Cross Border M&A with China

Tuesday, 07 August 2012 09:36

There are a lot of foreign invested enterprises which apply for merge and acquisition (hereinafter M&A) for cost savings, management convenience etc. Our team prepared general introduction below on M&A model, process and relevant matters to pay attention to while precede M&A deals.


M&A model:

M&A model can be divided into merge and new combination establishment:

First type is absorption, known as merge, is a model when two or more companies merge into one enterprise, where one company would retain its legal qualifications while legal qualifications of the other companies disappear along with merge.       

Another type is a new combination establishment where companies would be equally eliminated


M&A process:

1.      Proposed M&A of the companies is approved by more than two authorizations. Proposed company should submit an application of the company to be dissolved caused by merge at its former approved authorities, also will obtain an official approval to dissolve.  

2.      In case of absorption, appointed Party (one of the companies) becomes an applicant to apply for merge at its former approval authorities and will obtain an official preliminary approval for M&A. For new establishment, after negotiation between Parties, appointed Party will apply for submission at commercial authorities in the company’s residence after merge, will also obtain preliminary approval for M&A.

3.      Since the issue of preliminary approval by authorities proposed company for M&A will notice creditors within 10 days, furthermore innate country will make an announcement in the newspaper by posting advertisement on higher than provincial level within 30 days.

4.      If creditors will have no objections within 45 days after the announcement, applicant of proposed M&A company will again apply for submission of approval authorities and after an agreement for approval will obtain changed approval certificate or certificate for new establishment.

5.      Required procedures regarding matters for company to be absorbed:

1)      Company to dissolve should conduct tax liquidation audit, tax liquidation audit report should be issued by certified accountant firm.

2)      Company to dissolve should apply for tax cancellation procedures and will obtain notice on tax deregistration.

3)      Company to dissolve should apply for Custom cancellation procedures and obtain Custom deregistration certificate.

4)      Company to dissolve should apply for cancellation of foreign trade operator registration and will obtain deregistration certificate.

5)      Company to dissolve and absorbing company apply for absorption M&A’s foreign exchange registration ( company to dissolve should dispose all the other foreign exchange accounts besides exchange registration certificate and complete cancellation)

6)      Company to dissolve should apply for commodity inspection deregistration

7)      Company to dissolve should apply for finance deregistration and will obtain finance deregistration certificate.

8)      Companies to dissolve should submit application for cancellation approval certificate at approval organization and will obtain cancellation receipt for foreign enterprise approval certificate.

9)      Companies to dissolve should apply for deregistration at registration authorities and will obtain notification on record cancellation.

10)  Companies to dissolve should apply for organization code deregistration and will obtain organization code cancellation certificate.

11)   Company to dissolve should apply for statistics deregistration and will obtain statistics registration cancellation certificate.


6.      Required procedures on relevant matters for absorbing company or new company:

1)      Absorbing company should make capital verification and capital verification report should be issued by certificated accounting firm.

2)      Absorbing company should apply for registration change at registration authorities and will obtain business license, new company set up should apply for establishment registration at registration authorities and will obtain business license.

3)      After M&A remained or new company change or collected business license for establishment within 30 days, creditors and debtors of the company to dissolve caused by M&A should be notified and it should be announced in country’s newspaper of higher than provincial level.

4)      New company should carve seal

5)      Handle organization code certificate

6)      Conduct tax registration

7)      Conduct finance registration

8)      Perform record for foreign trade operators

9)      Conduct Custom registration

10)  Handle Commodity inspection registration

11)  Apply for statistics registration


While applying for M&A it is recommended to pay attention to the following matters:

1.      Besides M&A Parties and basic information of the company after M&A in the company M&A agreement, special attention should be paid to M&A inheritance plan of model, credits and debts, also method of staff placement, responsibility for violation the agreement etc.

2.      Balance sheet and list of property items submitted by the company should be of the recent period.

3.      After receiving preliminary approval in the period of announcement, M&A Company should receive no-objection certificate from the creditors.

4.      While managing foreign exchange registration, company to dissolve should dispose all the other foreign exchange accounts besides exchange registration certificate and complete cancellation.

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