CHINA Law and Practice Contributed by: Bing Zhai, Commerce & Finance Law Offices
3.2 Significant Changes to Takeover Law In 2024, the Chinese government introduced a series of policies and regulations aimed at revitalising and standardising the M&A market. These policies, issued by key regulatory bodies such as the State Council and the CSRC, have played a pivotal role in guiding market activity and fostering high-quality development. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies It is common for bidders to build a stake in the target company before launching a formal offer. Principal stakebuilding strategies include: • open market purchases – acquiring shares through stock exchanges, often gradually to avoid triggering disclosure thresholds prema - turely; • block trades – purchasing large blocks of shares from existing shareholders, such as institutional investors; and • pre-offer agreements – negotiating agree - ments with key shareholders to secure their support before the offer is announced. 4.2 Material Shareholding Disclosure Threshold According to Articles 13 and 14 of the Adminis - trative Measures on Acquisition of Listed Com - panies, as well as Opinion No 19 on the Appli - cation of Securities and Futures Laws – Opinion on the Application of Articles 13 and 14 of the Administrative Measures on the Acquisition of Listed Companies issued by the CSRC, the fol - lowing applies. • When an investor and persons acting in concert acquire 5% of the issued shares of a listed company through securities trading
panies in moving towards new quality productiv - ity by encouraging M&A in strategic and future industries, including cross-industry deals and acquisitions of unprofitable assets to strengthen supply chains and core technologies. They also promote industrial integration to address issues of scale without strength in some industries, simplifying review procedures for listed compa - ny integrations and encouraging private invest - ment funds to participate through mechanisms like lock-up period “reverse hooks” . Additionally, the guidelines increase regulatory tolerance for valuation, performance commitments, competi - tion and related-party transactions to optimise resource allocation. Efforts to improve M&A efficiency include supporting diverse payment tools (eg, cash, shares, convertible bonds) and phased financing, while a simplified review pro - cess streamlines procedures and shortens time - lines. Intermediaries are urged to enhance ser - vices, and regulatory efforts should be increased to combat illegal activities and protect small and medium investors. On 19 June, the Eight Guidelines for the STAR Market proposed greater support for M&A, encouraging STAR Market-listed companies to conduct upstream and downstream indus - trial chain integrations and acquire high-qual - ity unprofitable hard-tech enterprises. Driven by this policy, data from the Shanghai Stock Exchange showed that since the release of the Eight Guidelines, the STAR Market accelerated its pace, with over 40 equity acquisition transac - tions disclosed, more than double the number year-on-year, totalling over RMB11 billion. By the end of October, several STAR Market com - panies had released related M&A plans, with some already completing M&A, further directing resources towards new quality productivity.
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