Company mergers and acquisitions in China are controlled by law and foreign investors who want to buy or merge with a Chinese company must observe the general principles for these business actions. The regulations for this action are in line with the Chinese Company Law and the laws for foreign investments in China. Foreign investors who want to merge with or acquire domestic Chinese companies must do so lawfully and in good faith, not in excess and not for the purpose of reducing or controlling the competition. Our law firm in China can help you observe the rules for company mergers or make a secure company purchase in the country.
Rules for corporate mergers and acquisitions in China
The Rules on Acquisition and Merger of Domestic Enterprises by Foreign Investors represent the guideline and general principles for performing any corporate fusions in China. Mergers and acquisitions are a way for foreign companies to enter the Chinese market if opening a company is not an option or a desired course of action. Companies that agree to mergers are benefiting from this process and use it as a manner of financing their operations.
The manner in which the newly formed company is treated depends on the amount of financial contribution of the foreign investor in the registered capital of that company: the enterprise will be treated as a foreign-invested one after the merger only if the capital invested by the foreign party is more than 25 percent.
We have prepared a video about the rules standing at the base of mergers and acquisitions in China, and we invite you to watch:
Special approvals for mergers and acquisitions in China
The foreign-invested companies that are formed after a merger or acquisition in China can be subject to special approval from the Ministry of Commerce if they activate in certain business fields. In these cases, the investor must submit an application for approval to the Ministry. Once the investor merged or acquired a corporation, agreements can be reached between the legal entities regarding the treatment of creditors and employees in China.
Our team of lawyers in China can help you obtain the necessary approvals for acquiring State Owned Enterprises. Likewise, we can help you throughout the merging process between two Wholly Foreign-Owned Enterprises in China.