(1) Subject risk
To put it simply, the subjects involved in M&A legal relationship often seem to be two parties, but the identification of the two parties is not so simple.
Under normal circumstances, equity mergers and acquisitions should be the transferor and transferee of equity. However, in the practice of mergers and acquisitions, many equity mergers and acquisitions are signed by the actual controllers of both parties. Usually, the actual controllers first sign the framework agreement, and then gradually implement the detailed agreement, which will be signed by both parties in the legal sense.
Then, in this series of transaction contracts, how to arrange the legal relationship between the parties, not only to meet the needs of practice, but also to meet the requirements of legal effect, needs to make reasonable arrangements for different M&A cases.
In the arrangement of the transaction subject, it is still the signing status of the target company. From the perspective of legal effect, it seems that the target company should not be the subject of the transaction, but considering the information disclosure obligation of due diligence and the expansion of the subject of responsibility when the merger fails or terminates, the target company can be regarded as a party to the transaction contract.
However, in practice, the "legal joke" that the equity merger contract is not signed with shareholders but only with the target company is not a case. A court leader even told the author that this signature method was approved by his senior dean.
(2) the legal risk of information asymmetry
The legal risk of information asymmetry means that there may be serious asymmetry between the acquirer and the shareholders and management of the target company in the M&A process, which will bring uncertain factors in legal responsibility for mergers and acquisitions.
(3) Legal risks of M&A decision-making.
In practice, the merger and acquisition methods of Chinese enterprises are mainly equity acquisition and asset acquisition. Equity acquisition refers to the acquisition with all or part of the equity of the shareholders of the target company as the acquisition target. After the acquisition of muscle rights, the acquirer becomes the controlling shareholder of the target company, and the original debt of the target company is still borne by the target company. However, because the original debt of the target company has a great influence on the income of new shareholders, and the contingent debt of the target company is often unpredictable in the acquisition process, there is a certain debt risk in equity acquisition. Asset-based acquisition refers to a civil legal act in which the acquirer obtains all or part of the assets of the target company for compensation. The target of asset acquisition is the specific assets of the target company, which generally does not include the company's liabilities. Therefore, as long as the acquirer pays attention to the creditor's rights and debts of the asset itself, it can basically control the acquisition risk.
(4) Confidentiality risk
M&A transactions usually have confidentiality requirements from the beginning, not only the transaction data and information need to be kept confidential, but also the transaction itself and the true identity of the transaction subject.
The confidentiality obligation clause is not only an important part of the framework agreement, but also a necessary clause of the formal agreement.
(5) Risk due diligence
Due diligence is the most important content before merger and acquisition. On the one hand, due diligence can't find all problems, especially for M&A obstacles, contingent risks and invisible debts and responsibilities. On the other hand, it is extremely dangerous to ignore due diligence only through the design of the claim system. Due diligence needs to be treated rationally. Although all problems and risks cannot be exhausted, it is extremely important to assess and grasp risks. Only on the basis of full due diligence can we make a correct business judgment.
Due diligence requires the target company and the counterparty to fully disclose the comprehensive information of debts, liabilities and risks involved in the transaction, as well as the comprehensive information of assets, finance, disputes, corporate governance, labor affairs and so on. According to the specific project, scan the risks in this information and design the control scheme.
2. Legal risks in the implementation stage of M&A..
After the M&A mode is determined, the acquirer and the acquired party enter the M&A implementation stage. In the process of M&A implementation, both parties make strict M&A agreement to protect the security of the transaction; Ensure the smooth progress of M&A through reasonable arrangement of financing methods.
(1) Legal risk of M&A transaction
M&A Agreement is the legal expression of M&A transactions, and its strict provisions are an important guarantee to actively guard against various known and unknown legal risks. The M&A Agreement should set up representation and guarantee clauses, so that the acquired party can make a true and detailed statement of any information related to the target company M&A, and clarify the legal consequences of false statements, so as to ensure the security of the transaction.
(2) Legal risks of M&A financing
Under normal circumstances, it is difficult for the acquirer to completely use its own funds to complete the M&A process, and it is often necessary to inject a lot of funds in the process of mergers and acquisitions. The financing method adopted by the acquirer in the financing process will lead to changes in its own financial structure, which may lead to financial or operational risks. Whether the acquirer can use internal and external capital channels to raise funds on time and in full, that is, whether the enterprise has the financing ability, is one of the keys to the success of enterprise mergers and acquisitions.
(3) Financial risks
A. financial data integrity risk. Because financial information belongs to the target company, old shareholders often worry about the "unfavorable" factors contained in financial information, and often conceal or even destroy some financial information, resulting in incomplete financial information and financial files, which may lead to punishment of the target company.
B. risks in audit reports and notes to financial statements. The audit report is a third-party review of the company's finance, which often reveals some risk matters, while the notes to the financial statements are usually financial matters that need attention, and these information, especially the reserved opinions and emphasized matters, will contain the financial defect information of the target company.
C. determination of profit attribution. If M&A transactions involve listed companies, there is a problem of defining profit attribution nodes, and this attribution agreement is related to the performance of listed companies.
D. risk of future events. Because the M&A trade fair will last for a period of time, and the target company usually can't stop operating and wait for the merger to be completed, the audit report and evaluation report based on which both parties conduct the trade are based on a tentative base date, and the duration from the base date to the actual delivery date is uncertain. How to adjust the matters during this period and how to bear or enjoy the operating profit and loss need to be clear.
E. price payment risk. The payment of the transaction price needs to be arranged reasonably according to the specific transaction structure, and the corresponding node control and risk control should be considered. After the transaction is completed for a certain period of time, the balance must be paid to prevent the release of risks after delivery and handover.
(4) Risk of equity delivery
Based on different target companies, the requirements for equity delivery are different from those of the competent authorities, and the procedures for equity delivery and the changes handled at the same time are also different. Some equity delivery needs pre-approval (such as foreign-invested enterprises), and some need to go through certification procedures. Special attention should be paid to the special requirements of various special legal norms to avoid procedural or effectiveness defects.
(5) Company handover risk
Equity delivery is only the premise of actual control of the target company, and does not mean substantial control of the company. Company handover, including legal handover (change of various institutions, change of corresponding licenses, etc.). ) and real-time handover are the realistic level of company control. These transfers can be made before, after or during the delivery of the equity.
In the company handover, on the one hand, we should pay attention to the smooth handover of the target company, on the other hand, we should improve various handover procedures, formulate perfect handover documents, clarify responsibilities and preserve evidence.
Before the handover of the company, there are usually transitional arrangements to reflect the management arrangements of the parties to the transaction and avoid the risk of changes in the target company under unilateral control.
3. Legal risks in the post-merger integration stage.
After M&A, it is necessary to integrate the finance, assets, business, corporate governance structure, human resources, culture, management mode and organization of the target company. The integration scheme may involve many issues such as strategy, financial planning, creditor's rights and debts handling, supply and marketing channels, corporate governance and internal control system, human resources, organization, management mode, intellectual property rights, corporate culture, marketing and so on.
(1) Legal risks of financial integration
Enterprise merger and acquisition, like any other commercial competition mode, is inseparable from capital and must have excellent financial monitoring ability. Financial integration is the core content and important link in enterprise merger, reorganization and integration, which is not only related to whether the strategic intention of merger can be realized, but also related to whether the acquirer can effectively control the acquired party. Financial integration involves the connection and adjustment of financial management, and related financial integration contents should be solved according to the characteristics of mergers and acquisitions in order to achieve the purpose of financial integration smoothly. If the unified management of financial personnel is adopted; Unify enterprise accounting policies and accounting systems; Implement financial systems such as consolidated financial statements.
(2) Legal risks of asset integration
After merger and acquisition, through asset integration, non-core businesses can be stripped, non-performing assets can be disposed of, excellent assets can be reorganized, the quality and efficiency of asset operation can be improved, the enterprise organization can be improved, the capital can be enriched, the debt ratio can be more reasonable, the finance can be more sound, and the production cost can be lower. Enterprise asset integration includes the integration of tangible assets and intangible assets. The integration of tangible assets of enterprises includes the use of excellent assets and the clean-up and disposal of non-performing assets. The clean-up and disposal of bad debts and bad investments is an important supplement to improve the efficiency of asset operation and an important means to avoid risks and nip in the bud after mergers and acquisitions. The integration of intangible assets of enterprises is also a problem that can not be ignored in mergers and acquisitions. We should pay full attention to the integration of intangible assets to avoid legal risks caused by the loss and improper use of intangible assets.
(3) Legal risks of business integration
After the merger, the target company should abandon, merge and increase some business activities according to actual needs. In business integration, legal risks such as customer relationship maintenance, market development and diversified development are generally involved. After M&A, we should pay attention to the maintenance of the original customer relationship, take active customer maintenance measures, and attach importance to marketing integration including marketing means, strategies, marketing plans and tasks to prevent the original market share or advantages of enterprises from decreasing; Connect production, marketing, marketing and other related links, pay attention to existing customer relations and supply chain maintenance, and effectively reduce the legal risks of diversified development.
4. Legal risks of special M&A projects
In addition to the above-mentioned risk combing based on general M&A projects, special M&A projects have special legal risks due to special legal provisions, and the risk control of these special M&A projects may be self-contained and need to be studied separately.
These special projects mainly include:
(1) Foreign M&A
China's laws and regulations on foreign capital M&A are constantly adjusted with China's foreign capital policy. We should not only pay attention to the specific procedures and special requirements stipulated in 10, but also pay attention to other relevant regulations, such as foreign investment access policy, foreign investment examination and approval policy, indirect foreign investment M&A control, foreign investment M&A real estate special regulations, foreign exchange and foreign debt management, and special subject regulations (foreign-invested venture capital enterprises, Chinese-foreign partnership enterprises focusing on investment business).
(2) M&A of real estate enterprises
Real estate projects are usually carried out in the form of equity transfer due to factors such as large investment base, complicated circulation approval procedures and many subjects involved. Moreover, if the target company is not a pure project company of the transaction project, it will first make relevant restructuring arrangements such as company separation.
In the merger and acquisition of real estate project companies, the main risks are tax risks, contract risks involving third parties, contingent risks, project ownership and procedural risks. Among them, only the tax risk is very complicated. In the M&A transaction process itself, it includes not only the tax-related risk of equity transfer and the tax risk of individual shareholders, but also the tax risk of land transfer. After the merger is completed, it involves the risks of land value-added tax and enterprise income tax, because the related costs of equity transaction cannot enter the target company's own cost, which means that the transaction price can not only enter the land development cost, but also enter the operating cost of the project company, and can only enter the new share investment cost of the target company.
(3) M&A involves state-owned assets.
Mergers and acquisitions involving state-owned assets should not only pay attention to the state's legal norms and policies on state-owned assets management, but also pay attention to the state-owned assets management policies in the region where the target company is located. We should not only pay attention to reorganization and merger, but also pay attention to equity merger.
(4) M&A of listed companies
Due to the extensive publicity of listed companies, although there is no separate legislation on M&A in China, it is self-contained. The most important thing is the particularity of process and information disclosure. Not only listed companies need to perform special procedures and meet special requirements, but also the acquisition of listed companies.