M & A
Could you please generally introduce the new M&A rules?
The new M&A regulations are fairly short, containing only twelve articles, and still leave a lot of issues unresolved. For the most part, the rules set out the general scope of review, timetables, application documents, and potential penalties. At first glance, this appears to be fairly standard and reminds US of similar language from the Anti-monopoly Law and 2006 M&A Law pertaining to MOFCOM review of transactions.
What is what a VIE structure (境内企业)?
The structure is relatively simple. The core business in China, in which foreign firms are not allowed to operate subsidiaries, is a domestically-owned company, owned by one or more Chinese nationals. That entity holds the valuable operational licenses, for example a license to operate an online game. This domestic firm is the VIE and treated as part of the overall business.
What is the purpose of publishing such a new rule?
The new regulation has solved a major loophole in the previous rules by noting that it is not allowed to use such tricks and any other means to avoid the review
When did China issue the updated New Inbound M& A rules?
The latest rules are issued on August 25, 2011.
When will the rule become effective?
The updated New Inbound M& A rules will become effective on September 1, 2011
What kind of Chinese authorities have the authority to review the procedure?
The Ministry of Commerce (MOFCOM) is the appointed Chinese authorities have the authority to review the procedure