Background
On 8 September 2006, the revised Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ("the New Rules") replaced earlier provisional rules issued in 2003 (the "Provisional Rules"). The New Rules represent China's most far-reaching legislation governing foreign takeovers of domestic enterprises and encompass investment in both listed and unlisted Chinese companies across all sectors. They also cite the integrity of national economic security and the protection of important local brand names as the basis for invoking anti-monopoly probes into foreign acquisitions of substantial Chinese companies. Compared to the Provisional Rules, the New Rules also bring in international standards with regard to mergers and acquisitions in China. Leaning heavily on the Provisional Rules, the New Rules introduce mechanisms regarding share swaps, the protection of strategic interests and a chapter on special purpose vehicles ("SPVs").
