Spot the differences

May 13, 2010 | BY

clpstaff &clp articles

As the acquisition of a Chinese company by a foreign investor is treated differently under PRC law than a purely domestic M&A, counsel need to be mindful of several issues that are often overlooked

Unique legal issues may arise when a foreign investor acquires a PRC company. The possibility of transactional risk increases as these issues may go unnoticed by lawyers representing both sides of the deal. One of the main reasons for this lies in the fact that an acquisition of a domestic Chinese company by a foreign investor is treated in PRC law as distinct, in many ways, from a purely domestic acquisition where both parties are Chinese.

Practices normally adopted in the structuring and negotiation of a cross-border acquisition may need rethinking when the target is a domestic Chinese company. Here are three specifications counsel should pay closer attention to: