Under the microscope: China’s M&A security review regime

Asecurity review system for mergers and acquisitions (M&A) of domestic enterprises by foreign investors is designed to regulate foreign investors by reviewing their M&A where there may be potential risks against national security.

Article 31 of the Anti-Monopoly Law provides that where a foreign investor participates in the concentration of undertakings by merging and acquiring a domestic enterprise, or by any other means that involve national security, the matter shall be subject to a review on national security as is required by the relevant state regulations, in addition to a review on the concentration of undertakings in accordance with the provisions of this law.

The main legal bases of the system also include: Notice on Establishment of the Security Review System on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (document No.6) issued by the General Office of the State Council; the Interim Provisions of the Ministry of Commerce (MOFCOM) on Issues Regarding Implementing Security Review System on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors; and the Provisions of the Ministry of Commerce on Implementing Security Review System on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors.