The following is provided for information purposes, and not meant to be legal advice.
Here are some issues to consider when engaging in mergers and acquisitions in China:
Asset vs. Share Acquisition
Asset acquisitions are preferred over stock/share acquisitions because of liability concerns. However, there are advantages to stock/share acquisitions when the government is not allowing new entrants to an industry, and when there are certain product licenses and operating permits (such as pharmaceutical licenses) that cannot be transferred.
Employment
Employment at will does not exist in China. Fixed employment terms are required, and employees may be terminated only upon meeting certain grounds. Severance needs to be considered when employees are not transferred in the event of an acquisition, or when a restructuring results in a foreign investor controlling the target or its assets.
Anti-monopoly issues are handled by the Ministry of Foreign Trade and Economic Cooperation (“MOFTEC”) and the State Administration for Industry and Commerce (“SAIC”). Foreign investors are required to submit reports to the MOFTEC and the SAIC when they meet operating revenue, market share, and other competition requirements.
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