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Purchase of an equity interest

Time:2014-03-13 Hit:191


Purchase of an equity interest


  It must be underlined that foreign investors may directly or indirectly purchase equity (either registered capital or shares) In a target company registered in China. In a direct equity acquisition, the foreign Investor acquires equity in a domestic enterprise or a foreign-Invested enterprise (F1E) from the existing Chinese or foreign equity holders pursuant to a share purchase agreement or from the target through a subscription for new equity. In An Indirect equity acquisition, if the Chinese target company is an existing F.I.E. a foreign investor may acquire or increase control of the Chinese target company through the offshore purchase of some or all of a foreign party's interest in the F.I.E. Such a transaction is invariably conducted offshore in the jurisdiction of the F.I.E.'s existing foreign investor and generally does not attract Chinese legal implications. except in certain circumstances pursuant to the new antitrust review regime in China.

  Substantially the term 'mergers and acquisitions under the M&A Regulations 2006 covers, as mentioned above, two types of acquisitions. The first is an equity acquisition consisting of purchase by foreign investors of equity interest in a Chinese enterprise which is not a foreign-invested enterprise (F.I.R.). Either through equity transfer or subscription of new equity, the second is an asset acquisition consisting of a purchase of assets of a Chinese enterprise, which is interpreted to include FIEF, by a new F.I.R. formed by foreign investors.


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