Company Law in China

Company Law in China

Regulation of Business Organizations in a Socialist Market Economy

JiangYu Wang

This accessible book offer a comprehensive and critical introduction to the law on business organizations in the People’s Republic of China. The coverage focuses on the 2005-adopted PRC Company Law and the most recent legislative and regulatory developments in the company law landscape in China. The book covers a wide range of topics including the definitions of companies as compared with other forms of business organizations, incorporation, shareholders rights and legal remedies, corporate governance (including the fiduciary and other duties and liabilities of directors, supervisors and managers), corporate finance (including capital and shares offering), fundamental corporate changes (including mergers & acquisitions, and takeovers), and corporate liquidation and bankruptcy. In addition to presenting strong doctrinal analysis, the author also considers China’s unique social, political and economic contexts.

Chapter 11: Mergers, acquisitions, and takeovers

JiangYu Wang

Subjects: asian studies, asian law, law - academic, asian law, company and insolvency law, corporate law and governance


Any discussion of fundamental corporate changes in China cannot start without clarifying the key concepts involved and distinguishing them from each other. Jargon such as shougou, jianbing, goubing, and hebing frequently appear in newspapers, books, journals, and legislation concerning corporate activities, but the distinctions are not precise, and often the terms are used interchangeably. They are loosely grouped under the term 'mergers and acquisitions' (M & A) in China to refer to the combination of two or more business companies or one company's purchase of a large amount of stock or assets from another company. The Company Law has a few provisions loosely defining corporate combinations. Article 173 defines two types of mergers (gongsi hebing). A merger by absorption (xishou hebing) is effected by the absorbing of one or more existing companies by another. The absorbing company survives and continues the combined business, while the absorbed - or the merged - company will be dissolved. This form of merger is popularly known as Jianbing, namely one company swallows another. A merger by new establishment (xinshe hebing), which is essentially a consolidation in American corporate law, refers to the creation of a new company by combining two or more existing companies. Only the 'consolidated' company survives and continues with the assets and liabilities of the original - also called the 'constituent' - companies, while all the original companies are legally dissolved. Therefore, conceptually the key distinction is whether a new company is formed to replace the constituent companies that cease to exist.

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