| Like a smart businessman who should minimize costs and maximize profits, a smart attorney should minimize the risks whilst maximizing the interests of his clients. As an attorney, his major business is to manage his clients'risk in a professional and legal manner. This article, based on China's current conditions regarding the mergers and acquisitions of China's unlisted companies by foreign investor, is written from the viewpoint of foreign investors, and analyzes various measures required to control the legal risks of foreign investment in China.This dissertation comprises four chapters,totaling 30,000 words. It consists of three parts: the introduction, the principle part and the conclusion.The introduction expounds on the aim and intention of this dissertation.The principle part is the leading part of this dissertation. This part will begin with a brief introduction to the current Chinese M&A market. As three parties shall involve in a M&A deal. This section is divided into three chapters accordingly. Each chapter will expand on a party'influences on a M&A deal and analyze the reasons for, and the sources of the legal risks thereof and suggest measures to control such risks.Chapter One broadly introduces the background of M&As of unlisted Chinese companies by foreign investors recently. It focuses on some important definitions, the current M&A situation and the market characters. It then implies that risks will come together with opportunities in foreign capital's investment in China's M&A market. Chapter Two focuses on government supervision. It mainly introduces legal risks arising out of the existing Chinese legal framework regarding foreign investors'M&As upon unlisted companies, the complicated supervising procedure as well as the national economic security concerns. Industry admission, national economic security, antimonopoly and special supervision of SOE, amongst other things are just some of the risks. Based on the above mentioned analysis, this chapter provides some suggestions about how to control such risks. It is recommended that foreign investors should tactically adjust themselves to the reality and follow the trends, thus securing the golden investment opportunity in China, and also, strategically, they should fully understand the Chinese legal system and maintain a good working relationship with the Chinese government.Chapter Three focuses on the target companies. It points out that information asymmetry and noncompliance in corporate management are the main reasons for the outbreak of risks where a target company is concerned. Meanwhile, the function of a DD report is to disclose the legal risk existing in the target company. This chapter shall therefore start with an explanation of the contents involved in a DD report, in order to demonstrate the legal risks in a target company. At the end of this chapter, the article indicates that a useful way to reduce the risks arising out of the target companies is to select target companies tactically, conduct due diligence thoroughly and use preventive-risk contract clauses.Chapter Four is targeted at the investors. It introduces the qualification requirements for foreign investors imposed by the Chinese government and the different operating models of different foreign investors. These qualification requirements give rise to risks when foreign investors try to take over unlisted Chinese companies. These risks cover the qualification of capacity as a legal person and exit routes. In concluding, the article indicates that foreign investors should be familiar with Chinese law and policy, and make flexible portfolios of exit routes so as to control their risks.
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