M&A Registration to Become Easier in China

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.

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