CHINA Law and Practice Contributed by: Wei Chen, Yue Zhang, Hao Peng and Yi Sun, JunHe LLP
the public company, but is not the largest share- holder or actual controller of the listed company, it will state the purpose of the shareholding and whether it intends to continue increasing its interest in the listed company during the follow- ing 12 months in its report. Where: • the buyer comes to hold or control 20% or more of the issued shares of the public com- pany; or • the buyer comes to hold or control 5% or more, but less than 20%, and becomes the largest shareholder or actual controller of the listed company, it will also state its follow- up plan during the following 12 months with respect to the listed company, such as adjustment to its assets, business, staffing, organisational structure, articles of associa- tion, etc in its report, the buyer is not required to make a proposal or state that it will not be making a proposal within a specified period of time, unless the tender offer is triggered. 6.2 Mandatory Offer The threshold for a mandatory offer is 30% of the issued shares of a listed company, except for mandatory offer exemptions permitted under the laws. A tender offer will be triggered, unless exemption of the tender offer is permitted under the laws: • where the buyer comes to hold 30% of the issued shares of the target company and continues to increase the shareholding, it will make a general offer or partial offer; • where the buyer intends to acquire more than 30% of the issued shares of the target com- pany through share transfer by agreement, shares exceeding the 30% will be acquired
by tender offer. The buyer will make a general offer before performance of the agreement; and • where the buyer is not a shareholder of the target company but has interests over more than 30% of the issued shares of the target company, through investment, agreement and other arrangements, it will make a general offer. 6.3 Transaction Structures Acquisition of a public company could be effect- ed by various methods, such as: • acquisition of its shares through trading at the stock exchange; • share transfer by agreement (usually with the controlling shareholder of the public com- pany); • subscription of shares in a private placement; • takeover offer; • acquiring the voting rights through investment relationship, agreement or other arrangement (such as voting trust); or • a combination of two or more of these meth- ods. Typically in practice, the acquisition is achieved through share transfer by agreement, or in com- bination with other methods (eg, voting trust or subscription of shares in a private placement). A merger option is available, but not often used for acquisitions of public companies. A merger may generally involve more parties and trigger more information disclosure requirements or regulatory approvals (as the case may be) and the implementation will be more complicated. 6.4 Consideration and Minimum Price Cash transactions are more typical in public company acquisitions. Payment in stocks or
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