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How can foreign investors merge or acquire local entities for establishing a foreign-invested entity in China?
Q&AWith respect to Mergers and Acuisitions involving the acquisition of Chinese domestic companies by foreign investors, in June 2009, the Ministry of Commerce promulgated the “Provisions on Foreign Investors’ Merger with and Acquisition of Domestic Enterprises (Order No. 6, ‘Mergers and Acuisitions Provisions’),” which address share and asset acquisitions of Chinese enterprises by foreign investors. The Mergers and Acuisitions Provisions cover the following types of transactions:
Share Acquisitions
- Acquisition of equity in a Chinese company and its conversion into a Foreign-Invested Enterprise; or
- Subscription of additional registered capital in a Chinese company and its conversion into a Foreign-Invested Enterprise.
Asset Acquisitions
- Establishment of a new Foreign-Invested Enterprise and its acquisition of the assets of a Chinese company; or
- Acquisition of assets in a Chinese company by a foreign investor and the injection of those assets as registered capital into a Foreign-Invested Enterprise.
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