Guo Ban Fa [2011] No. 6

People’s Governments of provinces, autonomous regions and municipalities directly under the Central Government, ministries and commissions of and organizations directly under the State Council£º

With the in-depth development of economic globalization and the further expansion of China’s opening up in recent years, the investment made by foreign investors through merger and acquisition has been on the gradual increase, which has promoted the diversified utilization of foreign investment in China and played a positive role in optimizing the allocation of resources, promoting technical progress, improving business management level and other aspects. To guide the orderly development of mergers and acquisitions of domestic enterprises by foreign investors and safeguard national security, upon the approval of the State Council, you are hereby notified of the relevant matters on the establishment of a security review system for mergers and acquisitions of domestic enterprises by foreign investors (hereinafter referred to as the “security review of mergers and acquisitions”) as follows£º

I. The scope of security review of mergers and acquisitions

£¨I£©The scope of security review of mergers and acquisitions is the merger and acquisition by foreign investors of domestic military-industrial and military related enterprises, neighboring enterprises of key and sensitive military facilities and other units concerning national security; and such domestic enterprisers as major farm products, energy and resources, infrastructures, transportation services, key technologies and major equipment manufacturing involving in the national security and whose actual control right may be gained by foreign investors.

£¨II£©The mergers and acquisitions of domestic enterprises by foreign investors are the following£º

1ª±Any foreign investor purchases the equities of a domestic non-foreign-invested enterprise or offers to contribute the increase of capital of the domestic non-foreign-invested enterprises to alter it into a foreign-invested enterprise;

2ª±Any foreign investor purchases the equities of Chinese party of a domestic foreign-invested enterprise or offers to contribute the increase of capital of the domestic foreign-invested enterprise;

3ª±Any foreign investor establishes foreign-invested enterprises and purchases the assets of a domestic enterprise and handle them according to the agreement signed accordingly, or purchases the equities of a domestic enterprise via the foreign-invested enterprise; and

4ª±Any foreign investor directly purchases the assets of a domestic enterprise and utilize them to invest and establish a foreign-invested enterprise to operate business.

£¨III£© That any foreign investor gains the actual control right means that the foreign investor becomes the controlling shareholder or actual controller of one domestic enterprise through merger and acquisition, including the following£º

1ª±Total shares held by one foreign investor, its controlling parent company and subsidiary account for more than 50% through merger and acquisition;

2ª±Shares of several foreign investors total more than 50% through merger and acquisition;

3ª±The voting power enjoyed by one foreign investor whose shares may account for less than 50% through merger and acquisition has, however, been enough to have a major influence on the decisions of board of shareholders or board of directors; and

4 Other situations that may cause the actual control right to operating decision, finance, personnel and technology of one domestic enterprise to transfer to any foreign investor.

II. The content of security review of merger and acquisition

£¨I£©the effect of merger and acquisition on the national security, including the productive capacity of domestic products for the national defense, domestic service providing