New security review for M&A by foreign investors initiated

On 3 February the State Council issued the Establishment of a Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors Notice (Guo Ban Fa [2011] 6), which came into effect on 5 March (see China Business Law Journal volume 2 issue 3, page 5). On 4 March, the Ministry of Commerce (MOFCOM) issued the Matters Relating to Implementing the Foreign Investors Merging with or Acquiring Domestic Enterprises Security Review System Interim Provisions (MOFCOM Announcement No. 8 of 2011), which are to remain in force until 31 August.

Scope of application

The Notice delineates the scope of the merger and acquisition (M&A) security review, clearly setting out the industries and types of M&A transaction that are affected, and the powers of control.

Range of industries

• Military-industrial enterprises and those supporting the military industry, key enterprises and those around sensitive military installations as well as other entities related to national defence and security.
• Important enterprises related to national security and major agricultural products, energy and resources, infrastructure, transport services, key technologies and equipment manufacturing, where effective control might be gained by foreign investors.
• The State Council will make further provisions concerning the security review of M&A transactions by foreign investors affecting China’s financial institutions.

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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.