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International Corporate / M&A - China

posted 10 months ago

We provide global corporate solutions for cross-border transactions. By leveraging a multidisciplinary team in 25 countries and regions, our professionals formulate robust legal, accountancy, and finance structures that drive stakeholders’ objectives. Whether it’s the buyer or seller side, we assemble experienced experts to tackle international merger and acquisition challenges.

With offices in 25 countries and regions, including Belarus, Brazil, Bulgaria, China, Cyprus, France, Germany, Hong Kong SAR, Indonesia, Italy, Kazakhstan, Macau SAR, Mexico, Mongolia, The Netherlands, Nigeria, Portugal, Russian Federation, Serbia, Spain, Switzerland, Turkey, UK, USA, and Zambia, clients are advised in the comfort of their language and culture. Our process involves designating a local team in the country or region of the client as the primary liaison point, allocating an international team in the jurisdictions that the transaction touches, devising the corporate framework to connect national and international compliance obligations, and bridging cultural nuances at play. Through this one team, one focal point, and one purpose approach, we erase language, geographical and cultural barriers, as well as deliver transnational corporate solutions that efficiently close M&A deals.

The legal framework in the People’s Republic of China stems from civil law. Unlike its’ neighbouring jurisdiction Hong Kong Special Administrative Region (‘HK SAR’) based on common law and due to colonialism shares similarities with the UK, entities established in China are governed by the Company Law of the People’s Republic of China (‘Company Law’) adopted in 1993 and last revised in 2018 and the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (‘Provisions’).

From 1 January 2020, the adopted Foreign Investment Law of the People’s Republic of China (‘FIL’) unites foreign direct investment and other foreign investment (‘FIE’) under one legal body. The adoption of FIL simultaneously repeals the prior laws governing FIE, the Wholly Foreign-owned Enterprises Law, the Sino-foreign Equity Joint Venture Law, and the Sino-Foreign Cooperative Joint Venture Law. Equally, the FIL paves more consistency between the FIE and domestic entities, specifically Article 31 of the Foreign Investment Law stipulates ‘the organization form, institutional framework, and standard of conduct of a foreign-funded enterprise shall be subject to the provisions of the Company Law of the People’s Republic of China, the Partnership Enterprise Law of the People’s Republic of China, and so forth.

We engage all professional levels during the workflow process. For each transaction, our professionals work together to critically examine and identify the principal issues involved. Drawing from various legal, tax, and finance expertise, we devise an overarching framework, define steps and roles according to skill sets and appoint a primary client correspondent. By choosing a collaborative approach, we nimbly drill down risks and formulate responsive corporate solutions.

The impacts of COVID-19 and the related variants have substantially impacted the business landscape and propelled a new normal. For the firm, we are inundated with restructuring mandates such as M&A, liquidation, and relocation to new markets in response to the new normal. Such corporate changes can increase legal, accounting, and financial risks in the overall global corporate structure. As a result, we safeguard transactions by applying the law with an understanding of real-world challenges.

Recently, the M&A team completed a Sino-Foreign Joint Venture in the automotive industry. Due to travel restrictions in China, we were entrusted by the client to close the merger without their physical presence. By utilising technology, our team managed all phases of the merger including preliminary investigation, due diligence, business negotiation, contract drafting as well as formalising administrative requirements.

According to statistics, COVID-19 did not significantly affect the number of M&A deals in China and a limited impact was reported.

In 2021, the number of M&A transactions completed increased to 7,493 from 6,669 in 2020 and 6324 in 2019. Therefore, the reported number of M&A deals has increased in the last three years compared with 2018.

Though, the disclosed total transaction amount has decreased. Specifically, the announced total amount was USD 415 billion, which is a 1/3 decrease compared with 2018 and the total amount of transactions accomplished was USD 217 billion, which is more than a 1/3 decrease.

(Source of information:

According to statistics, the top sectors experiencing deals in 2021 include manufacturing, IT, and medical and health. Other major sectors reported involve finance, corporate services, real estate, and public services. Whilst manufacturing and building & building materials are reported as the top sector witnessing large transaction amounts.

Such data reflects our mandates in the past two years, over 2/3 of M&A deals closed by the team were in manufacturing sectors. Whilst the largest transaction amount was in the building materials sector.

(Source of information:

We work with a mixture of clients ranging from large corporations to SMEs. Our professionals understand that SMEs play a crucial role in developing tomorrow’s landscape, therefore SMEs are served with the same professional standards as large corporations – we value building corporate structures for businesses to thrive today and tomorrow, regardless of size.

We counsel entrepreneurs through the entire corporate life cycle. The entrepreneur solutions allow businesses to operate in full compliance, so they can focus on the bigger picture. The main areas include the following:

Intellectual property protection
For entrepreneurs, intellectual property is a core asset and provides a competitive edge in their market. The intellectual property rights (‘IPR’) team does not simply register, we formulate strategies to protect and economically leverage IPR across jurisdictions. Our previous cases include IPRS layout, defence strategy, infringement analysis, cross-border rights and technology disputes, and alternative dispute resolutions.

Establishing the correct company structure is imperative. The right establishment positions a robust foundation for business development and scaling up. In the pre-investment stage, we define items such as entity type, the investors, the business scope, the amount, the type and schedule of investment, the governing rules, governing authority, and so forth. Therefore, items such as rights, governance, and liabilities are clearly stipulated to substantially reduce related risks and disputes – especially with multiple stakeholders.

License and qualification
Incorporation involves the application of various licenses and qualifications. Often entrepreneurs overlook the importance and its role in the company’s development. Our incorporation specialists work alongside legal professionals to secure the proper license and qualification based on the business plan and conduct regular renewals or inspections as required by the relevant regulator.

Understanding and implementing well-written employment contracts reduces labour disputes or prolonged litigations. At Horizons, we craft written labour contracts that include mandate clauses such as the term of validity, job duties, remunerations, disciplines, liabilities, work and rest arrangements, insurances, as well confidentiality agreements, and non-competition clauses to safeguard company know-how and interests. Additionally, we standardise employee management through the employee handbook, which ensures employees are onboarded, managed, and dismissed according to the labour and labour contract laws, rules and regulations.

Contracts and Agreements
Prior to signing a contract, conducting due diligence of the counterparty verifies their business and legal qualification, credit status, and capabilities to execute obligations. The Corporate team composes and reviews contracts with great attention to the legal rights and obligations of both parties. We also implement contract management policies to preserve legal documents and related materials evidencing contractual performance. Such follow-up reduces legal risks and critical materials in arising litigations.

We utilise a two-pronged approach to disseminate the latest corporate insights to clients and potential clients – this includes building an online and offline network to engage stakeholders. We collaborate with governing bodies and possess memberships in professional networks, trade associations, and chambers of commerce, and offer expertise on the latest regulations from over 40 jurisdictions. Complimenting offline efforts, our digital content actively informs and engages stakeholders on the latest corporate regulations in China and around the world. The principal objective is to translate legal doctrine into clear and digestible intelligence, and aid business leaders in deciphering the next steps. As a result, we strive to supply unique and practical insights that differ from competitors.

The Revised Draft of the Company Law of the People’s Republic of China (the “Revised Draft”) marks a significant chapter for corporate law. Promulgated on 20 December 2021 by the Standing Committee of the 13th National People’s Congress, the Revised Draft amends 70 articles.

Enacted in 1993, the Company Law has been revised several times with the latest adoption in 2018. The Revised Draft revises long standings provisions to simultaneously increase protection for bona fide parties and further regulate unethical practices. Major alterations are outlined below.

Share classes
Joint stock limited companies are permitted to issue other types of shares. Other than ordinary shares, shareholders may issue preferred shares and deferred shares, shares with a different number of voting rights, and determine corresponding rights protection for such shareholders.

Simplified procedures
Provisions to simplify administrative procedures improve the facilitation of company operations. Specifically, capital reduction and simplified deregistration procedures under specific conditions are simplified.

Registration Rules
A company registration chapter is added to enhance the administration procedure. Such addition also elevates the Administrative Regulations of the People’s Republic of China on the Registration of Market Entities (effective on March 1, 2022) as a rule of law. In the chapter, further clarification is provided on matters and procedures related to the company’s establishment registration, alteration registration, and cancellation registration, and the company registration authority is instructed to optimise the registration process and improve the efficiency and convenience of registration.

Powers and duties of directors, supervisors, and senior management
The duties of loyalty and diligence of the directors, supervisors, and senior management are further stressed to protect stakeholder interests. Joint and respective liable are provisioned for those who cause damage to others in an intentional act or gross negligence whilst performing duties.

Shareholders’ right to know
Another addition is the right for shareholders to consult the register of shareholders and accounting vouchers. Shareholders can entrust agencies to access information, enable professionals of agencies to collate and analyze information and define reasonable decisions based on such insights.

The Revised Draft is envisioned to be adopted in 2023 since it is still under consultation. For companies, the revisions advance the corporate legal framework in China and provide a greater legal basis for courts to handle disputes.

Furthermore, we foresee forthcoming corporate legislation supplementing the Revised Draft (once adopted) and arising from needs of social development, such as the latest series of laws, regulations, and standards related to information and data protection and security.

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International Corporate / M&A - China

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