CHINA Law and Practice Contributed by: Wei Chen, Yue Zhang, Hao Peng and Yi Sun, JunHe LLP
11.4 Independent Outside Advice In a merger or acquisition deal in China, inde- pendent outside advice is usually sought by and given to (and therefore paid for by) the sellers ie, the shareholders of the company (including the founder(s) and VC investors). This advice normally includes legal, financial and tax advice from outside advisers in respect of the deal structure, valuation, pricing and legal aspects of the transaction. Financial advisers in China are not banned from providing a fairness opinion, but their doing so is rarely seen in practice.
• a duty to comply with the law, including a duty to protect the company’s interest against inter alia its shareholders. In most situations where directors breach their duties, the board of supervisors and the share- holders will have the legal standing to sue them on behalf of the company (or for the sharehold- ers in the cases where their interest is damaged). 11.2 Special or Ad Hoc Committees It is not common for boards of directors to set up special or ad hoc committees in business com- binations or use them when some directors have The board of directors of the target company (and the other functions of the company) are not expected to be actively involved in M&A nego- tiations, while it is more customary in China for the parties to the deal (ie, the sellers and buyers) to approach each other and negotiate directly, except in respect of due diligence where the company’s co-operation is expected (under the instruction and/or leadership of the board of directors). Litigation by shareholders challenging the board’s decision to recommend a merger or acquisition transaction (if any) is rarely seen in practice in China. a conflict of interest. 11.3 Board’s Role
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