Business restructuring and M&A in China

1) In what forms can the reorganization of a legal entity be carried out?

The reorganization of a legal entity can be carried out in the following forms: 

• consolidation;
• merger;
• acquisition;
• takeover;
• tender off;
• divestiture;
• division;
• bankruptcy.

2) What are the procedures for the division or merger of a company?

The procedures for the division are mainly as follows:

1) The company propose the resolution for division to the shareholders' meeting.
2) The shareholders’ meeting vote to pass the resolution.
3) The company notify creditors and announce the division resolution in the newspapers.
4) Divide the company’s assets according to the separation resolution.
5) Handle business registration in the administration.

The procedures for merger are mainly as follows:

1) All parties involved in the merger hold their respective shareholder meetings and pass the merger resolution.
2) The parties intending to merge come to the merger agreement.
3) The merger agreement needs to be approved by the special resolution of the shareholders’ meeting.
4) Notice to the creditors and announcement.
5) Submit the merger documents to the relevant regulatory authorities for review.
6) Company change or establishment registration depending on the merger ways.

3) How to separate a specific type of activity into an independent company?

Common methods are asset division and equity division. Asset division refers to the separation of certain businesses or assets by the company to form a new entity. Equity division refers to separate the equity of a subsidiary, allowing shareholders to hold more shares of the independent company.

4) Is it possible to reorganize a company in case of bankruptcy?

Yes, it is. To determine whether a company is in bankruptcy, we can search for the information in the local Administration and in the local people’s court. Moreover, we can search in the announcement of bankruptcy credit claims published by the Courts.

5) Which government agencies' approvals should be obtained for mergers and acquisitions?

The Market Supervision Administration.

Author: Claire Zhao