Boosting China’s Overseas M&A Push by Simpler Merger Code
Simpler Merger Code Proposed
China is planning to remove the need for State Council approval for large, sensitive outbound deals and to allow Chinese companies to vie for the same target, that is likely to further boost record overseas acquisitions by Chinese companies.
The draft rules aimed at speeding up approvals and allowing head-to-head competition between Chinese bidders were published by China’s chief outbound investment regulator, the National Development and Reform Commission (NDRC). Chinese companies seeking to carry out a deal of $2 billion or more in sectors or countries that China deems sensitive will no longer need approval from the State Council, or to provide proof of financing, under the proposed rule changes. However they would still require NDRC and the Ministry of Commerce, or MOFCOM, China’s other investment regulator’s clearance for sensitive deals.
The NDRC has also proposed to reduce the role its regional bureaus play in approving regular deals, that is likely to strip out an extra layer of red tape faced by companies based in far-flung provinces. NDRC has also proposed to remove its discretionary power to operate an informal policy of giving one Chinese company the exclusive right to bid for an overseas deal.
The new rules are expected to come into force soon after the consultation closes on May 13.
China is still keeping a close watch on capital outflows
However, China is still keeping a close guard on its capital outflows, meaning that it is not entirely going to be a smooth ride, even under the proposed rule changes by NRDC.
Funding arrangements will still need to be registered with the State Administration of Foreign Exchange (SAFE), and some legal and banking professionals felt that SAFE has in recent months tightened up the process for approving funding arrangements, requiring extra paperwork, queries and ad hoc meetings, to ensure the transactions are genuine.
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