CHINA Law and Practice Contributed by: Bing Zhai, Commerce & Finance Law Offices
enterprises to submit annual reports to the relevant commerce authorities. This is done through the enterprise registration system and the national enterprise credit information pub - licity system, as stipulated in the Measures for the Reporting of Foreign Investment Information and the Notice on Foreign Investment Informa - tion Reporting. Foreign investment restrictions in China are pri - marily governed by two negative lists. The first is the market access negative list, which applies to all enterprises operating in China. The second is the Negative List for Foreign Investment Access, which specifically regulates foreign investments. • The Market Access Negative List (2022), jointly issued by the NDRC Commission and MOFCOM, outlines six prohibited items and 111 items that require prior approval for access. • The Special Administrative Measures (Nega - tive List) for the Access of Foreign Investment (2021), also issued by the NDRC and MOF - COM, came into effect on 1 January 2022. This list includes 31 sub-items across 12 major sectors, such as mining, manufactur - ing and utilities like electricity, heat, gas and water supply. The restrictions vary, including outright prohibitions on investment, opera - tional restrictions and shareholding limits. 2.4 Antitrust Regulations In China, business combinations (eg, mergers, acquisitions and joint ventures) are primarily reg - ulated under the Anti-Monopoly Law of the Peo - ple’s Republic of China (AML) and its supporting regulations. Key antitrust provisions include: • mandatory notification – transactions that meet certain turnover thresholds must be notified to the SAMR for antitrust review,
where failure to notify can result in penal - ties including fines and orders to unwind the transaction; • prohibition of anti-competitive conduct – the AML prohibits business combinations that may eliminate or restrict competition, such as monopolistic agreements, abuse of market dominance and concentrations that harm market competition; and • compliance guidelines – the SAMR has issued guidelines to help enterprises comply with antitrust requirements, including risk management and compliance systems for business combinations. 2.5 Labour Law Regulations In M&A transactions, terminating employee labour relations is a complex issue due to poten - tial adjustments in business direction, manage - ment and workforce needs. Ensuring a smooth and compliant termination is a major challenge for both the target company and the buyer. Under the Chinese legal framework, the termina - tion of labour relations is strictly regulated, espe - cially unilateral termination by employers, which requires specific conditions and procedures. In M&A, termination plans must consider both the approach and costs. Typically, a combination of mutual agreement and lawful unilateral termina - tion is used, such as under Article 40(3) (signifi - cant changes), Article 41 (economic layoffs) or Article 44 (dissolution) of the Labor Contract Law, supplemented by other unilateral meth - ods like non-renewal of contracts. For unilateral termination, parties must assess local judicial interpretations and alignment with the trans - action context. Offering compensation beyond statutory minimums can help achieve mutual agreement under Article 36, reducing legal risks and ensuring smooth transitions.
459 CHAMBERS.COM
Powered by FlippingBook