In the past two articles, the author summarized cases where listed companies obtained approval from the China Securities Regulatory Commission (CSRC) after adopting step-transaction plans, and examined the advantages and other issues with step-transaction plans. This article continues to examine other issues with step-transaction plans.
Restrictions on acquisition of minority interest and use of raised funds. At a training seminar held by the CSRC on sponsors regarding M&A, in July 2017, it was stated that relevant funds raised in the acquisition of a minority interest of a holding subsidiary should only be used for payment of the cash consideration, and taxes and fees for the said transaction, and should not be used for work in progress of the target asset (the holding subsidiary).
Associate
Grandway Law Offices
The report submitted to the CSRC in the case of Maoye Communication and Network showed that the raised funds would be used for three works in progress of the target company. In the first feedback, the CSRC asked: “Is the purchase of the remaining 49% equity in SINOWEL by the listed company through issuing shares a purchase of minority interest of the target asset? If so, is the use of the raised funds in construction of relevant projects of the target company in compliance with CSRC regulations?”
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Yin Yi is an associate at Grandway Law Offices
7/F, Beijing News Plaza
No. 26 Jianguomennei Dajie
Beijing 100005, China
Tel: +86 10 8800 4488 / 6609 0088
Fax: +86 10 6609 0016
E-mail: yinyi@grandwaylaw.com
