Developments In M&A Regulations In China And Impact On VIE Structures

The Ministry of Commerce (MOFCOM) for the People's Republic of China (the "PRC" or "China"), which provides security reviews for inbound mergers and acquisitions, has implemented new review features that have the potential to alter the foreign investment landscape. Variable Interest Entities ("VIEs"), corporate structures utilized in certain mergers and acquisitions (M&A) to access industries normally restricted to foreign investment, may now fall under the scrutiny of MOFCOM. This would subject VIEs to tighter screening procedures and increase the likelihood that certain transactions will not be completed. Foreign companies making acquisitions in China will have to reconsider their approach to VIEs as these structures come under greater scrutiny.