The commercial structure of merger by share exchange is defined as that the merger company exchanging the shares of the target company for the shares held by shareholders of the target company by issuing new shares as consideration by way of private placement, and the merger company becoming the controlling shareholder, or even sole shareholder of the target company.
Ultimately, the merger company survives and the target company ceases to exist upon merger by absorption. Instead of becoming a subsidiary of the merger company, the target company eventually disappears (by merger). Following the share exchange, the objective of the merger company is to merge the assets of the target company, instead of becoming a wholly owned subsidiary.
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Wang Xiaoxin is a senior counsel, Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC), and Ai Dunyi is a Masters candidate at the School of Transnational Law of Peking University