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China enjoys the highest level of foreign investment of any country in the
world today, and is to all appearances intent on maintaining and even
increasing that level. Yet, despite substantial liberalisation pursuant to
China’s WTO commitments, investment in China remains tightly circumscribed.
For complex reasons stemming from China’s protection of its own internal
economy, the government hedges each form of foreign invested enterprise (FIE)
with complex rules for qualification and approval. Many sectors of the economy
remain fenced off from foreign investors, while investors in other sectors
face a gauntlet of regulatory approvals at nearly every important stage of
business. The result is a complex system of laws, regulations, and guidelines,
bristling with challenges and uncertainties for even the simplest
restructurings, that sometimes apply across the board to all FIEs and
sometimes only to a particular kind of FIE.
This detailed, systematic explanation—by a practising lawyer at one of the
biggest law firms in China—provides thorough and up-to-date guidance on the
rules and procedures affecting investments, mergers and acquisitions, and
listings in China today. Focusing on such practical matters as applications,
regulatory requirements, and transactional procedures, the author leads the
practitioner through the maze of interconnected national and local
authorities, with lucid explanation of the lines drawn as to total investment
amount, sector or category of business, industrial compliance, geographic
location, and various imposed restrictions, with expert knowledge of when and
under what circumstances various rules apply and when they do not. Included in
this superb analysis are detailed descriptions of such factors as the
following:
• establishment of a new FIE, including a substantial review of the articles
of association or shareholders’ agreement;
• the equity or shares transfer in, or merger with or by, an existent FIE;
• the cross-border acquisition of a domestic company by foreign investors;
• the meaning of the official classifications ‘encouraged,’ ‘permitted,’
‘restricted,’ and ‘prohibited’;
• enforcement (or enforceability) of certain approvals, depending on context;
• permits (e.g., for advertising);
• foreign exchange controls;
• taxation and accounting matters;
• export and import and customs duties;
• eligibility for certain preferential treatments;
• equity or contractual joint venture with Chinese parties; and
• ‘controlling’ or ‘relatively controlling’ shareholding of Chinese parties.
For law firms advising companies on investing in China, or for in-house
counsel, this book is without peer as a comprehensive, reliable, and
easy-to-use resource. At every stage of a project, from the initial business
decision to problems arising after successful start-up and during day-to-day
operations, it will provide clear, authoritative guidance for years to come.
1. Introduction: Regulatory Framework of Foreign Investment.
Part I. Investment Vehicles. Introduction I: Investment Vehicles
under the New Company Law (2005). 2. Common Vehicles of Foreign
Investment. 3. Foreign Invested Holding Company (FIHC). 4.
Foreign Invested Company Limited by Shares (FICLS). 5. Foreign Invested
Limited Liability Partnership (FILLP).
Part II. Merger and Acquisition: Non-Listed Companies.
Introduction II: M&As under the New M&A Rules (2006). 6.
Acquisition of Domestic Enterprises in General. 7. Acquisition of
Particular Structure: Acquisition via SPV, Share Swap. 8. Acquisition
of State-Owned Enterprises (SOEs). 9. Equity Transfer and Pledge in
Existing FIEs. 10. Acquisition (Domestic Re-Investment) by Existing
FIEs. 11. Merger between FIEs or with an FIE. 12. Merger
Controls under Competition Law.
Part III. Merger and Acquisition: Listed Companies. Introduction III:
Takeover under the New Takeover Code (2006). 13. Takeover of Listed
Companies in General. 14. Strategic Investment in Listed Companies.
15. Investment via Qualified Foreign Institutional Investors (QFIIs).
16. Transfer of State-Owned Shares in a Listed Company. 17.
Disclosure in the Takeover. 18. Substantial Assets Restructuring (SAR)
of a Listed Company.
Part IV. Securities Offering. Introduction IV: Securities Offering
under the New Securities Law (2005). 19. Initial Public Offering (IPO)
and Listing. 20. Follow-on Shares Offering by a Listed Company. 21.
Corporate Bonds Available to a Listed Company. 22. Corporate
Governance and Internal Controls of Listed Companies.
