relevant markets or tend to create monopoly. In the United States, the relevant “pre-merger notification” legislation is known as the Hart-Scott-Rodino (H-S-R) filing.
The Legislative Bureau of the State Council set up an Antitrust Law working group in August 1987, but the PRC Antitrust Law is far from being promulgated mainly because of the disagreement over the governmental agency. Despite the absence of an Anti-monopoly Law, China recently launched its own "H-S-R Rules" (the "rules"). The Rules appeared as Articles 19 – 23 of the Provisional Regulations on Foreign Investors Acquiring Domestic Enterprises ("Regulations"), which were promulgated on March 7, 2003 and came into effect as of April 12, 2003. The Regulations is co-issued by the MOFTEC, SAT, SAIC, and SAFE.
The principal purpose of the Regulations is to allow put the acquisition of domestic companies follow the same approval process as that for joint ventures and other foreign investment projects.
Under the Rules, a foreign investor who wishes to engage in M&A in China, must report the proposed transaction which meets the stipulated thresholds to MOFTEC and SAIC for approval. The threshold criteria include:
• Either party to the Transaction has an annual sales volume of more than RMB1.5 billion in the China market in the current year;
• The foreign investor has acquired more than 10 enterprises in China within the past year, which engage in the same trade;
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