China Issues New Ground-Breaking M&A Regulations

August 18, 2006

In 2005, the state-controlled China National Offshore Oil Corporation (“CNOOC”) attracted a lot of media attention when it tendered an unsolicited bid of $18.5 billion for the proposed takeover of Unocal Corp.  However, CNOOC later withdrew its bid partly because of the opposition that it received from U.S. lawmakers over national security concerns. In the future, U.S. investors interested in acquiring Chinese companies might have to face similar type of scrutiny under new Chinese M&A regulations.

On August 8, China issued the Regulations on Acquisition of Domestic Enterprises by Foreign Investors (the "New Regulation"), supplanting the Interim Regulations on Acquisition of Domestic Enterprises by Foreign Investors issued on March 7, 2003.  The New Regulation was jointly issued by the Ministry of Commerce ("MOC"), the State Asset Supervision and Administration Commission, the State Administration of Tax, the State Administration of Industry and Commerce ("SAIC"), the China Securities Regulatory Commission (“CSRC”) and the State Administration of Foreign Exchange ("SAFE"), which are the principal agencies responsible for the oversight and regulation of foreign investment in China.  The new rules on safeguarding national economic security, antitrust review, stock-for-stock acquisitions and special-purpose entities will have a far-reaching, if not revolutionary, impact on M&A activities by foreign investors in China.  The New Regulation will become effective on September 8, 2006.

While the New Regulation contains a number of grey areas awaiting clarifications by the Chinese authorities, this e-Alert explores the pertinent points and provides a summary of what to expect in the M&A landscape in China.

Click here to read the e-Alert.

These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from this document without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so.

<< Back