Compliance issues in listed companies’ outbound M&A

As the “One Belt One Road” policy became a national regime, 2015 witnessed a trend of increasing outbound mergers and acquisitions (M&As). There were more than 300 outbound M&As among listed companies in China in 2015, with a total volume of more than RMB900 billion (US$137.7 billion). We have seen an even faster pace occurring with M&As this year.

In the first season of 2016, the total transaction volume has already broken the record of the total transaction volume for the entire year of 2015. Domestic listed companies are among the major supporters of the recent M&A trend. Outbound M&A transactions are precious opportunities for domestic listed companies, but we should also be mindful of the many potential traps involved.

Information disclosure: According to the Administrative Measures for the Material Assets Reorganization of Listed Companies, Administrative Measures for the Takeover of Listed Companies, compliance rules for listing on stock exchanges, and the memorandum for disclosure of information, listed companies in pursuit of outbound M&As need to fulfil their responsibilities in disclosing information as required by the China Securities Regulatory Commission (CSRC) and the stock exchanges. When the outbound target being acquired or merged by the listed company has a size that reaches the threshold standard of large-scale asset restructuring, or when the acquisition of assets is done through private placement, the requirements for disclosing information are even stricter.

Xu Jun is a senior partner and Zhang Xia is an associate at AllBright Law Offices