On 5 July 2010, the Ministry of Commerce (MOFCOM) enacted regulations which set out the rules and procedures to do with divesting assets. These regulations are entitled “Interim Regulations on Implementing the Divestiture of Assets or Businesses in Concentration of Business Operators” (divestiture regulations). A copy of the divestiture regulations are located here.
The following are some salient features of these recently enacted divestiture regulations:
- the objective of the regulations are to ensure that any divestiture or assets or business pursuant to the merger control regime is conducted smoothly (Article1);
- business operators who are required to divest assets pursuant to the merger control regime (known as “divestiture obligors”) would have to divest their assets within a time limit stipulated within a merger control decision by MOFCOM (including finding a purchaser and enter into the relevant sales agreements) (Article 3);
- divestiture obligors may appoint a “supervision trustee” and a “divestiture trustee” to assist in the divestiture process. The former will supervise the divestiture process and the latter would assist with locating a purchaser as well as assist with the actual sale process (Article 4);
- supervision trustees and divestiture trustees must
- be equipped with the resources and capabilities necessary for conducting trust businesses; and
- not possess substantial interests in any of the business operators participating in the merger under scrutiny.
In addition, supervision trustees and divestiture trustees may be the same natural person or legal entity (Article 5); and
- purchasers of divested business must satisfy the following requirements;
- they must not possess substantial interests in any of the business operators participating in the merger under scrutiny;
- they must be equipped with the necessary resources and capabilities and must be willing to maintain and develop the business to be divested; and
- the purchase of the business to be divested must not result in eliminating or restricting competition (Article 8).
It is timely that MOFCOM has enacted these divestiture regulations. These regulations provide some sort of structure from which business operators can expect to divest their assets pursuant to a merger control decision issued by MOFCOM. In our view, these regulations are consistent with the divestiture regulations in the more experienced antitrust jurisdictions such as the European Union.
In practice, it is important to work closely with MOFCOM when a business has been told to divest pursuant to a merger control decision. Regular consultations with MOFCOM will ensure that the divestiture process goes smoothly. In our experience, it takes approximately 6 months for a business to find a suitable purchaser for the divested business and to reach the relevant agreements for the sale. It is also noteworthy that MOFCOM has stipulated that divested businesses should be transferred to the purchaser within 3 months after the execution of the sales and other agreements, although this time limit may be extended with MOFCOM’s consent.