Experienced arbitrator and in-house legal head Chris Chi uses his wealth of arbitral experience to explore methods of acquiring equity and real estate with greater efficiency
China has legislation on the acquisition by a foreign investor of equity in a Chinese-fund invested company, as well as legislation on the purchase and transfer of land use rights and the associated properties (real estate).
In practice, a foreign investor may wish to acquire a foreign shareholder’s equity in an existing Sino-foreign joint venture company (a target company) at the shareholder level while simultaneously acquiring into the target company real estate that is owned by the Chinese shareholder (the local partner) but leased by the target company at the company level.
In doing so, the shares and real estate can be acquired together at both levels. However, there has not been any coherent and detailed legislation on achieving a transaction with this goal so far.
First of all, let us separate the goals of investment. A great number of Sino-foreign joint venture companies (JVs) have been established since the 1970s, when the foreign company laws – the Law on Sino-foreign Equity Joint Ventures, the Law on Sino-foreign Cooperative Joint Ventures and the Law on Wholly-owned Foreign Enterprises, as well as legislation related to the three – were passed and took effect.
Chris Chi is an arbitrator of the Beijing Arbitration Commission and Hong Kong International Arbitration Centre and also serves as head of legal of China and the North Asia region for Schlumberger