New security review for M&A of domestic enterprises by foreign companies

On 25 August, the Ministry of Commerce (MOFCOM) published the Implementation of a Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors Provisions (MOFCOM Notice No. 53 of 2011), which took effect on 1 September.

The Provisions elaborate on the requirements of the Establishment of a Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors Notice (Guo Ban Fa [2011] No. 6), published by the General Office of the State Council on 3 February (see China Business Law Journal volume 2 issue 3, page 5), by clarifying the security screening procedures for M&A deals, the application documents required, and other matters.

According to the Provisions, if any aspect of an M&A deal falls within the scope of an M&A security review but the applicant fails to apply for a review, the local department of commerce should, after accepting the application to proceed with the M&A deal, suspend processing the application and ask the applicant to submit an application to MOFCOM. Before making such an application, the applicant may propose the holding of prior discussions with MOFCOM.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.