China's New Merger & Acquisitions Rules

China's Ministry of Commerce posted information about new merger and acquisitions rules on Friday. The new rules provide as follows:

"1. Foreign investors may establish Sino-foreign cooperative advertisement enterprises by purchasing part of the equity shares of domestic enterprises, and establish foreign funded advertisement enterprises by purchasing all of the equity shares of domestic enterprises in line with Regulations on Advertisement and Regulations on Merger and Acquisition.
2. Foreign investors to establish foreign funded advertisement enterprises through equity shares merger and acquisition, both the domestic investors and foreign investors shall conform to conditions of Article 9 and Article 10 of Regulations on Advertisement.
3. Foreign investors investing in advertisement industry through merger and acquisition of domestic advertisement enterprises shall go through formalities of examination and approval and registration in line with regulations of Article 6 and Article 7 of Regulations on Advertisement.
4. Acquiring Opinion of Examination and Approval on Project of Foreign Funded Advertisement Enterprises issued by State Administration for Industry and Commerce, applicants shall submit related documents and go through formalities of examination and approval in line with Regulations on Advertisement and related rules on merger and acquisition."

These new rules substantially revise the 2003 rules that applied to acquisitions. Some, but not all, acquisitions by foreign enterprise require government approval. Whether approval is required depends on the size of the deal or whether the deal involves a crucial enterprise or well-known Chinese brand. The new rules also allow acquirers to finance transactions using shares as payment.