15.07.10 02:06 Age: 9 yrs
MOFCOM Issues New Provisional Regulations on Divestitures
Beijing, China - July 15, 2010
China’s Ministry of Commerce (MOFCOM) recently released new regulations governing the divestiture of assets. Divestiture is often necessary in order to comply with a merger approval. Though the new regulations are deemed “provisional” they will be in effect until MOFCOM decides to revise them, which could be a period of several years.
The bulk of the regulations concern the relationships between the business divesting assets, MOFCOM, and intermediate trustees. Trustees must act to find buyers for assets that must be divested if the divestiture obligators cannot find appropriate buyers within the time period specified by MOFCOM; furthermore, trustees must monitor and report to MOFCOM at various points in the divestiture process.
The new regulations require that divestiture obligators submit their candidates to act as monitoring trustees to MOFCOM at the beginning of the divestiture process so that they can be reviewed – MOFCOM will assure that the proposed trustees are independent and do not have interests in the divestiture. Trustees are also required to sign entrust agreements with divestiture obligators in order to clarify the parties’ respective responsibilities, and ensure that the trustee is compensated for its role, but not in a way that would violate the independence of its decision-making.
Trustees must abide by due diligence and independence, reporting to MOFCOM with monitoring reports and assessment reports, and must also coordinate the resolution of all potential disputes between buyers and divestiture obligators. The trustees cannot disclose any information to the divestiture obligator in the course of its duties without first seeking MOFCOM approval.
Finally, the new regulations also put in place requirements for the independence of the divestiture business buyer, including having no substantial interest to the business operators involved in the acquisition process, and having no existing businesses that would raise monopoly concerns when combined with the new business. MOFCOM also retains final control over reviewing and approving the divestment, though the time that it takes to review a proposed divestment shall not count against the deadline in the divestiture time frame.