Investments and Transactions

Investment projects in China should undergo a comprehensive review prior to implementation, with particular emphasis on selecting the appropriate location, taking into account any local incentives and support available during the setup phase. Additionally, the various options for the legal structuring of your intended investment and the regulatory approval process should be thoroughly reviewed in advance.

In the area of Chinese corporate law, the process of structuring and establishing a Chinese subsidiary by foreign investors has been simplified considerably in the recent years. Nevertheless, depending on the specific case, the establishing procedure - from applying for a business license, to acquiring land use rights certificates or alternatively leasing commercial space, to obtaining environmental approvals and building permits, not to mention the specific procedures of transferring foreign investment funds to China - should still not be underestimated.

In addition to so-called foreign "green-field" Investment Projects, reinvestments, and foreign investments into existing subsidiaries, foreign investors have access to the usual forms of corporate transactions in China. Insofar M&A projects in China can be structured and implemented in the forms of share deals, asset deals, or the common different types for corporate mergers.

For the preparation of such transactions in China, usually a Due Diligence is conducted. The scope of the Due Diligence depends on the nature of the intended specific transaction project - in any case, a comprehensive legal and tax due diligence is in general considered as essential before any kind of corporate transaction.

The specific legal structuring of the transaction should be made by taking into account the legal and tax Due Diligence results. As a basic rule, a share deal -meaning the purchase and acquisition of company shares, is also in China a commonly applied option. However, in some cases - especially in order to mitigate certain identified risks - an asset deal, that is the “buyout” of certain chosen specific company assets or even entire business units, may be the more appropriate approach.

In certain cases, a merger might be the advisable solution, particularly in order to straighten and simplify existing corporate structures in China. In this context, the usual types of business mergers are also available in China - such as a "merger by absorption" (more specifically a so-called "Upstream" or "Downstream" merger), or a merger through the formation of a new entity.

When legally structuring a corporate transaction project in China, also the Chinese merger control regulations should be taken into account.

Transactions in China typically involve extensive - and sometimes tough - negotiations between the parties involved. In order to ensure that these transactions can be closed in accordance with applicable Chinese laws and regulations requires that the locally required process for implementation and registration of the intended transaction at the local authorities is adequately addressed and considered within the contact negotiation stage.

Establishing and registering foreign subsidiaries requires special knowledge to structure the appropriate legal entity, as well as local expertise to ensure that there are no surprises or delays during the incorporation, registration and approval process due to local regulations and obstacles.

In all these matters, we can provide you with our expertise, advice and support, based on our many years of experience in China.