Operation   of mode

The procedure is relatively simple.It does not involve the assessment of assets, and does not need to go through asset transfer procedures, saving costs and time.

Investigation procedure

Generally, it only involves the property right investigation of the transaction assets, without the need for detailed investigation of domestic enterprises, so the cycle is shorter and the risk of merger and acquisition is lower.

Approval procedure

Because of the different nature of the target enterprises, the regulatory attitude of the relevant government departments is also different.For those who do not involve state-owned equity and equity mergers and acquisitions of listed companies, usually only need to go to the industrial and commercial departments for change registration.

According to the Anti-monopoly Law and other relevant provisions, if the standards set by the State Council are met, M&A transactions may still need to be approved by provincial or national anti-monopoly review agencies.For  involving the foreign capital merger and acquisition, the approval of various departments such as the commercial department and the NDRC department is required.

Involving the state-owned equity mergers and acquisitions, but also through the state-owned Assets Management department examine and approve or approval or Keep on record, and after evaluation, entry transactions and other procedures.Involving the equity of a listed company, merger and acquisition transactions also need to be approved by the SFC, mainly to ensure that the interests of other shareholders are not compromised and that disclosure obligations are fulfilled in accordance with the provisions etc.

In the case of assets that do not involve state-owned assets or listed companies, the merger and acquisition of assets is an act between the acquirer and the target enterprise, which usually does not require the examine and approve or registration of the relevant government departments.

In addition, if the assets intended to be transferred belong to machinery and equipment that are subject to exemption and tax concessions for imported equipment and  are still under the customs supervision period,According to relevant regulations, the target enterprise should be approved by the customs and pay the corresponding taxes before transferring.

Involving state-owned assets, it is also necessary to go through asset assessment procedures.In case of major asset changes involving listed companies, the listed company shall also be approved by the SFC.

Examination and approval risk

The nature of the target enterprise has changed as a result of foreign investors buying shares in the target enterprise，Therefore, it is necessary to perform more stringent government approval procedures, which makes foreign investors bear a relatively large risk of approval.

Circumvent restrictions

Restrictions that can be entered into specific industries (such as the automotive industry/chemical industry) to circumvent the restrictions on asset transfers (such as intangible assets such as patents) in asset acquisitions.It is impossible to enter the industry through the establishment of a new enterprise, but the method of equity merger and acquisition can exceed the obstacle law.

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Transaction risk

As the shareholders of the target enterprise, they should undertake all kinds of legal risks before the merger, such as liabilities, legal disputes, the risk of unpaid taxes and fees, the risk of unobtained legal certificates,the risk of substandard environmental protection, and the risk of incomplete financial information etc.In practice, due to the acquirer lacks sufficient understanding of the target enterprise before the merger and acquisition, Resulting in various potential risks of the target enterprise erupt after the merger and acquisition, which can not achieve the best intention of both sides.

In equity mergers and acquisitions, in addition to the risk of contingent liabilities, the acquirer must also consider many other potential risks.These risks will inevitably increase the difficulty of legal due diligence and financial due diligence, and extend the M&A process, thereby increasing the cost burden of the acquirer and the uncertainty of the M&A transaction.

Credit rights and debts are borne by the company that sells the assets;The acquirer does not bear any responsibility for the target company's own creditor's rights and debts；Assets merger and acquisition can effectively avoid various problems involved in the target enterprise, such as debts and debts, labor relations, legal disputes, and so on.

The acquirer only needs to investigate the potential risks of the asset itself，For example whether to set a mortgage and other rights, whether it is equipped with the corresponding documents, if it is a tax-free equipment, then also need to consider whether the Acquisition the tax-free equipment is still under the supervision period.The above these potential risks can be measured by inquiring to relevant government departments or requiring the target companies to provide corresponding licenses, and the controllability is strong.

In the acquisition of assets, the Credit rights and liabilities of assets are generally clear, except some legal liability，Such as environmental protection and resettlement of employees, there is basically no problem of contingent liabilities.So asset acquisitions are concerned with credit rights and debts situation of the asset itself.

Tax factor

Relative tax savings.In the case of equity mergers and acquisitions, the target company does not have additional income，Therefore, the target company does not have the problem of business tax and income tax under this circumstance.

Except stamp dutyAccording to the relevant provisions on equity transfer, the shareholders of the target company may need to pay personal or corporate income tax due to the income from equity transfer.If the transfer of land and housing ownership occurs during the merger and acquisition process, the taxpayer may also face the deed tax.

Taxes may be overpaid.In the case of asset mergers and acquisitions, the target company has income，therefore, It is possible to generate business tax and income tax as a result of the increased value of the Transfer.

According to the different assets purchased, the taxpayers need to pay different kinds of taxes, mainly VAT, business tax, income tax, deed tax and stamp tax, etc.

Mode selection

Mergers  and acquisitions object

The mergers and acquisitions object is the assets of the target enterprise, such as physical assets or intangible assets such as patents, trademarks, goodwill, etc., such as machinery, plant, land and other physical assets,Does not affect the change of equity structure of the target enterprise.Assets mergers and acquisitions  lead to the outflow of assets of the domestic enterprise, but there is no change in the structure of the shareholder and the nature of the enterprise.

Transaction  subject

Nature of  transaction

The nature of  transaction is essentially equity transfer or capital increase,The acquirer becomes the shareholder of the target company through merger and acquisition, and obtains the shareholder rights such as dividend right, voting rights and so on in the target Enterprise.But the assets of the target company have not changed.

Transaction effect

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Assets can not be exempt from His property rights，That is to say, the assets of mergers and acquisitions originally set up guarantees and transferred with the transfer of ownership of assets.

Third-  party  equity impact

The target company may have multiple shareholders, and in many equity mergers and acquisitions, not all shareholders participate, but equity mergers and acquisitions will still affect all shareholders.According to the "Company Law", shareholders who transfer shares to entities other than shareholders shall be subject to the consent of  more than half  the other shareholders, and the other shareholders enjoy the preferential rights under the same conditions.If the planned transfer of the equity is pledged or has been used as a contribution to other enterprises, then the merger may also affect the equity pledger or other enterprises of the actual rights and Interests.

In asset acquisitions, those who are most affected are those who have certain rights to the assets, such as guarantor, mortgagee, right of lease holder.The transfer of these properties must be approved by the relevant rights holders mentioned above, or must fulfill the obligations of the relevant rights holders mentioned above.

In addition, in equity merger and acquisition or merger and acquisition，asset  creditors of the target enterprise who plan to transfer equity, or creditors of the target enterprise, may consider the equity or asset transfer price to be manifestly unreasonable，In fact, the mergers and acquisitions transaction has caused damage to them and the acquirer knows the above situation，In accordance with the provisions of the contract Law on the right of rescission, the acquirer has the right to revoke the aforementioned transfer of equity or assets, thus resulting in the failure of the merger and acquisition transaction.Therefore, the consent of the relevant creditors is very important for merger and acquisition  transactions.