Tentative Provisions for the Implementation of Asset or Business Divestitures of Concentrations of Business Operators

Repealed on December 04 2010: http://www.chinalawandpractice.com/Article/3433690/Provisions-on-the-Attachment-of-Restrictive-Conditions-to-Concentrations-of-Business-Operators-Trial.html

(Promulgated by the Ministry of Commerce on, and effective as of, July 5 2010.)

Announcement of Mofcom [2010] No.41

Article 1: These Provisions have been formulated pursuant to the Measures for the Review for Concentrations of Business Operators in order to regulate the implementation of decisions that impose restrictive conditions on concentrations of business operators (concentrations) requiring them to divest assets or businesses so as to ensure that the asset or business divestiture is accomplished smoothly.

Article 2: For the purposes of these Provisions, the term “asset or business divestiture” means the divestiture, pursuant to the review decision on a concentration of business operators (Review Decision) rendered by the Ministry of Commerce, of part of the assets or businesses of a business operator involved in the concentration that bears the obligation of divesting assets or businesses (the Divestiture Obligor) and related acts (Divestiture).

That part of the assets or businesses of a Divestiture Obligor that are divested are known as the “Divestment Business”.

Article 3: A Divestiture Obligor shall find a suitable purchaser and execute the sale agreement and other related agreements (Self-divestiture) by the deadline specified in the Review Decision. If the Divestiture Obligor fails to complete the Self-divestiture by the specified deadline, the Divestiture trustee shall find a suitable purchaser and reach a sale agreement and other related agreements (Appointed Divestiture) by the deadline and method specified in the Review Decision.

The Divestiture Obligor shall transfer the Divestment Business to the purchaser and complete all the relevant legal procedures, such as those for the transfer of title, within three months from the date of execution of the sale agreement and other related agreements. Based on the specific circumstances of a case, the Ministry of Commerce may, following an application and explanation of the reasons by the Divestiture Obligor, extend, according to the circumstances, the deadline for transfer of the business.

Article 4: A Divestiture Obligor shall, pursuant to the requirements of the Review Decision, appoint a monitoring trustee and, at the Appointed Divestiture stage, appoint a Divestiture trustee.

The term “monitoring trustee” means a natural person, or a legal person or other organisation appointed by the Divestiture Obligor and responsible for supervision of the entire business Divestiture process.

The term “Divestiture trustee” means a natural person, or a legal person or other organisation appointed by the Divestiture Obligor at the Appointed Divestiture stage and responsible for finding an appropriate purchaser and reaching a sale agreement and other related agreements.

The Divestiture Obligor shall submit the name of the selected monitoring trustee to the Ministry of Commerce within 15 days from the date on which the Ministry of Commerce rendered the Review Decision and, 30 days prior to entering the Appointed Divestiture stage, it shall submit the name of the selected Divestiture trustee to the Ministry of Commerce.

Article 5: The monitoring trustee and Divestiture trustee must be natural persons, or legal persons or other organisations that have the necessary resources and capabilities to engage in the entrusted business, and shall be independent from the business operators involved in the concentration and from the purchaser of the Divestment Business, and not have a material interest in them. The monitoring trustee and Divestiture trustee may be the same natural person, or legal person or other organisation.

The monitoring trustee and Divestiture trustee shall be accountable, and report on their work, to the Ministry of Commerce. The Divestiture Obligor may not issue any instructions to the monitoring trustee or Divestiture trustee without the consent of the Ministry of Commerce.

Article 6: The Divestiture Obligor shall execute written appointment agreements with the monitoring trustee and Divestiture trustee, specifying the duties and obligations of both parties.

The monitoring trustee shall perform its duties from the date on which the appointment agreement enters into effect until the date of completion of the business Divestiture, and the Divestiture trustee shall perform its duties from the date on which the appointment agreement enters into effect until the date on which the Appointed Divestiture stage ends. Without the consent of the Ministry of Commerce, the Divestiture Obligor may not terminate or amend the appointment agreement with the monitoring trustee or the Divestiture trustee.

The remuneration of the monitoring trustee and the Divestiture trustee shall be paid by the Divestiture Obligor. The amount and method of payment of such remuneration shall be such as not to prejudice the monitoring trustee's and Divestiture trustee's independence in performing their entrusted duties or their work efficiency.

Article 7: The monitoring trustee shall, under the supervision of the Ministry of Commerce and based on the principle of due diligence, perform the following duties independent from the Divestiture Obligor:

(1) monitoring the Divestiture Obligor in its performance of the obligations set forth in Article 12 hereof and regularly submitting supervision reports to the Ministry of Commerce;

(2) assessing the purchaser candidate recommended by the Divestiture Obligor, the sale agreement and other related agreements, etc. to be executed, and submitting an assessment report to the Ministry of Commerce;

(3) monitoring the performance of the sale agreement and other related agreements, and regularly submitting supervision reports to the Ministry of Commerce;

(4) being responsible for mediating disputes arising between the Divestiture Obligor and potential purchaser over Divestiture matters, and reporting on the same to the Ministry of Commerce; and

(5) submitting at the request of the Ministry of Commerce other reports relating to the business Divestiture.

The agreement appointing the monitoring trustee shall expressly provide for the foregoing duties of the monitoring trustee.

The Divestiture Obligor shall provide the support and convenience necessary for the monitoring trustee to perform the aforementioned duties, including providing to the monitoring trustee information on the parties that have a connection with the Divestment Business, the account books and records of the Divestment Business, the information provided by the Divestiture Obligor to the potential purchaser, information on the potential purchaser and the progress of the Divestiture, and other information and support necessary for the monitoring trustee to perform its duties.

The term “potential purchaser” means a business operator that satisfies the criteria set forth in Article 9 hereof and that expresses its intent to the Divestiture Obligor to purchase the Divestment Business.

Without the consent of the Ministry of Commerce, the monitoring trustee may not disclose to the Divestiture Obligor the various reports it submits to the Ministry of Commerce in the course of performing its duties. The monitoring trustee shall keep confidential the trade secrets and other confidential information that it learns in the course of performing its duties.

Article 8: The Divestiture trustee shall, under the supervision of the Ministry of Commerce, find a suitable purchaser and reach a sale agreement and other related agreements by the deadline and method specified in the Review Decision.

The Divestiture Obligor shall give the Divestiture trustee in the appointment agreement the written authority to independently dispose of the Divestment Business, and shall provide the support and convenience necessary for the Divestiture trustee to perform its duties.

Without the consent of the Ministry of Commerce, the Divestiture trustee may not disclose to the Divestiture Obligor the information on the performance of its duties. The Divestiture trustee shall regularly report to the Ministry of Commerce on the performance of its duties and keep confidential the trade secrets and other confidential information that it learns in the course of performing its duties.

Article 9: A purchaser of a Divestment Business shall satisfy the following requirements:

(1) being independent from the business operators involved in the concentration and not having a material interest therein;

(2) having the necessary resources and capabilities and the desire to safeguard and grow the Divestment Business;

(3) the purchase of the Divestment Business not resulting in the elimination or restriction of competition; and

(4) if the purchase of the Divestment Business requires the approval of other relevant departments, the purchaser shall satisfy the necessary conditions to secure the approval of other regulators.

Article 10: No agreement between the Divestiture Obligor and purchaser, including the Divestment Business sale agreement, transition agreement, etc. may contain provisions that run counter to the Review Decision.

Article 11: The Ministry of Commerce will assess the selected monitoring trustee, Divestiture trustee and purchaser of the Divestment Business, the appointment agreements and the Divestment Business sale agreement and related agreements to be executed provided by the Divestiture Obligor based on Articles 5, 9 and 10 hereof so as to ensure that they conform with the requirements of the Review Decision. The time required by the Ministry of Commerce for the aforementioned assessment shall not count toward the time limit for the Divestiture.

The Ministry of Commerce shall supervise and assess the performance by the monitoring trustee and Divestiture trustee of their duties.

Article 12: The business operators involved in a concentration shall perform the following obligations until the Divestiture is complete so as to ensure the value of the Divestment Business:

(1) maintaining the mutual independence of the Divestment Business and other businesses and adopt a management method that is the most compatible with the interests of the Divestment Business;

(2) not carrying out any acts that could have an adverse effect on the Divestment Business, including engaging the employees of the divested business, obtaining the trade secrets or other confidential information of the Divestment Business, etc.;

(3) appointing a manager exclusively responsible for managing the Divestment Business and performing the obligations set forth in Items (1) and (2); the manager shall perform his/her duties under the supervision of the monitoring trustee, and his/her appointment and replacement shall be subject to the consent of the monitoring trustee;

(4) ensuring that the potential purchaser can obtain full information on the Divestment Business in a fair and reasonable manner so as to enable the potential purchaser to assess the value, scope and business potential of the Divestment Business;

(5) at the request of the purchaser, providing it the necessary support and assistance so as to ensure the smooth handover and stable operation of the Divestment Business; and

(6) transferring the Divestment Business to the purchaser and carrying out the relevant legal procedures in a timely manner.

Article 13: The relevant provisions hereof shall apply mutatis mutandis to the implementation of the other restrictive conditions set forth in Article 11 of the Measures for the Review for Concentrations of Business Operators.