Study On Legal Issues Of Regulation On The Offshore Company’s M&A Of Domestic Enterprise

Offshore Company is the 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. 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, large-scale increase of the merger and acquisition by offshore companies in China, as grew up under the economic transition circumstances, has brought severely negative effects to the economy of China. Therefore, it is of vital important for our country to regulate it comprehensively.The innovation of this article has the following points:First of all, the cross-border M&A by offshore companies is just usually a problem which is incidentally mentioned in the research of capital flight, but this article is doing the research of the cross-border M&A by offshore companies in China. Secondly, the author comes to the fundamental ways of merger and acquisition by offshore companies. Especially some Chinese investors firstly 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. Thirdly, in this paper, the laws and regulations with cross-border M&A by offshore companies in China are classified. Specially, the latest "19th file" is the research object in foreign exchange regulations, the Enterprise Income Tax Law is the research object in tax regulations, indicating that the legal and regulatory on the cross-border M&A by offshore companies still remains some blank areas. Fourthly, the article mentioned the extraterritorial regulatory effectiveness on the round-tripping capital which is a cross-border flow of capital. Fifthly, the article also analyses the criteria of foreign juristic person recognition and principle of national treatment from the perspectives of the public law and private law.The main content of this paper is divided into four parts. The first part is the basic theory of the cross-border M&A by offshore companies. The second part deals with China’s legal measures to regulate cross-border M&A by offshore companies from the perspectives of investing, financing anti-monopoly, and taxation, pointing out the shortcomings of Chinese legal regulations. 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. Finally, the author comes up with some suggestions to improve the legal regulations on offshore companies’ cross-border M&A.The valuation of this article at least has shown as following aspects:Firstly, whether as a country, which is considered as a cross-border capital outflow country, or as a cross-border capital inflow country,China should configure its own regulatory powers according to goals of regulation and make its effort to the supervision of offshore companies’cross-border M&A more reasonable and effective. Secondly, the legal status of foreign companies should be improved. For those offshore companies controlled domestic company could be considered to make more stringent requirements in information disclosure, corporate governance. Thirdly, China should take its own advantages on the scale economy, efficient government services and so on in the international competition of attracting foreign investment.