On June 8, 2006, six ministries and commissions, including the State Administration for Industry and Commerce and the Ministry of Commerce, issued the Regulations on Merger and Acquisition of Domestic Enterprises by Foreign Investors, which gave a detailed explanation of the process and information provided by foreign investors in the merger and acquisition of domestic enterprises. However, theory is equivalent to practice, and there is still a big gap between the actual handling process and the legal provisions. In recent years, our agents have handled many cases of foreign capital merging with domestic capital.

1. Related concepts: equity merger and acquisition: refers to that foreign investors purchase the equity of shareholders of domestic non-foreign-invested enterprises (hereinafter referred to as "domestic companies" or "domestic-funded enterprises") or subscribe for capital increase of domestic companies, so as to change domestic companies into foreign-invested enterprises;

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Merger and acquisition of assets: foreign investors set up foreign-invested enterprises, purchase and operate the assets of domestic enterprises through enterprise agreements, and foreign investors agree to purchase the assets of domestic enterprises, and invest the assets to set up foreign-invested enterprises to operate the assets;

2. Equity swap: this refers to the acquisition by means of equity, that is, the shareholders of overseas companies purchase the equity of shareholders of domestic companies or the additional shares of domestic companies with their equity or the additional shares of overseas companies.

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Share repurchase: refers to the return acquisition of special purpose companies. Shareholders of overseas companies directly or indirectly controlled by domestic companies or domestic natural persons purchase shares of shareholders of domestic companies or issue additional shares of domestic companies as a means of payment in order to realize the listing of the rights and interests of domestic companies that they actually own or control abroad.

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Special statement: This operation guide is only for equity mergers and acquisitions, and does not involve asset mergers and acquisitions, equity replacement and share repurchase.

Second, due diligence.

1. Before conducting M&A on domestic enterprises, it is necessary to conduct due diligence research on the target of M&A, that is, domestic enterprises. The research covers a wide range of topics, including establishment, alteration, organization, major contracts, intellectual property rights, finance, taxation, labor and personnel, etc. Generally speaking, the business content is controlled by the acquirer himself, and the lawyer only carries out other content.

Research.

2. Key points: Before entering the site for investigation, it is necessary to (1) have a proper understanding of the business, competitors, market environment and relevant legal environment of domestic-funded enterprises, so that the investigation can be targeted, grasp the key points, and thus save the investigation time. (2) Communicate with the acquirer, because the acquirer is an expert in the industry, and they can often provide many useful suggestions to lawyers.

3. On the basis of due diligence, issue a due diligence report.

Third, communication and consultation.

1, every communication and negotiation, lawyers should participate as much as possible in order to know the whole progress in detail;

2, every communication and negotiation, lawyers should make meeting minutes, after the meeting, will be sent to the parties on the same day;

3. For the intentions reached by all parties in the process of communication and consultation, a memorandum should be prepared about ten minutes after the meeting for all parties to sign. According to our experience, all parties will not go back on their words after signing and approving the memorandum, which should handle the next meeting.

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Explain the time of the meeting and the issues that need further discussion, as well as the caliber of written reports to the government and external publicity, so as to avoid unnecessary worries of third parties that have business dealings with domestic enterprises.

Four. Framework agreement:

When the parties reach an agreement on the main contents, the lawyer shall draft a framework agreement on mergers and acquisitions, which shall at least include the following contents:

1. Name and domicile of the parties, etc.

2. The nature, legal form and effectiveness of M&A..

3. Representations and warranties of all parties

4. Assets of domestic-funded enterprises

5. Liabilities of domestic enterprises

6. Equity of domestic-funded enterprises

7. M&A conditions of the acquirer (under what conditions can M&A rights be exercised)

8. Conditions of the acquired party (domestic enterprise) (under what conditions to sell shares)

9. equity transfer price

10, the total capital and debt involved in the merger.

1 1. The source, nature, method and payment term of the transfer fee paid by the acquirer.

12, the creditor's rights and debts of the acquired party and the handling methods of various contracts.

13, handling of preferred stocks, futures stocks and options

14, no competition

15. Disposal of intangible assets of the company, including the company's copyright and neighboring rights, patents, trademarks, know-how, computer software copyright, exclusive right of layout design of integrated circuits, trade names, etc. The ownership of intangible assets can be defined by means of transfer, license and possession.

16. Safety and welfare of employees of the acquired party.

17, business management transformation plan and labor and personnel management plan after merger and acquisition.

18, exemption clause

19, tax arrangement

20. Liability for breach of contract

2 1, entry into force conditions

22. Accessories

23. Reservation clauses and operation opinions of the contract: It should be stipulated in the agreement that if the due diligence results are inconsistent with the facts, the target company fails to provide detailed information disclosure, or the laws, policies and market conditions of the expected time and place of the merger change, the acquirer can: adjust the purchase price, abandon (terminate) the contract, seek compensation, etc.

Verb (abbreviation of verb) Drafting legal documents for formal merger and acquisition.

1. The core documents are the equity transfer agreement and the articles of association.

2. It should be pointed out that the M&A Agreement submitted to the examination and approval authority should be as simple and clear as possible, and should not use too abstruse legal language. The person in charge of the examination and approval authority is not a legal expert. Obscure legal language looks unfathomable and can reflect the level of lawyers, but it is not good for dealing with mergers and acquisitions, which increases the difficulty of approval.

3. Be good at making supplementary agreements and attachments for the examination and approval personnel to see clearly.

The examination and approval authority in Shanghai requires that the articles of association of the company should include the provisions of the supervisor or the board of supervisors and the rights and obligations of shareholders, otherwise it will definitely be returned for supplement and modification. Henan, Shandong and other places have no special requirements for this.

Six, provide the following information to the competent department of commerce, submit the application for merger and acquisition

1. Write down the basic information of the original company (domestic-funded enterprise), the original shareholders and their respective proportions, the number of shares transferred respectively, and write down the basic information of the transferred company.

2. Copy of business license

3. The general meeting of shareholders decided that the old shareholders agreed to transfer the shares to the new shareholders.

4. The old and new articles of association should be adjusted by the Industrial and Commercial Bureau, and the archives inquiry stamp of the Industrial and Commercial Bureau should be stamped. The new articles of association shall clearly stipulate the investment period of new shareholders, and the investment period must conform to the provisions of the foreign investment period.

5. Contract (if two or more foreign parties merge or China holds part of the shares)

6. Equity transfer agreement It is best for the old shareholders to choose a bank with experience in foreign capital acquisition of domestic equity transfer funds, otherwise it will be very troublesome to settle foreign exchange.

7. Audit Report The audit report generally takes 5 working days, so the audit report should be prepared in advance to avoid delaying the submission of application materials.

8. The asset appraisal report is made together with these seven items. At present, under the situation that the state strengthens the supervision of foreign capital inflow, the amount of assets to be evaluated should be basically the same as that of equity transfer price. Because the asset appraisal amount is too high, it is suspected of being sold at a low price, and it is also suspected of hot money inflow.