M&A Registration to Become Easier in China

November 30, 2011 Posted by China Briefing Reading Time: 3 minutes

Nov. 30 – China is attaching more importance to supporting company restructuring as well as mergers and acquisitions (M&As), hoping these business activities will help optimize the country’s resource distribution and push forward economic transition. On Monday, the State Administration for Industry and Commerce (SAIC) released a new document, requiring government departments to offer greater convenience for the registration of businesses after combination and separation (C&S).

The document, titled “Opinions on Improving Registration Services for Companies after C&S and Supporting Enterprise M&As as well as Restructuring (gongshangqizi [2011] No.226),” specified the following aspects in which local Administrations for Industry and Commerce (AICs) shall improve their registration services for businesses after C&S:

AICs shall support companies to realize C&S through different avenues: A company may realize combination through either a merger (where the purchasing company exists) or consolidation (where the purchasing company does not exist); a company may realize separation through either a split-off (where the original legal personality exists) or the complete division of the original company into separate legal entities (where the original legal personality does not exist).
AICs shall support the C&S of various types of companies: For a company that is separated, maintained or newly-established after the restructuring of a foreign-invested company, its registration may follow the standards stipulated in the new SAIC document and other related regulations, if the company to be registered is domestically-invested.
AICs shall support corporate autonomy after C&S: A company that survived or is newly-established after C&S may choose the form of the company (either a limited liability company or a corporation limited); it may also negotiate the size of the company’s registered/paid-in capital as well as each shareholder’s capital contribution through the combination/separation contract, as long as the negotiated capital size meets certain criteria stipulated in the new SAIC document.
AICs shall improve the efficiency of company registrations after C&S: 45 days after a company’s C&S is publicly announced, applicants may apply for company de-registration, establishment, or change (including an increase in shareholders and registered capital, among other changes) at the same time.
AICs shall provide services that support affiliation changes after C&S: Where a company which is separated or does not survive after a combination has any affiliate, the disposal of the affiliate after C&S shall be clarified in the combination/separation contract. The de-registration or the shareholder change registration of the affiliate can be done with the AIC in accordance with the decisions in the contract.
AICs shall provide services that support the inheritance of another limited liability company’s equity after C&S: Where a company which is separated or does not survive after a combination has any holdings in another limited liability company’s equity, the disposal of the equity after C&S shall be clarified in the combination/separation contract. The registration of equity transfer, registered/paid-in capital size change or shareholder change can be done with the AIC in accordance with the decisions in the contract.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. For advice, please email china@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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