CHINA Law and Practice Contributed by: James Hu, Yingjie Kang, Huihui Li, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
Sanctions for Closing Before Clearance The AML prohibits parties from implementing a notifi - able transaction before filing a merger control notifica - tion (failure to notify) and obtaining a merger control clearance (gun-jumping). The Merger Review Regulation provides guidance on the relevant factors for determining whether a transac - tion has been implemented and may so constitute a failure to notify or gun-jumping. A non-exhaustive list of actions that may constitute gun-jumping includes: • effecting changes on the registration of the corpo - rate entity or the register of shareholders; • appointing senior management personnel; • participating in business decision-making and management; • exchanging sensitive information with other opera - tors; and • carrying out business integration. The Revised AML increased the maximum fine for failure to notify and gun-jumping from CNY500,000 to CNY5 million where the transaction has no anti- competitive effect. Where the transaction has or may have anti-competitive effect, the maximum fine is 10% of the party’s turnover in the preceding year. As of October 2025, SAMR has imposed penalties on six cases of failure to notify and gun-jumping under the revised AML, with the highest fine reaching CNY1.75 million. In addition to imposing fines, SAMR can order the transaction parties to undertake the following steps to restore the situation to the pre-transaction state: • suspend the transaction; • dispose of shares or assets within a specified time limit; • transfer the business within a specified time limit; and • implement other measures as required. In July 2021, SAMR issued a penalty decision against Tencent for its failure to notify an acquisition of a 61.64% stake in China Music Corporation. SAMR imposed the maximum fine of CNY500,000 (the maxi -
mum fine at the time) and imposed remedies to restore competition in online music broadcasting platforms through measures such as abandoning exclusive music copyright licensing arrangements. Tencent was also required to notify SAMR of future transactions, including those that fall below notification thresholds – a requirement that generally goes beyond the scope of remedies contemplated under the AML. While the Revised AML notes that criminal liabilities may be imposed for breaches (including gun-jump - ing), the precise application of criminal liabilities on undertakings and individuals is expected to be clari - fied in amendments to China’s Criminal Law.
7. Foreign Investment/National Security 7.1 Applicable Regulator and Process Overview National Security Review (NSR) Overview
In China, FDI that has an impact or a potential impact on national security is subject to national security review, as stipulated in both the National Security Law and the FIL. The review regime is established in 2011 and updated in the Measures for Security Review of Foreign Investment (the “NSR Measures”) jointly pub - lished by the NDRC and MOFCOM on 19 December 2020 and effective from 18 January 2021. NSR Industry Scope China’s NSR regime targets foreign investments in two categories related to defence and national security in China. • Category A – defence-related sectors, which are notifiable regardless of whether the foreign investor will have control over the target: (a) investment in sectors related to national secu - rity, such as the military and arms industry, or other ancillary industries; and (b) investment in areas adjacent to military or arms facilities. • Category B – other sectors concerning national security, notifiable only if the foreign investor will acquire control: (a) important agricultural products;
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