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Mergers & Acquistions in China

Last Updated: Jan. 3, 2012

Information provided below will guide you to:

 

Documents Required & Registration Procedures of Mergers & Acquistions A business in China

Condition(s):

  • For the industries where Wholly Foreign Owned Enterprise (WFOE) is not permitted 100% own the business to operate in China by thepdf “Catalog of Industries for the Guidance of Foreign Investment”, the M&A should not lead to the consequence of the foreign investor’s holding 100% of the equity of the business in China;
  • for the industries where it is required for a Chinese party to control or relatively control the shares, the Chinese party should still control or relatively control the shares of the business after M&A been done;
  • For the industries where foreign investors are prohibited from operation, no foreign investor could have M&A in this indurtry
  • For M&A usually there are 2 wasy of acquistion a business in China: Equity acquisition; Asset acquisition.

Documents Required for equity acquisition

  • Foreign Investor: 2x Certificate of Incorporations or Equivalent document certified by Chinese embassy or Chinese consulate overseas (2 original) [ SampleCHINA: UK , US, HK,AUS, RUS, SGP, GER, SWE, ISL etc. ] For individual investor: The passport copy of Investors need be certified by Chinese embassy or consulate.(2 original) Double check with us if individual investor is in China currently.
  • Investor: 2x original Bank Reference Letters from investor’s bank to declare a good standing [bank 34KB Sample ]
  • Articles of Association of the acquired Chinese company (Copy)
  • Business license of the acquired Chinese company (Copy)
  • All Share holders' ID card copy of the acquired Chinese company (Copy)
  • The latest annual audit report copy of the acquired Chinese company which provided by a local Certified Public Accountant (CPA)
  • Written report of assets evaluation by Local asset assessment institution (PTC will assistant this, the Chinese version of the sample report:CHINA433K Sample)
  • The proposal on the settlement of local employees after equity acquisition ;A (PTC will assistant this)
  • Board members' passport copy or I.D card copy of the proposed company in China, appointment letters and signed by all board members.
  • For equity acquisition: Board Resolution of the Chinese company on approval of equity acquisition by foreign investor. For assets acquisiton: Board Resolution of the Chinese company on approval of selling the assets.
  • For Chinese State-owned company, a letter of approval from local State-owned Assets Supervision and Administration Commission (SASAC) or equivalent authority is required.
  • Foreign investors, the acquired Chinese company, creditor etc. should settle an agreement on handling of credits and debts of acquired Chinese company (if applicable)
  • Due Diligence by Foreign Investor's lawyer (if applicable)
  • Written report of assets evaluation by Local asset assessment institution
  • Equity Transfer Arrangement agreement

 

Pre-registration of M&A in China:

  • Memorandum of Understanding (MOU) by Foreign Investor and the Chinese company
  • Due Diligence by Foreign Investor's lawyer (if applicable)
  • Written report of assets evaluation by Local asset assessment institution
  • Equity Transfer agreement by both parties

 

Procedures of Equity Acquisition after Pre-registration of M&A

Foreign investors are not allowed to directly submit the application documents of M&A application to the relevant authority in China. PTC could act as a sponsor to submit the applications as following:

 

  • Submit for Written report of assets evaluation by Local asset assessment institution
  • Prepare application forms of M&A a business.
  • Certificate of Approval by Ministry Of Commerce or Foreign Economical Cooperation Bureau
  • Apply for new Business License with SAIC
  • New Legal Representative stamp by Public Security Bureau (if applicable)
  • Registration and Approval with State Administration of Foreign Exchange (SAFE)
  • Consideration Payment. [Wiki: Definition]
  • Change of Organization Code License by Technical Supervision Bureau (TSB)
  • Change of Tax Certificate from local Tax Bureau
  • Change Information of Foreign Currency and RMB bank account (if applicable)

 

Procedures of Asset Acquisition after Pre-registration of M&A

Establishing a New WFOE to control over the acquired assets in China as soon as the written report of assets evaluation been approved.

  • Name registration with State Administration of Industry and Commerce (SAIC)
  • Certificate of Approval by Ministry Of Commerce or Foreign Economical Cooperation Bureau
  • Apply for Business License with SAIC
  • Chops made by Public Security Bureau (PSB)
  • Organization Code License by Technical Supervision Bureau (TSB)
  • Tax Certificate by Tax Bureau
  • Registration and Approval with State Administration of Foreign Exchange (SAFE)
  • Open Foreign Currency and RMB bank account
  • Inject Capital from investor’s overseas bank account
  • Capital Verification Report by Certified Public Accountant (CPA)
  • Applying for Permanent Business License with SAIC
  • Financial certificate Registration
  • Statistics license Registration

 

More information about Mergers & Acquisitions:

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