On Foreign Mergers And Acquisitions Legal Regulation

Recently, Merger and Acquisition by Foreign Investors (Foreign M&A) has developed rapidly and attracted attention of wide range in our country. With the promulgation of Regulation on Merger and Acquisition of Domestic Enterprises by Foreign Investors by Ministry of Commerce (Promulgated in 2006 and Amended in 2009, hereinafter shall be referred to as "M&A Regulations"), which was deemed as the basic law in M&A area, the legal regulation on M&A of domestic enterprises by foreign investors within Chinese territory entered a new developing era. This article attempts to, by the means of analyzing key provisions of M&A Regulations and combining legal practice in our country, interpret Chinese legal system concerning foreign M&A as a whole.This article consists of 4 chapters. The first chapter defines relevant concepts involved in Foreign M&A, reviews the main development procedure of Foreign M&A in China, including the exploration period, recovery period comprehensive development period, and interprets the effect imposed by Foreign M&A including both positive effects such as making up the insufficiency of state-owned capital, satisfying the diversified needs of foreign investment and promoting of equity structure of domestic company, and negative effects including losing of state-owned assets, potential impairment to national security and monopolistic problems. The second chapter introduces the relevant legal systems concerning foreign M&A in US and Taiwan and lists the main rules governing foreign M&A in China. The third chapter, by combination of other relevant rules and regulations, interprets some key issues in M&A Regulations such as means of M&A, SPV issues, concentration of business operators and national security. Such chapter aims to interpret the rational of those provisions and figure out imperfect parts of those provisions. The fourth chapter proposes some suggestions from a foreign investor's perspective concerning the "two-track" legal regime on domestic and foreign investment and equality between foreign investment and domestic investment on China's M&A regime reform.