If a foreign funded enterprise in China is not profitable, can it merge with a domestic entity? 10

Chinese enterprises that have been acquired by foreign investors can still operate normally. M&A activities are carried out under certain conditions of property rights system and enterprise system, and in the process of M&A, one or a part of the rights subjects obtain corresponding benefits by transferring the control they have over the enterprise, and the other part of the rights subjects obtain this part of the control by paying a certain price. The process of enterprise mergers and acquisitions is essentially a process of continuous change of corporate rights subjects.

1. What are the precautions for mergers and acquisitions?

1.Understand the value and situation of the target company.

Enterprises should reasonably determine the value of the target company and reduce the valuation risk. Information asymmetry is the root cause of the risk of valuation of the target company, so enterprises should conduct a detailed review and evaluation of the target company before mergers and acquisitions.

Enterprises can hire an investment bank to conduct a comprehensive plan according to the company's development plan, conduct a comprehensive analysis of the target company's industrial environment, financial status and operating capabilities, so as to make reasonable expectations of the target company's future profitability. It is necessary to be careful of the loopholes in the financial statements of the target party, pay more attention to the off-balance sheet content, whether there are pending lawsuits, large guarantees and other estimated liabilities, and whether the main facilities and key equipment are mortgaged, so as to prevent the risk of asset misrepresentation.

2.Look for the right moment and solve it quickly.

Once an enterprise has determined the target of mergers and acquisitions, it is necessary to see the right time, advance when it should advance, retreat when it should retreat, and strategize. It should not be too long, time-consuming and laborious, inflating the cost of mergers and acquisitions, and even worse, drilling a gap for the target company and falling short. Therefore, it is necessary to strike decisively and fight quickly.

3.Unify the strategic direction of development and properly place employees.

Enterprises should prevent operational risks and employee placement risks, and thoroughly integrate production, technology, resources, and markets to carry out overall layout. In addition, the cultural concept should be unified, and the development goals, job requirements, and management methods of the two parties before the merger and acquisition are different, and they should be unified in one direction after the merger and acquisition. Finally, it is necessary to properly resettle employees, treat the employees of the acquired enterprise equally, and give the same welfare and political treatment, which will stimulate the enthusiasm of the employees of the acquired company, and the benefits after the merger and acquisition can be guaranteed.

Foreign-funded enterprises can be mergers and acquisitions, and they can also be acquired. Businesses need to notify the creditors of the announcement and make an announcement in the newspaper. The creditor's rights and debts of a foreign-funded enterprise shall be inherited by the acquired company. M&A refers to mergers and acquisitions. It is different from a corporate merger.

Legal basis] Article 172 of the Company Law.

The merger of the company can be a merger by absorption or a new merger.

The absorption of another company by one company is a merger by absorption, and the absorbed company is dissolved. The merger of two or more companies to establish a new company is a new merger, and the parties to the merger are dissolved.

Article 173.

In the case of a merger, the parties to the merger shall sign a merger agreement and prepare a balance sheet and a list of assets. The company shall notify the creditors within 10 days from the date of making the merger resolution and make an announcement in the newspaper within 30 days. Within 30 days from the date of receipt of the notice, and within 45 days from the date of announcement if the creditor does not receive the notice, it may request the company to pay off the debts or provide corresponding guarantees.

Foreign-owned enterprises can also be merged. According to the relevant laws of China, foreign-funded enterprises can be acquired, and if the equity of foreign-funded enterprises is changed, it needs to be approved by the examination and approval authorities and the registration authority to change the registration.

Several Provisions on the Change of Equity of Investors in Foreign-invested Enterprises

Article 2. The term "change of equity of investors in foreign-invested enterprises" as used in these Provisions refers to changes in the investors of Sino-foreign joint ventures, Sino-foreign cooperative joint ventures and foreign-funded enterprises (hereinafter collectively referred to as "enterprises") established within the territory of the China National Nuclear Power Plant in accordance with the laws of the People's Republic of China or their share of capital contribution (including the provision of cooperation conditions) (hereinafter referred to as "equity") in the enterprise. Including but not limited to the following main reasons for the change of equity of investors in foreign-invested enterprises:

1) Transfer of equity by agreement between enterprise investors;

2) the transfer of equity by the enterprise investor to its affiliates or other transferees with the consent of the investors of other parties;

3) The adjustment of the registered capital of the enterprise by the enterprise investor agreement leads to a change in the equity of the investors of all parties;

4) The enterprise investor pledges its equity to the creditor with the consent of the investors of other parties, and the pledgee or beneficiary acquires the equity of the investor in accordance with the provisions of the law and the contract;

5) The enterprise investor is bankrupt, dissolved, revoked, revoked or dies, and its heirs, creditors or other beneficiaries acquire the equity of the investor in accordance with law;

6) Where an enterprise investor merges or divides, its successor after the merger or division inherits the equity of the original investor in accordance with law;

7) If the enterprise investor fails to perform the capital contribution obligations stipulated in the enterprise contract and the articles of association, the investor shall be replaced or the equity shall be changed with the approval of the original examination and approval authority.

Article 3 The change of equity of enterprise investors shall comply with the relevant laws and regulations of China, and shall be approved by the examination and approval authorities and the registration authorities in accordance with these regulations. Equity change without approval by the examination and approval authority is invalid.

Therefore, if it is a foreign-funded enterprise, it can also be merged, as long as it is a number of enterprises set up within the scope of our country, whether it belongs to a private enterprise in China, or a private enterprise in a foreign hail, or other foreign enterprises, as long as it meets certain conditions for mergers and acquisitions, or it has been approved by the relevant institutions in China, then these foreign-funded enterprises can be mergers and acquisitions as long as they want to merge and acquisition. However, the merger and acquisition will definitely involve the change of equity, so after the change of equity, it is also necessary to register the change with the relevant authorities in China.

State-owned enterprises can be acquired. The transfer of state-owned assets shall be decided by the institution that performs the duties of the capital of the plant. If the institution performing the duties of the investor decides to transfer all the state-owned assets, or if the transfer of part of the state-owned assets causes the state to no longer have the status of controlling the shares of the enterprise, it shall report to the people at the same level for approval.

Article 51 of the Law on State-owned Assets of Enterprises.

The term "transfer of state-owned assets" as used in this Law refers to the act of transferring the rights and interests formed by the state's capital contribution to an enterprise to other units or individuals in accordance with the law; Except for the transfer of state-owned assets free of charge in accordance with state regulations.

Article 52.

The transfer of state-owned assets shall be conducive to the strategic adjustment of the layout and structure of the state-owned economy, prevent the loss of state-owned assets, and shall not harm the legitimate rights and interests of all parties to the transaction.

Article 53.

The transfer of state-owned assets is decided by the institution that performs the duties of the investor. If the institution performing the duties of the investor decides to transfer all the state-owned assets, or if the transfer of part of the state-owned assets causes the state to no longer have a controlling position in the enterprise, it shall report to the people at the same level for approval.