Mergers & AcquisitionsYour current position:Home >> Mergers & Acquisitions

Specifications on the Minimum Capital Required

Time:2014-03-13 Hit:273


Specifications on the Minimum Capital Required


          Where the foreign investor sets up a new F.I.E. to acquire assets in a domestic company," the foreign investor will need to capitalize on the new company with an amount that is sufficient for the new company to purchase the target assets as well as to fund its working capital and other needs. The part of the capital contribution that is equal to the purchase price should be contributed within three months of the date on which the business license is issued. In special circumstances, with the approval of the approval authority, a minimum of 60% of the amount equal to the purchase price can be paid within six months of the date on which the business license is issued, with the balance to be paid within 12 months of that date.'9 The total amount of investment of the new company should be determined by reference to the purchase price of the assets and the scale of production and operations. Moreover, the debt-to-equity ratio should comply with applicable rules.

          The timing for payment of the purchase price for assets should be the timing applicable to equity acquisitions. The 2006 M&A Regulations lay down the procedure for the approval of an asset purchase agreement and the establishment of a new company that will acquire the assets. the asset purchase agreement must be submitted as part of the approval procedure, however, because at this stage the new company has not established; the purchase agreement will need to be signed by the foreign investor on behalf the new company and the agreement will be assigned to, or renewed in favour of, the new company once it is established. The application documents must be submitted to the appropriate level of Approval Authority and should include a statement of arranging meets in respect of the employees of the company selling its assets. The application documents must also include a certificate that the seller has notified its creditor and published newspaper advertisements, as well as a statement as to whether creditors have raised any objections. However, the formation of a new company as the acquisition vehicle will obviously take time, and this will need to be factored into the transaction timetable. The acquisition vehicle will need to be established with a business scope that will allow it to carry on business using the acquired assets. Ideally; the new company will be able, at the minimum, to replicate the seller's business scope but this may not be possible where the seller is a domestic company. A domestic company or an F.I.E. that sells assets in a transaction falling within the scope of the M&A Regulations must notify creditors in writing of the assets sale and publish an advertisement of the assets sale in a newspaper 15 days prior to submitting, the relevant application documents to the Approval Authority.



Last article:Purchase of an equity interest
Next article:No deta
shanghai attorney