CHINA Law and Practice Contributed by: Liu Cheng and Li Yumeng (Audrey), King & Wood Mallesons
2.4 Definition of “Control” Pursuant to the Provisions on Concentration Review, the concept of “control” in a concen - tration includes both ”sole control” and “joint control”. SAMR will take into account the following fac - tors when determining whether an undertaking acquires control over another undertaking: • transaction purpose and future plans; • change of shareholding structure; • matters put to vote, voting mechanism, his - torical attendance rates and the votes in the shareholders’ meetings or any other authority; • composition, voting mechanism, historical attendance rates and the votes of the board and other decision-making or management bodies; • the appointment and dismissal of other senior management; • the relationship between the shareholders and board directors; and • the existence of major business relationships and co-operation agreements. The acquisition of minor interests less than con - trol can still be caught based on the acquiring party’s right to appoint directors or senior man - agement, veto rights against major business decisions, or control over key resources. 2.5 Jurisdictional Thresholds The current jurisdictional thresholds of merger control in China are only based on turnover, as follows: • the combined worldwide turnover of all the undertakings concerned in the preceding financial year was more than CNY12 billion (approximately USD1.68 billion based on the exchange rate as the average central parity of
tors stipulated in the Trial Discretion Benchmark were already considered in these cases. For more details, see 2.13 Penalties for the Imple- mentation of a Transaction Before Clearance . In July 2021, SAMR published its penalty deci - sion on a failure-to-notify case regarding the acquisition of CMC by Tencent Music, which is the only case where SAMR imposed remedies for failure-to-notify cases, and Tencent was fined CNY50,000, which was the maximum penalty under the pre-amended AML. All penalties imposed for cases of failure to notify In China, certain types of transactions that con - stitute a “concentration of undertakings” are caught if they meet the jurisdictional thresholds. A concentration of undertakings is defined as: • a merger of undertakings; • acquiring control over one or more undertak - ings through acquisition of equity or assets; and are made public by SAMR. 2.3 Types of Transactions • acquiring control or the ability to exercise a decisive influence over one or more undertak - ings under a contract or any other means. Internal restructuring or reorganisations are gen - erally not caught if they fall under the exceptions outlined in 2.1 Notification . Based on the definition of “concentration”, transactions that do not involve the transfer of shares or assets but still concern the acquisition of control (eg, change of articles of association in relation to the appointment of directors and their voting mechanism) could potentially be caught.
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