Legal Issues For Foreign Acquisitions Of Domestic Enterprises

Mergers and acquisitions of domestic enterprises by foreign investors is a conduct of foreign investors to substantially gain the rights and interests of domestic enterprises according to Chinese law. It has three basic characters: first, the side to gain domestic enterprises must be foreign investors; second, the side to be gained by foreign investors must be domestic enterprises; third, the deal of mergers and acquisitions should be in accordance with Chinese law. Since 1990s, more and more transnational companies have entered china's market ,especially from the year 2003, they have begun to merge and consolidate china's main equipment-making enterprises related to the industry of electricity,engineering machinery,gas engine and so on . This has begot worries of some relevant ministries and people. At the beginning of 2006, the program of merger and acquisition of china's biggest equipment-making company XuGong Construction Machinery Group by Carlyle Group of US was plunged in trouble, because the ministry of commerce didn't want Carlyle to be the biggest stake holder. Carlyle's frustration meant Chinese relevant authorities had treated the side effect of mergers and acquisitions by foreign investors sternly. China's related policies may and will be adjusted. On August eighth 2006, the ministry of commerce issued by its tenth order of 2006. This meant that china's policies had adjusted. This adjusting does not indicate that china has retreated to the track of protectionism, but shows the challenges China face on the path of reform and opening-up: how to perform well between opening-up and protectionism and how to keep the balance between respecting the rule of market-oriented economy and maintaining the country's economic security. So my paper will analyze and discuss these hot issues among china's economy and outline some constructive suggestions on this.Mergers and acquisitions by foreign investors are "double-edge swords", and have some side effects on domestic market, so we should act to use its positive effects and avoid side effects. In this paper, I dwell a lot on the side effects that may cause negative impacts in China's economy and the main existing problems of China's merger and acquisition legal system. This paper also introduce some good experience and practice of mergers and acquisitions in developed countries and I absorbed this in my last chapter in order to make our China's legal system on mergers and acquisitions by foreign investors more scientific, more perfect and more practicable. Abide by this thought, my paper's frame are as follows:First, an outline of mergers and acquisitions by foreign investors. On this part, I analyzed and discussed the definition,legal characters,mold,effect of mergers and acquisitions by foreign investors. This can give my readers a macro-understanding of mergers and acquisitions.Secondly, laws and regulations on mergers and acquisitions of major international economic organizations and countries. On this part, I comprehensively introduced the basic principles of WTO, the related provisions on mergers and acquisitions of European Union, the United States and Japan. I made a sum-up of these regulations and gave a lot of suggestions to that of China.Thirdly, the cause and status quo of our legislation on mergers and acquisitions by foreign investors and the major existing problems of our legal system about mergers and acquisitions by foreign investors.Fourthly, suggestions to perfect our legal system about mergers and acquisitions by foreign investors. My suggestions are as follows: establish the basic principles of the laws of mergers and acquisitions by foreign investors; adjust the industry policies on mergers and acquisitions by foreign investors; unify the legislation of mergers and acquisitions by foreign investors and enact a basic law on mergers and acquisitions that is suitable to both domestic and foreign investors; amendments and perfections of related regulations of ; enact anti-monopoly law, establish anti-monopoly mechanism on mergers and acquisitions by foreign investors.