China's first share swap to test M&A laws

Poly Investments has carried out the first share swap in China under new M&A rules, but uncertainty still surrounds the treatment of acquiring equity interest.

Poly's Hong Kong-listed company acquired the equity interest of its sister company, Shenzhen Poly Investments. While the deal is a welcome first since the introduction of China's M&A Laws, it is yet to test one undefined article on the statute.

Under Chapter 4 of the law, share swaps can only occur if the acquiring offshore company is listed in a "recognized stock exchange". What "recognized" means is so far unclear and the well-respected Hong Kong exchange (where Poly is listed) is unlikely to raise any eyebrows among the regulators.