January 11, 2018
On December 26, 2017, the National Development and Reform Commission (“NDRC”) formally issued the Measures for the Management of Overseas Investments in Enterprises. The new regulation is more market-oriented and the process is simplified. We can expect this new regulation to come into effect on March 1, 2018.
Here are several major changes:
- The measures of overseas investments are more market-oriented. This adjustment is conducive to Chinese enterprises market-oriented investment and outbound M&A.
- The approval process is simplified. In a cross-border M&A practice, a big concern of the European sellers is whether or when the Chinese investors can get a confirmation letter from NDRC before they can submit a binding offer. Now, this Confirmation Letter step is canceled which will undoubtedly greatly increase the flexibility of the M&A deal. Moreover, the new rules abolish the requirement of reporting to local authorities. Instead, a more efficient online reporting system directly to NDRC is encouraged. The evaluation time for most projects is also shorten from 40 days to 30 working days.
- Relax the supervision and control of non-sensitive projects. As a result, if the oversea investment by a Chinese company through their joint ventures or overseas subsidiaries is non-sensitive and with a deal value under 300 million USD, it can be carried on without reporting to the NDRC. The regulatory control over the reinvestment of non-controlling foreign enterprises will be also relaxed, so companies can easier go from minority shareholder to buy-out structures.
Across Partners views the new regulation as significant. The adjustment on policy re-emphasizes China’s ambitions on going global and continuous encouragement of overseas investment.