Study On The Legal Regulations Over Offshore Companies Cross-boarder M & A

Offshore Company is a special purpose vehicle which is set up at a given offshore land by investors outside the offshore territory in accordance with the special company law. The offshore company can operate anywhere in the world except the offshore territory.Statistics from Bank for International Settlement (BIS) , IMF and OECD shows that around USD 5-7 trillion are deposited in the offshore territories. Some experts estimate around USD 7-12 trillion is controlled by offshore companies. The reason why investors have keen interest in setting up offshore companies in the offshore territories lies in the facts that offshore companies have unparalleled advantages, such as no or low taxes, no foreign exchange control and confidentiality of the investors'information. However, offshore companies have brought serious negative effects to some countries and districts. Take tax as an example, the Tax Justice Networks estimate that some 250 billion USD are losing each year globally.As to China, an increasing number of offshore companies are being set up at offshore territories. Some Chinese investors first set up an offshore company then return to China to set up a wholly foreign-owned enterprise or merger and acquire a domestic company, resulting in capital flight on one hand, and domestic assets being controlled by a foreigner on the other hand and tax losses as well. Therefore, it is of vital important for China to regulate the offshore companies comprehensively.In this essay, the author first introduces the basic theory of the offshore company, including the history, characteristics, positive and negative effects of offshore companies. Then the author comes to the fundamental ways of merger and acquisition by offshore companies. And following that, the author gives introduction to the legal regulations carried out by some international organization and some major countries, hoping those legal regulations could be of some help to China. This article also deals with China's legal measures to regulate cross-border M&A by offshore companies from the perspectives of anti-monopoly, investing, financing and taxation, pointing out the shortcomings of Chinese legal regulations on the said issue. Finally, the author comes up with some suggestions to improve the legal regulations on offshore companies'cross-border M&A.