Special scrutiny on listed companies’ overseas M&A activities

In the wake of Chinese companies’ global shopping spree, publicly listed firms on the domestic stock market are apparently a leading force, backed by their robust reputations and abundant financial resources. In order to buy overseas assets, these listed companies must meet certain requirements set by the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), the State Administration of Foreign Exchange (SAFE) and the State-owned Assets Supervision and Administration Commission (SASAC), as well as special provisions about corporate governance, major asset restructuring and information disclosure rolled out by the China Securities Regulatory Commission (CSRC) and stock exchanges.

PARALLEL APPROVAL

As overseas M&A deals are subject to approvals of multiple regulators, it is important to determine the order of regulatory approvals. In order to accelerate the approval process and further optimize the M&A market, the Ministry of Industry and Information Technology, the CSRC, NDRC and MOFCOM issued the Parallel Administrative Approval Workflow for the Mergers and Acquisitions of Listed Companies in October 2014, clarifying the CSRC’s approval workflow and the order of approval for the overseas investments of ordinary domestic companies.

According to the parallel approval workflow, the approval and registration of overseas investment projects conducted by the NDRC, as well as the approval of foreign investors’ strategic investments in listed companies and the undertaking of concentrated examination conducted by the MOFCOM, are no longer prerequisites to the CSRC’s administrative approval, and these examinations are carried out simultaneously. With the consent of shareholders, listed companies could apply for administrative permits to the CSRC and other relevant regulators, which independently examine and approve the applications at the same time. The change will shorten the time of approval for listed companies’ overseas M&A deals.

Lin Zhong is a partner at EY Chen & Co. Law Firm