On 28 August 2010, Chinese government released the Opinions on Promoting Enterprise Consolidation and Re-organisation, dated. According to the Opinion, mergers & acquisition transactions for the purpose of restructuring are encouraged and will be facilitated by the relevant authorities.

In China, a company must file record numerous information with its local Administration for Industry and Commerce (AIC), such as the company’s shareholding structure, business scope, registered capital, corporate governance and etc. In the event such information has to be changed, the filing with the AIC must be updated accordingly within the statutory time limits. As the restructuring of a company by merger or split will inevitbly lead to  a variety of changes to the corporate information filed with the AIC at different stages of the restructuring, it has become complex  endeavour to update corporate registrations at the AIC.

In order to facilitate the restructuring of companies and guide them through the government formalities to update their corporate registrations in an efficient manner, the State Administration for Industry and Commerce (SAIC) issued its Opinions on Duly Registering Company Mergers and Divisions so as to Support Enterprise Consolidation and Re-organisation on November 28 2011.The Opinions intend to provide convenience to and reduce the operational costs of company restructuring.

Multiple registrations at one time  For a restructuring project involving a merger or a split, there are multiple registrations to be completed before it can be finally closed. When the restructuring involves companies located in different areas, the registration formalities will have to be completed with various AICs of diverse administrative levels. The Opinions provide that all registrations relating to a restructuring company may be handled at the same time.

Flexibility in determining the registered capital  In case of consolidation of companies, the registered capital of the surviving company will be the total of the registered capitals of all the combined companies; in case of a split, the total registered capital of the companies split from the original one will equal the registered capital of the original company.The Opinions grant much flexibility for the restructuring parties to determine the registered capital for the surviving company: the parties can agree on the registered capital and share percentages at their own discretion by mutual agreement.

Survival of branch companies  Prior to the issuance of the Opinions, if a dissolving company or a company to be split has branch companies, these branch companies should be deregistered in the process of the restructuring.The new Opinions offer a solution by giving the restructuring companies the right to decide the future of these branch companies. If the branch companies are to be transferred to the surviving or newly-incorporated company, they may be registered under the designated company through the company name change procedure.

New shareholder to join the restructuring  It is not uncommon that the restructuring of a company or a group of companies would probably accept new shareholders and new investments. In the past, the AIC would probably request the company to complete the restructuring as a first step, to be followed by the registration of another round of investment with new shareholders.To facilitate this type of restructuring, the Opinions states that the changes to shareholding structure, the registered capital and other matters of the restructuring companies may be registered simultaneously with the competent AIC.

The Opinion (in Chinese): http://www.fdi-law.com/view.php?id=100308