CHINA Law and Practice Contributed by: Lingyun Dai, Tao Liu, Xueyong Liao and Yuzhou Shang, Lifeng Partners
ment option to the shareholders of the target com - pany. In practice, cash has been the predominant payment method in various types of listed company acquisitions in the domestic capital markets. PRC laws also impose a minimum price requirement for tender offers: the offer price for the same class of shares must not be lower than the highest price paid by the acquirer for such shares during the six-month period preceding the announcement date of the ten - der offer. 7.5 Conditions in Takeovers Subject to the procedural requirements for the acqui - sition of listed companies, the laws and regulatory authorities in China do not actually impose strict restrictions on the acquirer’s use of offer conditions and the establishment of deal protection clauses. However, based on publicly disclosed information, most tender offers do not contain special offer condi - tions and rarely include deal protection clauses such as break fees, matching rights or force-the-vote pro - visions. In the acquisition of Tiamaes Technology, Qiming Ven - ture Capital first signed an agreement in the name of the general partner Suzhou Qihan to lock in the equity, and then completed the fund-raising (Suzhou Qichen) to take over the transaction. The funding came from LPs such as Oriza Holdings (43.48%) and Kunshan State-owned Capital (21.74%), forming a step-by-step process of “agreement signing → fund registration → fund-raising → closing and transfer of ownership”. This case demonstrates that in the acquisition of domestic listed companies, funds can be raised after the agreement is signed. However, in practice in the domestic capital market, the acquirer generally proves its financial strength before the transaction and does not use obtaining financing as a condition for the offer. 7.6 Acquiring Less Than 100% Given the stringent regulatory requirements imposed by the PRC capital markets on the governance struc - ture of listed companies – including but not limited to compliance with the Guidelines for Articles of Asso - ciation of Listed Companies and the Code of Corpo -
rate Governance for Listed Companies – it is challeng - ing for bidders to establish special governance rights within the corporate governance framework beyond securing greater voting influence at the shareholders’ meeting level through mechanisms such as voting rights entrustment, voting rights waiver or concert party arrangements. In the PRC capital markets, there is no mechanism to push debt down to the target company, nor is there a mandatory squeeze-out mechanism to force minority shareholders to sell their shares. However, under cer - tain specific circumstances, eligible shareholders may request the company to acquire the shares they hold. 7.7 Irrevocable Commitments In tender offer transactions, it is relatively uncom - mon for major shareholders of the target company to directly issue irrevocable commitments to accept the offer or pledge their voting rights. According to PRC laws and regulations, sharehold - ers that intend to accept a tender offer must gen - erally appoint a securities company to handle the pre-acceptance procedures. Such “pre-acceptance” signifies a preliminary expression of intent by the target company’s shareholders to accept the offer. Shareholders that have pre-accepted the offer may appoint a securities company to withdraw their pre- acceptance within three trading days prior to the expi - ration of the tender offer period. However, if the tender offer period is within the final three trading days before its expiration, pre-accepted shareholders lose the right to withdraw their acceptance. Consequently, if a shareholder receives a more favourable bid, it retains the flexibility to reconsider its decision – provided the withdrawal request is submitted before the tender offer enters its final three trading days. 8. Management Incentives 8.1 Equity Incentivisation and Ownership In private equity transactions, equity incentives for the target company’s management team are common. Specific rights depend on the management team’s future value and participation. Notably, some buyout
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