Many foreign companies are looking to acquire PRC companies to access the Chinese market or expand their Chinese operations. M&A activities in China are divided into two main categories: I) Equity M&A and; II) Asset M&A.

I. Equity M&A

This refers to a transaction where foreign investors purchase by agreement the shares of a Chinese domestic company or subscribe for an increased proportion of the shares in a domestic company.

Types of Equity Deal Structure:

China’s Ministry of Finance (MoF) and State Administration of Taxation (SAT) have released an update to the VAT reforms under the Shanghai pilot program. The announcement clarifies issues regarding the application of “zero VAT rate” and “VAT exemption”.

According to the guidance—Cai Shui [2011] No. 131 issued on Dec 20, 2011,the following VAT applicable services provided in pilot areas are subject to the zero VAT rate:

• From 1 January 2012 qualified businesses in Shanghai will be required to charge VAT following approval by the local tax bureau;
• Input VAT is creditable both for qualified pilot participants and their customers;
• Generally, the program follows existing VAT mechanisms;
• Two new VAT rates will be introduced, 6% and 11%, adding to the existing rates of 13% and 17%;
• Treatment of exports is yet to be determined but likely 0% or tax exempt;
• The first VAT return is due on 15 February 2012;

Lorsque l'on envisage un investissement dans une entreprise opérant en Chine, qu'il s'agisse d'un partenariat, d’une acquisition, d’une prise de participation, de l'achat de valeurs mobilières ou d’une autre forme de transaction, il est important de mener une due diligence pour minimiser les risques, évaluer les avantages concurrentiels et identifier les opportunités de croissance.

When considering an investment in a venture operating in China, whether it be a partnership, acquisition, shareholding stake, securities purchase or other form of transaction, it is important to conduct due diligence to minimize risk, assess competitive advantages and identify growth opportunities.

En Décembre 2010, une branche du State Administration of Foreign Exchange (SAFE), Shanghai Foreign Exchange Authority (SFEA), a publié une circulaire visant à assouplir le contrôle sur les opérations en devises étrangères et plus particulièrement les transactions transfrontalières entre le siège et sa filiale.