1、中文 3758 字 本科毕业论文外文翻译 外文题目： Managing risks in Chinese M&A transactions 出处： http:/ 作 者： Lefan Gong 原 文： China: Managing Risks In Chinese M&A Transactions 28 November 2007 Article by Lefan Gong Against the backdrop of Chinas accession to the WTO and the continuous lifting of restrictions on foreign inv
2、estment in many industries, China is going through an extraordinary period of merger and acquisition activity. However, executing M&A transactions in China is not for the faint of heart, and making successful investments and striking good deals require more than a gold-rush mentality. In particular,
3、 taking an overly cautious approach might result in missing out on great opportunities, while an undisciplined or overly optimistic approach might well lead to disaster. Consequently, it is essential that dealmakers and their counsel take an informed, balanced, and practical approach to the myriad a
4、nd unique risks presented by Chinese M&A transactions. Matters that require careful attention in Chinese M&A transactions include regulatory restrictions on commercial enterprise, governmental approvals that are required in connection with purchases and sales of businesses, confirmation of title to
5、assets, assessment of potential liabilities, and structure of purchase price and other amounts potentially payable to the seller. Circumstances in China that tend to make these matters challenging include a legal and regulatory system that is in a state of flux, unavailability and unreliability of p
6、ublic records, unfamiliar customs and practices, a sellers market created by a significant influx of investment capital, and regulatory restrictions applicable to deferred payments of purchase price. This Commentary identifies several key areas of risk associated with M&A transactions in China, with
7、 the aim of helping dealmakers identify and address important issues at an early stage. Assessing Regulatory Restrictions An initial matter that a foreign investor needs to assess in setting its expectation is how the Chinese regulatory restrictions and the personal views of the applicable approval
8、authorities may affect the structure and process of the deal. One of the first things that a buyer may want to look into is whether the target company, after being acquired by a foreign investor, can continue to conduct its business and operations in the same manner without becoming subject to addit
9、ional regulatory restrictions. There are still a number of business sectors in China that are not fully open to foreign investors and in which such investors cannot establish wholly foreign-owned enterprises (WFOEs) or even joint ventures. A foreign investor should determine as early as possible whe
10、ther there are percentage limitations on potential ownership in an enterprise in a given industrial sector, as this will directly affect the deal structure. For example, if the target company is a conglomerate, some assets may need to be carved out to make sure the postclosing target company will st
11、eer clear of the sectors that are prohibited or restricted for foreign investment. Through the State Development and Reform Commission and the Ministry of Commerce, Chinas central government sets the policy and pace of opening up the industrial sectors and publishes and updates the Foreign Investmen
12、t Catalogue every few years. Prospective buyers should immediately familiarize themselves with this guidance. In addition to identifying prohibitions and restrictions on investment in certain sectors, the Catalogue lists those sectors where foreign investment is encouraged, which could mean tax holi
13、days and preferential treatment for foreign investors. If the transaction parties can manage to interpret the industrial terms fairly liberally and have the applicable approval authorities agree to such interpretations, the effort may yield significant benefits when the company files its tax returns
14、. In addition to the restrictions imposed by the central government, attention should be paid to possible regulatory constraints at the local-government level. For instance, the Shanghai government requires licenses for handling public-security projects that cannot be issued to WFOEs. Although it is
15、 reasonable to assume that a share acquisition transaction would allow the target company to keep its licenses and permits after the closing of the deal, the chance of surprises increases when different government agencies are involved in the process. Thus, it is critical to determine at an early st
16、age whether the required licenses and permits can be renewed or exchanged for new ones after the target company converts to a foreign-invested enterprise. As a rule of thumb, the share purchase (or equity interest transfer) agreement would normally time the closing a couple of days after all the nec
17、essary approvals, new licenses, and permits have been obtained (assuming that all other closing conditions have been satisfied). In addition, prospective buyers should not be entirely surprised if due diligence indicates that the target company has been engaging in some of its business activities wi
18、thout proper licenses or permits. In this case, the buyer will need to assess the risk exposure and decide whether it should forgo the transaction, insist that the seller cure the deficiencies prior to closing, or structure the transactions as an asset purchase and apply separately for the required
19、licenses. Navigating Approval Processes Chinas regulatory environment is still rated among the top concerns for U.S. companies, according to a recent survey by the US-China Business Council.1 Foreign companies investing in China have to deal with the ambiguity of the law and the contradictory views
20、of different government agencies and officials. These conditions frequently result from a combination of ever-changing laws and regulations and formal and informal implementation rules. For instance, a government official with approval authority may have his own interpretation of the law and may ass
21、ure an investor or its counsel that his approach is correct, while officials in another government agency suggested otherwise. Unanticipated hidden rules, which can be created by both governmental and quasi-governmental agencies, can also present challenges. For instance, a property registration cen
22、ter2 may employ local unpublicized procedures that require share purchase agreements or equity transfer agreements to be in a prescribed form. Avoiding these land mines doesnt take magic, just hard work and vigilance. Foreign investors must do substantial homework to develop keen judgment on legal c
23、ompliance and risk assessment in China. Foreign investors not familiar with China should resist the urge to make innocent assumptions and should engage sophisticated counsel to detect and resolve issues as early in the process as possible. Confirming Title to Assets In China, the verification of the
24、 ownership of assets can present substantial challenges. Publicly available information and government records, if they exist, may be inadequate or unreliable. For private companies, internal documentation is usually not well kept and organized, and it may be insufficient to show what assets belong
25、to whom. For state-owned enterprises, the situation may not be significantly better, and requests for information often meet with reluctance and the state-owned culture of secrecy. It is important to realize that a target companys assets may have been used in related-party transactions. For example,
26、 one companys assets might have been pledged for anothers bank borrowings, and the same assets might have been used multiple times for making (registered) capital contributions in different companies. The buyer also needs to be extremely careful if substantial assets of a target company were bought
27、from the bankruptcy auction of a state-owned enterprise. If the process was not properly supervised by the court and the case was not effectively closed, the sale could risk being overturned because of a flawed auction process. Finally, prospective buyers must be vigilant and vigorous in title searc
28、h and verification. Many state-owned enterprises, and sometimes even privately owned companies, may use or claim to own land officially labeled as allocated land, which is provided by the government at nominal cost (or no cost at all) but cannot be sold, transferred, mortgaged, or otherwise disposed
29、 of. A marketable title, or granted land-use right, must be obtained before such land can be sold or transferred, which could require the payment of significant land premiums to the land bureau. Assessing Liabilities Contingent and off-balance-sheet liabilities may present another serious area of ri
30、sk for buyers of Chinese companies. Typical areas of potentially significant liability exposure include tax, employment, legacy problems, and environmental issues. Tax due diligence should be an integral part of any buyers assessment of a Chinese company. Failure to capture irregular or illegal tax practices and quantify the associated hidden liabilities and downside risks could lead to serious problems. In
