By Susan Ning, Liu Jia and Hazel Yin
China Securities Regulation Commission ("CSRC") is the authority in charge of supervising Chinese listed companies. In August 2010 and November 2011, CSRC published on its website two FAQs addressing application of the merger control regime under the Anti-Monopoly Law ("AML") to listed companies.
In the August 2010 FAQ, CSRC explicitly confirms that for mergers and acquisitions or reorganizations of listed companies that are notifiable under the AML, clearance by MOFCOM is a pre-condition for CSRC to issue its approval of the transaction.1 According to the FAQ, companies applying for CSRC approval shall fulfill the following requirements:
- The applicant shall confirm whether the transaction has reached the merger filing thresholds and provide the relevant evidence;
- If the transaction triggers the merger filing thresholds, the applicant shall submit MOFCOM’s clearance decision to the CSRC;
- The applicant’s financial advisor shall verify and provide expert opinion on whether the merger has triggered the merger filing thresholds, and whether the merger is in compliance with the relevant laws and regulations;
- The applicant’s legal advisor shall provide legal opinion on whether the transaction is in compliance with the AML, whether the transaction is approved by MOFCOM, and whether there are any legal obstacles.
All of the above statements/opinions made by the applicants or the outside advisors, together with the MOFCOM decision, shall form part of documents to be disclosed to the public.
For a notifiable transaction involving listed companies where both CSRC and MOFCOM antitrust approval is required, how to streamline the different approval process in terms of timing is another important issue.
In practice, some listed companies may not be able to get MOFCOM’s antitrust approval within the application period specified by the CSRC which is six months at the maximum, either because they failed to make a timely filing or because the filing process itself is lengthy.
In the November 2011 FAQ, the CSRC provided guidance on how to solve the timing problem.2 According to this FAQ, if the applicant fails to get the antitrust approval (or other approvals, such as foreign investment approval and national security approval) within the specified time line and hence cannot submit the application documents to CSRC timely, the applicant shall report and explain to CSRC or its branches, and make the relevant public announcements. The applicant shall also keep the CSRC or its branches updated of the application status and make public announcements every 30 days about the application progress. Once the approval is obtained, the applicant shall make public announcement within 3 days and submit to CSRC the complete application package within 3 days.
The CSRC guidance explicitly confirms the applicability of the AML to transactions relating to Chinese listed companies. Failure of making a notification may generate risks not only under the AML but also the relevant CSRC rules and regulations in relation to disclosure requirements.
In addition, since the MOFCOM antitrust review process usually takes quite long, it is for the benefits of the listed company to assess the notifiability of its transaction at the very early stage and to start preparing for the filing if the transaction does fall under the AML.
1The August 2010 FAQ is available at http://www.csrc.gov.cn/pub/newsite/ssb/ssgsywzx/ywzx/201008/t20100802_183207.htm (in Chinese).
2 The November 2011 FAQ is available at http://www.csrc.gov.cn/pub/newsite/ssb/ssgsywzx/ywzx/201111/t20111104_201447.htm (in Chinese).