Step-transaction plans for M&A and listco restructurings (2)

In the previous article, the author reviewed several listco restructuring cases. The listed companies obtained approval from the China Securities Regulatory Commission (CRSC) through step-transaction plans. Strong points of the step-transaction plans for listco restructuring were also analyzed. It is provided in the Administrative Measures for the Material Assets Reorganization of Listed Companies that the listed company that purchases assets by means of share issuing (except for those listed by backdoor listing) may raise a part of supporting funds at the same time.

It is also provided, in the Questions and Answers on Listed Companies Issuing Shares to Purchase Assets and Raise the Supporting Funds at the Same Time (Q&A), that the supporting funds raised may be used to pay the cash consideration of the M&A transaction, pay the M&A expenses, including taxes and relocation expenses, and be input in construction of projects in progress of the underlying assets. This article enumerates the do’s and don’ts of the step-transaction plans for listco restructuring.

Raising funds to pay the cash consideration of the M&A transaction does not involve cash acquisition as in Step 1 of the step-transaction plan. In the case of Pubang Landscape, it would pay the cash consideration in three instalments. It agreed that Pubang Landscape would pay the third instalment of the consideration in the amount of RMB133 million (US$19.7 million) on the precondition that “Pubang Landscape will pay the third instalment with raised funds if this transaction is not approved by the CSRC, or if the share issuing at the same time as the M&A for raising supporting funds is not successful, or the fund, raised are insufficient”.

Yin Yi is an associate at Grandway Law Offices