Foreign investor acquires a domestic enterprise refers to foreign investors to purchase domestic non-foreign-invested enterprises in the territory. The shareholders to subscribe for equity or capital increased, so as to transform the domestic company into a foreign-invested enterprise; or, a foreign investor establishes a foreign-invested enterprises and through the enterprise agreement, to purchase the assets of a domestic enterprise and operates its assets, or, the foreign investor purchases, by agreement, the assets of a domestic enterprise and invests such assets to establish a foreign-invested enterprises and operate the assets thereon.
Accordance with the "Foreign Investment Industrial Guidance Catalogue", it does not allow foreign investors to become a sole proprietorship in the industry, mergers and acquisitions that may cause foreign investors to hold the entire equity interest of an enterprise, it may request the China side holding or relative holding in the industry. The industry, upon after the merger and acquisition, the company is still under the China's share in the enterprise by controlling or relatively in a controlling position; prohibits foreign investors operating the industry, foreign investors shall not engage in mergers and acquisitions in the industry of that enterprise.
Foreign investors, upon the acquisition of the foreign invested enterprises, that enterprises' registered capital is more than 25% ratio, can enjoy the treatment of foreign investment enterprises. For less than 25%, unless provided otherwise by laws and administrative regulations, the companies do not enjoy the treatment as foreign-invested enterprises.
Domestic companies, enterprises or natural persons, outside its legal name of the company, establish or control by merger with its affiliated domestic companies, foreign-invested enterprises that establish the foreign-invested enterprises, do not enjoy the treatment, but in the territory of the foreign company that subscribed and hence increase the capital or if the foreign companies set up business after the merger, increases the capital which accounted for the proportion of established enterprises’ registered capital is more than 25% are otherwise exceptional. According to the manner described in subsection, those established foreign-invested enterprises, the actual control of a person other than the registered capital of foreign investors in the enterprise in the investment ratio is higher than 25% of the foreign-invested enterprises, it can enjoy the benefits.
Domestic companies, enterprises or natural persons, outside its legal name of the company, establish or control by a merger with its affiliated companies, corporations, should report to the Ministry of Commerce for approval. Foreign-invested enterprises shall not be a party to domestic investment or otherwise circumvent the above requirements.
The parties to the merger and acquisition should clearly state the relationship. If both parties belong to the same actual controller, the parties shall disclose to their approval authority its actual controller, the purpose of these takeovers and assess whether there is a fair market of the results. The parties shall not be in trust, on behalf of holders or otherwise circumvent the aforementioned requirements.