A Study On The Legal Problems Of Cross-Jurisdiction Mergers And Acquisitions Of Chinese Enterprises Against A Background Of Economic Globolisation

In the past century,enterprises mergers and acquisitions(M & A)have developed from domestic mergers and acquisitions to cross-jurisdictional M & A,and from developed countries to worldwide expansion.As pointed out by the United Nation Conference on Trade and Development(UNCTD),cross-jurisdictional M &A has become the major mode of multinational direct investment.It is increasingly the strategy for countries to strengthen their international competitiveness,and to enhance the operation of multi-national companies.Although it was not until the 90s in the 20^th century that cross-jurisdictional M & A,as a new form of both inbound and outbound investment,was introduced to China,it had since developed rapidly.M & A has become an important trend of foreign direct investment into China.Chinese enterprises engaging in outbound M & A are also in rapid increase.For China,cross-jurisdictional M & A is still a novel matter.Lack of management experience,lack of correct, adequate understanding and appraisal of both the positive and negative impacts of M & A involving foreign capital had bred the 'foreign investment threat theory'.This is not conducive to the healthy and orderly development of M & A involving foreign capital in China.The growth momentum of outbound M & A by Chinese enterprises is also not satisfactory due to weak government support.It is therefore imperative to embark on in-depth research on the issues relating to cross-jurisdiction M & A by Chinese enterprises.This paper strives to identify the practical model to regulate cross-border M & A for reference by the Chinese government for its effective implementation.This paper adopts a research method that combines theoretical analysis and practical analysis.While applying specific theoretical analysis to cross-border M & A behavior,practical analysis is also applied to investigation material,with matching data and tables.This paper also adopts case studies by analyzing some typical cases.To provide workable experience in governmental regulation of cross-border M & A,this paper compares different regulatory theories and systems in Western countries.This paper starts with the concepts of M & A,defining cross-jurisdiction M & A,and confirms the research framework.It is argued that China's economic development benefits from economic globalization.To sustain the development,China should further immerse in the economic globalization process.As cross-border M & A has become the major mode of international direct investment, China's economic strategy for immersing into economic globalization should combine 'attracting incoming investment' and 'encouraging outgoing investment'.In the study of legal framework involving cross-jurisdictional M & A,it is apparent that the negative effect of cross-jurisdiction M & A does exist,mainly as anti-competition impact.Cross-jurisdiction M & A involves two levels of legal regulations:both domestic and international.China has to step up its domestic regulation of cross-jurisdiction M & A to ensure the healthy and orderly development of cross-border M & A while China participates into economic globalization.As regards mergers and acquisitions of Chinese enterprises involving foreign capital,I reviewed its development,then analyzed its impact on China's foreign investment policy.Existing regulations on M & A involving foreign capital is clearly inadequate:the Anti-monopoly law is still not in operation,and lacks implementation details.The legal framework involves mainly broad policy and principles.Different legal regulations are inconsistent with each other,and the contents fragmented.It is suggested that by learning from the experience of foreign countries,China builds up a comprehensive legal system for regulating M & A involving foreign capital with anti-monopoly law at the core:with "Rules on enterprises M & A" as the foundation,at the centre includes companies law, securities law,contract law and anti-monopoly law.As an integrated whole,relevant provisions of social security law,labour law and even environmental protection law should be integrated.Administrative rules and systems as well as judicial explanation in relation to M & A involving foreign investments should also be part of the M &A legal framework.To perfect existing legal framework,the following proposals are advanced:1.To protect national economic security,on the basis of 'provisional regulations for the guidance of the direction of foreign investments' and 'Guidance catalogue for foreign investment industries',legislate on the industry types of prohibited,restricted and encouraged M & A involving foreign capital,and provide for the shareholding proportion of foreign investments in specified industries;2.On the basis of national security examination system under the Anti-monopoly law,to further improve the examination system of M & A involving foreign investment,including limited automatic approval system,approval procedure to be limited to those restricted or prohibited industries,or those projects with foreign investment shareholdings with 50%or more.The examination system should be substantive;3.Before the implementation of the 'Anti-monopoly law' on 1^st August 2008,to devise detailed and practicable implementation details;4.Amend 'Companies Law'to perfect protection of creditors'rights; 5.To improve the law relating to offers for M & A,specify the application of contractual M & A,strengthen provisions for disclosure requirements,provide the right for counter-acquisitions by target company by making relevant amendments of the 'Securities law',and to improve the protection of the rights of minority shareholders;6.To clarify the legal status of the Management and Supervisory Committee of State-owned assets,to establish authoritative Assets Valuation Organizations,to formulate 'Assets Valuation Standards',to improve and perfect the legal system of state-owned assets evaluation,to prevent the dissipation of state-owned assets;7.To perfect the law relating to protection of labour rights.As regards overseas M & A by Chinese enterprises,I had a review of its history,and concluded that 'outbound investment' by Chinese enterprises is the inevitable option for China's economic development. 'Outbound investment' is a way for Chinese enterprises to become bigger and stronger.Overseas M & A is a better option for the 'outbound investment' of Chinese enterprises.I analyzed the restraint factors of overseas M & A by Chinese enterprises,the inadequacy of the legislation on overseas M & A by Chinese enterprises.By learning from experience in foreign countries,I am of the opinion that to encourage 'outbound investment' by Chinese enterprises,apart from the self-improvement of the enterprises themselves,the Chinese government should provide good external environment for overseas M & A by Chinese enterprises,including support and protection by way of legal system that embraces supervisory system,promotion system and protection system:to promulgate the'Supervision Law of Overseas Investment',amend the'Method of foreign exchange management for overseas investment',including relaxation of foreign exchange control, to devise and promulgate the Guidance Catalogue on industries and regions for outbound investments,gradually opening up channels for financing outbound investment,perfecting international tax system such as avoidance of double taxation,establishing information service system for external investment,providing technological support to promote external investment,strengthen international bi-lateral and multi-lateral investment treaties,establish external investment insurance system,establish external investment protection system.In sum,this paper aims to answer three levels of questions in relation to cross-jurisdiction M & A by Chinese enterprises against a background of economic globalization:1.Should China involve in cross-jurisdiction M & A? Why?2.Why should cross-jurisdictional M & A be regulated? What are the basis of legal regulation?3.How should China regulate cross-jurisdictional M & A through its legal framework to ensure its healthy and orderly development?...