CHINA Law and Practice Contributed by: James Hu, Yingjie Kang, Huihui Li, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
The amended turnover thresholds are as follows: • the aggregate global turnover of all the undertak - ings to the concentration exceeds CNY12 bil - lion (increased from 10 billion), or the aggregate Chinese turnover of such entities exceeds CNY4 billion (increased from 2 billion) in the preceding financial year; and • each of at least two of the undertakings to the concentration had a turnover in China exceeding CNY800 million (increased from 400 million) in the preceding financial year. Special rules apply to the calculation of the turnover of undertakings in the financial sector. Consistent with the revised AML, the Amended Threshold reiterates SAMR’s right to review transac - tions that do not meet the turnover thresholds, pro - vided that there is evidence that the transaction may have the effect of eliminating or restricting competi - tion. No Possibility of Exemptions for Foreign Investors or Investments Where the merger requirements are met, no exemp - tion is available for foreign investors or investments. Process and Timeline The merger review procedures in China include the simplified procedure (ie, expedited merger review procedure for certain types of transactions unlikely to raise concerns in China) and the normal procedure (ie, standard procedure for the remaining types of notifi - able transactions). Upon notification, all transactions enter a pre-accept - ance phase where SAMR may request further informa - tion about the transaction and the notification. There is no statutory time limit for the pre-acceptance phase; the actual duration depends on the questions and time needed to collect the requested information. In the experience of the authors, the pre-acceptance phase generally lasts four weeks on average under the simplified procedure, and four to eight weeks under the normal procedure. A notification will only be accepted once SAMR considers the information it receives to be complete and satisfactory.
Once the case is accepted, it will enter into a three- phase review period. Most cases undergoing the sim - plified procedure are cleared within Phase I (ie, 30 days upon case acceptance). For cases undergoing the normal procedure, if the transaction does not raise competition concerns it is usually cleared within the review period for Phase II (ie, 90 days). For transactions with competition concerns, the review extends to Phase III (ie, 60 days). In practice, SAMR’s review of cases with significant competition concerns may exceed the maximum statutory period of 180 days for the three phases. The Revised AML introduced a “stop-the-clock” mechanism whereby the statutory merger control review period can be suspended under three scenarios, namely: • if the filing parties fail to submit supporting infor - mation in a timely manner, which prevents the progress of the review; • when new circumstances or facts that materially impact the review arise and need to be verified; or • when remedy conditions need to be further evalu - ated (provided that the filing parties consent). There is no maximum time limit for SAMR to suspend the review time under the “stop-the-clock” mecha - nism. Clearance and Transaction Closing Merger clearance must be obtained before the closing of the proposed FDI transaction which, in the case of a greenfield JV, refers to the incorporation of the JV and, in the case of an equity or asset transfer, the registra - tion of the equity or asset to be acquired. Delegation to Local Authorities SAMR announced a pilot programme to delegate the review of certain simple case filings to five local authorities in Beijing, Shanghai, Guangdong, Chong - qing and Shan’xi Provinces during a three-year pilot period commencing on 1 August 2022. Based on SAMR’s guidance, a transaction can be delegated to one of the five Local AMRs where it has one of the following nexus to the relevant city or province:
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