Practical Law China

International standards, local insight

Navigate the complexities of doing business in China with a know-how service trusted by lawyers worldwide

When you’re doing business in China, you need insight from local experts and know-how you can trust. You need market standard agreements that you know work under Chinese law and up-to-date guidance to help you manage risk.

Practical Law China is a new online know-how service from Practical Law, the leading provider of know-how to lawyers worldwide. It brings together the expertise of our team, all former lawyers at top firms and companies around the world, with insight and guidance from leading Chinese and International law firms and overviews of the main IP rights used in China.

  • Save time and increase efficiency with instant access to a vast bank of high quality know-how resources
  • Remove maintenance headaches: no need to worry when your China know-how was last updated
  • Mitigate risk of using out-of-date information: see instantly if a resource is up-to-date
  • Better manage operations in China and have more informed conversations with local counsel with a series of practical toolkits to support your transactions
  • Ensure your contracts are enforceable with more than 100 Practical Law standard documents and clauses, localised for China, with integrated drafting notes
  • Understand quickly where and how Chinese law differs and stay alert to sensitive issues with detailed drafting notes, practice notes and Q&A overviews
  • Dig deeper and examine the law for yourself with direct links to legislation in English and written Chinese on Westlaw China (Westlaw China subscribers only)
  • Standard documents and drafting notes on registering and protecting trade marks, including pro-assignee and pro-assignor trade mark assignment agreements, trade mark licence agreements, trade mark co-existence agreements and model trade mark registration applications for foreign entities.
  • Standard documents and drafting notes for IT contracts including standard conditions for the sale of IT equipment and services and a pro-customer and pro-supplier software licence agreement.

Whether you don’t have access to China know-how, or don’t have time to update your own, Practical Law China provides the support you need to work faster and advise with confidence.

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About Practical Law China

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"I have always considered Practical Law resources to be of the highest quality. I particularly like their plain English approach, which is of critical importance in China."

- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

China resources are organised into practical toolkits to help you carry out common transactions

From establishing a business in China to international M&A and boilerplate commercial agreements, our China toolkits will help you work smarter and mitigate risk when carrying out transactions with Chinese counterparties. Each toolkit provides a series of practical resources, including standard documents and clauses, checklists and practice notes.

About Practical Law China

The best way to experience Practical Law China is to try it

"I have always considered Practical Law resources to be of the highest quality. I particularly like their plain English approach, which is of critical importance in China."

- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

Our uniquely practical resources focus on the needs of the busy practitioner.

Practical Law resources are created and kept up-to-date by our team of expert legal editors

Standard documents and clauses

Start from a template you can trust with more than 100 international market standard documents and clauses, localised to work under Chinese law

View extract:

Post-acquisition WFOE Articles of Association: China

These articles of association (Articles) for a wholly foreign-owned enterprise (WFOE) are not based on a Practical Law document and do not use Practical Law boilerplate. Instead, they adopt the general structure and format of templates promulgated and recommended by the PRC Ministry of Commerce (MOFCOM), which reflect certain requirements of applicable Chinese law as well as the customary expectations of approval authorities.

These post-acquisition WFOE Articles retain the same structure and much of the content of the standard WFOE Articles. Many clauses of the WFOE Articles are required under the Law of the People's Republic of China on Wholly Foreign-Owned Enterprises 2000, the Regulations for the Implementation of the PRC WFOE Law 2001, and the Company Law of the People's Republic of China 2005. Other clauses of the Articles derive from the template Articles issued by MOFCOM and are customarily included.

These WFOE Articles are designed for use in connection with the acquisition by a foreign investor of 100% of the equity interests in a target Chinese company. Under Article 2 of the Provisions on Mergers & Acquisitions of a Domestic Enterprise by Foreign Investors 2006 (amended 2009) (2006 Cross-Border M&A Provisions), on completion of such an acquisition, the target Chinese company is to be converted from a purely domestic entity to a foreign-invested enterprise (FIE). If the foreign investor acquires all of the equity in the target Chinese company, then the target is converted into a WFOE. If the foreign investor acquires less than all of the equity in the target Chinese company, then the target is converted into an equity joint venture (EJV) or (less commonly) a co-operative joint venture (CJV) (see Country Q&A, Structures: China: International Joint Ventures).

Acquisition of all of the equity in a Chinese target is permitted only in cases in which the Chinese Foreign Investment Catalogue permits a wholly foreign-owned structure in the given industry. In respect of foreign direct investment in China, foreign investors generally prefer a WFOE to either type of joint venture, but in the context of a cross-border acquisition of an existing Chinese company, this is a matter which will be subject to negotiation between the parties and the particular dynamics of the transaction.

The establishment of a WFOE (or any FIE) requires the preparation and submission for approval of a package of documents relating to the investor together with preliminary approvals from a number of regulatory authorities, some of which are common to all FIEs, while others are specific to the industry in which the WFOE will engage.

Practical Law China and Zhong Lun Law Firm
Hide Note: About this documentNote: About this document
About this document
About this document

The wholly foreign-owned enterprise ( (WFOE) articles of association (Articles) is one of the fundamental documents used in Chinese foreign direct investment ( (FDI) practice and dates from the mid-1980s, when the Chinese legislature, the National People's Congress (, adopted the first Wholly Foreign-Owned Enterprise Law in 1986.

Originally, use of WFOEs was restricted to high-tech industries and export-oriented businesses. Once those restrictions were relaxed in the late 1990s, WFOEs quickly became the preferred foreign investment vehicle in China and remain so to date, if permitted. Foreign ownership is still restricted in some industry sectors. Investment restrictions are set out in the Catalogue for the Guidance of Foreign Investment Industries 2011 ( (2011 Foreign Investment Catalogue). If restrictions are imposed, the investor may want to consider finding a suitable Chinese partner and entering the industry using an equity joint venture (EJV) or co-operative joint venture (CJV) structure (for more information, see Article, China's new foreign investment catalogue comes into effect (

This standard document, for the establishment of a WFOE following a foreign investor's purchase of all the equity interests in a Chinese entity, has been adapted from the standard WFOE Articles of Association template issued by the Ministry of Commerce ( (MOFCOM) and its predecessor institutions. It reflects established market practice over more than two decades since the early period of China's economic opening, and also reflects the requirements of:

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Integrated drafting notes

Get guidance and practical tips on what you need to do differently in China. These detailed drafting notes flag up where law and practice diverge and where international counsel might expect to get push-back from Chinese counterparties

View extract:

Due diligence information request: China

Hide Note: About this documentNote: About this document
About this document
About this document

Purpose of document

This standard document contains a set of long-form legal due diligence enquiries for use in China in the acquisition of the following (among other entities):

This document has been adapted from Standard document, Legal due diligence information request: long form: share purchases (

How will this document help you?

International companies and financial institutions may instruct either a local Chinese law firm or the China office of an international law firm (acting alone or in co-operation with a local Chinese law firm) to conduct the due diligence process. It is becoming increasingly common for international companies and financial institutions to instruct (either directly or indirectly) local Chinese law firms to take a lead or an important supporting role in the due diligence process, in whole or in part. This is not only due to cost considerations but also to the greater on-the-ground resources available in multiple locations across China in the larger Chinese law firms.

Financial and tax due diligence is very often undertaken by accounting firms rather than law firms. Given the regulatory risks associated with China acquisitions, particularly arising from foreign legislation such as the US Foreign Corrupt Practices Act 1977 ( (FCPA) and the UK Bribery Act 2010, it is important that counsel remain closely engaged in overseeing the due diligence process.

A significant percentage of due diligence exercises concerning domestic Chinese target companies will generally disclose certain problems involving technical non-compliance with applicable legal requirements, including:

  • Problems with land use rights ( and building ownership rights.

  • Problems with government approvals and licences for business operations.

  • Pollution discharge exceeding environmental requirements.

  • Improper or unregistered loans.

  • Labour, social insurance, as well as health and safety matters.

  • Improper or suspicious payments or methods of doing business.

Further, documentation for procurement, supply, licensing and other transactions undertaken by many Chinese target companies tends to be fragmentary, particularly when they are intra-group. Gaps often exist in the corporate records of affiliates in the target company's group. These issues reflect the divergence between legal requirements and practice and are often matters that can be rectified as a condition to closing.

The corporate records of foreign-invested target companies in China tend to be more complete with fewer compliance gaps. However, some foreign-invested target companies operating in industry sectors that are subject to restrictions on foreign investment use nominee shareholder and other similar arrangements in an effort to circumvent these restrictions. These arrangements entail additional regulatory and practical risks that require careful analysis and assessment.

It is not unusual for some Chinese domestic target companies to fail to provide the full set of requested due diligence documents or even all basic due diligence documents in response to an initial document request. This is due in part to the lack of familiarity on the part of many Chinese domestic target companies with the purposes of due diligence in the context of an acquisition transaction. However, it is also due to the fact that in many Chinese domestic target companies document control systems are often weak. In many cases there is no single repository within the organisation for all of the documents included in the due diligence document request. In some cases it will be necessary to send a team in advance of the due diligence process to the target's premises to talk through the document request with the relevant department managers so that the requested documents can be collated. It is not uncommon for due diligence in China to require several successive rounds of requests, document reviews, management interviews and follow-up requests for supplemental documents and written or verbal clarifications.

Equity interests in Chinese target companies

The vast majority of domestic companies and foreign-invested companies in China do not issue shares. Instead, equity interests in such companies take the form of "registered capital", which is the amount of capital contributed by the shareholders and registered with the relevant government departments. For these companies, the concepts of issued and authorised capital, preferred and common shares and so on are not applicable. Further, transfers of and other changes to registered capital will always require registrations and approvals of relevant government departments. By contrast, Chinese domestic companies limited by shares (including publicly listed companies) and foreign-invested companies limited by shares do issue shares, and the transfer of these shares is subject to fewer restrictions. However, the acquisition by a foreign party of either shares or registered capital of a purely domestic Chinese target company will still be subject to the Provisions on the Merger or Acquisition of Domestic Enterprises by Foreign Investors 2009 ( (2009 M&A Regulations) and related laws and regulations. These will trigger approval and registration requirements and the conversion of the target into a foreign-invested company with registered capital. See Country Q&As:


We are making this information request to assist our legal due diligence review in connection with the proposed purchase by [FULL COMPANY NAME] (Buyer) of [the entire OR [PERCENTAGE]% of the] registered capital of [FULL COMPANY NAME IN ENGLISH AND CHINESE] (Company) from [FULL COMPANY NAME IN ENGLISH AND CHINESE] (Seller) [agreed to be purchased under [heads of terms OR memorandum of understanding OR letter of intent] dated [DATE]] (Transaction).

Where the Company has subsidiaries or affiliated companies (together, Company's Group), please treat any request for information relating to the Company as applying to each of member of the Company's Group.

When supplying replies and copy documents in response to this information request, please comply with the following guidelines:

  1. Provide the appropriate documents or information, or an appropriate negative statement, as soon as is practicable.

  2. Do not wait until you have collected all the requested documents and information before responding to us; where you are unable to provide some answers or documents immediately, simply mark the response to the corresponding question "to follow", and answer the remaining questions.

  3. Provide a written response where the documents do not clearly explain the position.

  4. Where you are uncertain of the scope of any question, or the relevance of any information or document, please provide as much information as you can. Please work on the basis that we would rather be provided with too much rather than too little information.

  5. Where appropriate, differentiate between information that is of significance to the operation of the business of the Company and the Company's Group and information that is of low importance.

  6. Where the same information or document is supplied in response to two or more different questions, you need not repeat your response if all appropriate cross-references are made.

  7. Regularly update your responses as more information becomes available or if subsequent events make any existing response inaccurate.

  8. Provide the documents requested in lever-arch files with an index, using the same headings and numbering adopted in this information request.

[To assist in our legal review we may hold interviews with the Company's management.]

This is an initial request for information and we may ask for further information in due course.

Responses to this information request are not disclosures for the purposes of any warranties in the legal documents relating to the Transaction.



Please provide the information and copy documents requested below.


Hide Note: Corporate structure and recordsNote: Corporate structure and records
1. Corporate structure and records
Corporate structure and records

The exact corporate documents that a company is required to have depends on various factors such as:

  • Business sector.

  • Type of company.

  • Geographic location.

Important issues to keep in mind are:

  • It is not unusual for Chinese domestic companies to undergo significant changes in name, ownership, business scope, and location but to fail to comply with administrative formalities when doing so. A historical review of this basic company information is therefore necessary. Foreign investment enterprises generally have a better record of compliance.

  • The Chinese economy is highly regulated, and therefore it is not unusual to discover in due diligence that the target company has failed to obtain required permits or approvals for its business operations, or that the approvals have not been given at the proper level.

  • Abuse of company powers of attorney in favour of a company executive or their friends and relations is not uncommon.

1.1 Details of the following current [and historical information] in relation to the Company together with related corporate documents:

(a) full company name;

(b) the following corporate documents:

(i) business licence (original and duplicate);

(ii) project proposal, feasibility study report, and related government approvals (if relevant);

(iii) approval reply and approval certificate (if relevant); and

(iv) capital contribution report and capital verification report;

Hide Note: Capitalisation requirements and documents for Chinese domestic companiesNote: Capitalisation requirements and documents for Chinese domestic companies
1.1(b)(iv) Capitalisation requirements and documents for Chinese domestic companies
Capitalisation requirements and documents for Chinese domestic companies

Capitalisation requirements

The Company Law of the People's Republic of China 2005 ( (2005 Company Law) has capitalisation requirements for domestic Chinese companies that differ in part from those for FIEs. However the documentation requirements are the same.

Article 26 of the 2005 Company Law requires the investors in a domestic company to make an initial contribution to a company's registered capital of no less than 20% of the amount stated in the business licence (unless special regulations stipulate a lower percentage of the company's registered capital). Alternatively, the investors can make an initial contribution of no less than the statutory minimum (usually, the statutory minimum amount of the registered capital for a limited liability company is RMB30,000 and RMB5 million for a company limited by shares). For FIEs, the investors must make an initial contribution of at least 15% of the approved amount of registered capital.

The shareholders of a domestic company are required to fully capitalise the company within two years of the date of establishment, while for a domestic investment company, the deadline is five years. For FIEs, the deadline for capitalisation is generally also two years, but the required capitalisation schedule depends on the size of the company. The capitalisation schedule must be detailed in the joint venture contract (if relevant), articles of association and other incorporation documents.

Documenting capitalisation

The 2005 Company Law and other Chinese legislation have specific requirements concerning the documents for capitalisation. The company itself must issue a capital contribution certificate to the investor that made the contribution (Article 32). These certificates are not transferable. Additionally, the company must retain a certified public accountant registered in China to verify the capital contributions made and issue a capital contribution report ( a formal report verifying the amount and nature of the capital contributions) (Article 29). Different types of contributions have different types of documentary requirements:

  • For cash contributions, the auditor typically will require evidence that cash has been deposited to the account of the entity.

  • In-kind contributions are subject to valuation.

  • Only tangible assets and intellectual property rights (not merely licence rights) can be contributed as capital.

(c) any approvals, certificates or permits for special industries or business activities (such as banking, telecom, pharmaceutical licences);

Hide Note: Special operating licences in ChinaNote: Special operating licences in China
1.1(c) Special operating licences in China
Special operating licences in China

For many categories of business (the range of which is about 100), a special operating licence issued by the relevant industry regulatory body is required in addition to the business licence with an appropriate approved business scope. Examples of business areas that require separate industry operating licenses include:

  • Food manufacturing.

  • Pharmaceuticals.

  • Agricultural seeds.

  • Telecommunications.

  • Banking.

  • Insurance.

  • Engineering and construction.

In many cases, these operating licences are issued in a separate application process after the entity business licence has been issued. Depending on the regulatory framework, the industry regulator sometimes issues a preliminary approval before the entity is established. In many cases, a change in ownership, and more specifically, the introduction of an element of foreign ownership, will trigger a requirement to reapply for a new operating licence. In a foreign acquisition of all or part of the equity of a domestic target company, the target company must be converted into a WFOE or an EJV (or a CJV), which requires the issuance of a new business licence for the new entity form, and that converted entity will generally also need to reapply for relevant operating licences in its own name.

Any restrictions in a given industry sector on direct foreign investment will similarly apply to foreign acquisitions of equity interests in a domestic Chinese enterprise. See Country Q&A, Share acquisition documents: China: International Acquisitions (

(d) registered address and locations within China and abroad, including a branch, representative office, as well as related approvals and registrations;

Hide Note: Operating locations for businesses in ChinaNote: Operating locations for businesses in China
1.1 Operating locations for businesses in China
Operating locations for businesses in China

The establishment of a branch of a company requires additional documentation. It must be registered with the relevant local office of the State Administration for Industry and Commerce ( (local AIC), which issues a business licence to the branch. A branch can engage in business operations, but the branch must operate within the business scope of the company setting up the branch.

(e) registered capital and whether fully contributed and total investment (if applicable);

Hide Note: Total investment amountNote: Total investment amount

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Practice notes

Understand the law and how it applies in practice with clear and detailed how-to guidance to support foreign investment activity in China

View extract:

Governing law clauses in China-related commercial contracts

An overview of the restrictions Chinese law imposes on choice of governing law, including the basic rule for foreign-related contracts and when foreign law can be chosen. The note also considers the exceptions to the foreign-related contract rule and the specific contracts that must be governed by Chinese law.

Jessica Fei, Briana Young, Fang Wu and Chris Chung, Herbert Smith Freehills

This note looks at the choice of governing law in China-related commercial contracts, including, among other things, the Chinese regulatory framework and the consequences of failing to agree a governing law clause. New legislation related to governing law was adopted in China in 2010, which in part changes the approach to these issues.

To help you understand this change in approach, this note gives the basic rule for foreign-related contracts and the four conditions under that rule, one of which a contract must satisfy to be considered a foreign-related contract. A list of the seven contracts that must be governed by Chinese law is also included.

For public policy reasons foreign law cannot be the governing law under two circumstances, which are listed, along with a list of the legislative areas involving Chinese social public interest that cannot be excluded by the choice of foreign law.

In this note, "China-related" is used to refer to contracts where either:

  • One of the parties is an entity incorporated or organised in mainland China or is an individual with mainland Chinese nationality.

  • Part or all of the contract is to be performed in mainland China or has its subject matter within mainland China (for example, an asset purchase or construction project in mainland China).

"China-related contract" is not a Chinese legal term, but reflects common usage among lawyers.

This note only considers commercial contracts that are negotiated between parties. It does not consider consumer or standard form commercial contracts.

Restrictions imposed by Chinese law on choice of governing law

In the last few years, China has updated and consolidated its legislation on conflict (choice) of law issues. The rules, as explained below, are now more harmonised with international legislation, while continuing to protect Chinese national interests.

Foreign-related contracts: basic rule

The basic rule under Chinese law is that parties may choose a foreign governing law if the contract is "foreign-related", as defined under Article 126 of the Contract Law of the People's Republic of China 1999 (1999 Contract Law) and related legislation.

To be foreign-related, a contract must meet at least one of the following four conditions:

  • At least one of the parties is a foreign individual, foreign entity or stateless person. This is determined by place of incorporation or registration for companies and other entities, and by nationality for individuals. Companies incorporated in Hong Kong, Macau and Taiwan are treated as foreign for the purposes of this rule. Although foreign-invested enterprises (FIE) (外商投資企業) ( set up in mainland China, such as joint ventures and wholly foreign-owned enterprises (WFOE) (外商獨資企業) (, are wholly or partially foreign funded, they are Chinese legal persons because they are incorporated in China.

    Regarding individuals, mainland Chinese citizens are not considered foreign unless they have permanent residency abroad. However, citizens of Hong Kong, Macau and Taiwan are treated as foreign under Chinese civil law. Non-mainland Chinese citizens are always foreign. Stateless individuals are also treated as foreign.

  • The subject matter of the contract is outside mainland China. This is determined by the location of the subject matter of the contract. For example, if two Chinese parties contract to purchase land outside mainland China, the contract is foreign-related and may be governed by foreign law. Conversely, if the foreign connection is merely incidental to performance, it is unlikely that the contract will be considered foreign-related. For example, a contract to build a factory in China is not foreign-related under this heading even if the factory is intended to produce goods for export trade.

  • The occurrence, modification or termination of the civil legal relationship between the parties occurs outside mainland China. If a contract is executed, amended or terminated outside mainland China, this may satisfy the "occurrence, modification or termination" test, with the result that it would be regarded as foreign-related.

    However, parties seeking to rely solely on this condition must generally show that they have a legitimate commercial reason for executing, amending or terminating a contract outside mainland China. Due to the difficulty in determining what would be sufficient in this respect, this third test is not used as frequently as the first two. The Chinese courts will refuse to treat a contract as foreign-related if they believe that the parties are relying on this condition purely to avoid Chinese law governing the contract. For example, if two Chinese parties meet in Hong Kong to execute or terminate a contract performed in China and select foreign law on that basis, it is likely that a Chinese court would disregard that selection (Article 11, Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the "Law of the People's Republic of China on the Application of Laws to Foreign-Related Civil Relations" (I) 2012 (2012 Foreign-Related Civil Relations Interpretation) and Article 304, Opinions of the Supreme People's Court on Some Issues Concerning the Application of the Civil Procedure Law of the People's Republic of China 1992 (

  • The habitual residence of a party or both parties concerned is outside mainland China. This is a new condition, added by the 2012 Foreign-Related Civil Relations Interpretation, which took effect on 1 July 2013. The meaning of "habitual residence" differs depending whether a natural person or a legal person is concerned. The habitual residence of a company or other legal person is the jurisdiction in which it has its principal place of business (Article 14, Law of the People's Republic of China on Application of Laws to Foreign-Related Civil Relations 2010 (2010 Foreign-Related Civil Relations Law)).

    The habitual residence of an individual is the place where he has resided continuously for at least one year and that forms the centre of his life when the foreign-related civil relationship is established, changed or terminated (Article 15, 2012 Foreign-Related Civil Relations Interpretation). An example is a commercial contract with a Chinese company founder who has emigrated to Hong Kong and has residency but is not yet a permanent resident. There is an exception for places where the individual receives medical treatment, goes on secondment (labour dispatch) or performs public services.

Counsel drafting or reviewing a governing law clause should consider the above conditions carefully, taking into account the facts of the transaction in question.

Choosing foreign law

In commercial practice it is not uncommon for English law, for example, to be chosen as the governing law of an agreement, even if neither party is English. However, this arrangement was sometimes challenged by Chinese courts that were not familiar with international commercial practice. Article 7 of the 2012 Foreign-Related Civil Relations Interpretation upholds international commercial practice by confirming that contract parties may select the law of any jurisdiction, even where it is unrelated to their contract. A contract between a Canadian party and Chinese party, for example, can be governed by English law or Hong Kong law (or any other foreign law), unless the contract falls into one of the exceptions below.

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Understand the law and how it applies in practice with clear and detailed how-to guidance to support foreign investment activity in China

View extract:

China merger filing checklist

A checklist of the key actions parties must undertake when preparing for a People's Republic of China (PRC) merger filing. The checklist is prepared by reference to the PRC merger notification form (MNF) promulgated by the Chinese Ministry of Commerce (MOFCOM), China's merger control authority in July 2012. The checklist looks at the preliminary assessment, early preparation for a merger filing through information collection and preparation of the MNF. The MNF should be submitted to MOFCOM for a decision and the checklist considers the tasks that should be completed between case docketing and decision.

Practical Law China

This checklist looks at the key steps a party should take when preparing for a People's Republic of China (PRC) merger filing. It is important to plan for PRC merger filings as early as possible and this checklist provides guidance on preparing for the preliminary assessment. It looks at information collection and preparation of the PRC merger notification form (MNF). The MNF should be submitted to the Chinese Ministry of Commerce (中华人民共和国商务部) ( (MOFCOM) as soon as possible and the checklist provides information on the tasks to be completed between case docketing and MOFCOM's decision.

For an overview of Chinese anti-monopoly law, see Country Q&A, Competition law in China: overview (

Preliminary assessment

As China has become a key merger control jurisdiction for global mergers and acquisitions (M&A) and joint venture transactions, it is important to plan for China merger filings as early as possible.

Identify an internal legal team to work on the preliminary assessment, supported by external counsel as required.

Make a preliminary assessment on the following issues:

  • Notifiablity of the contemplated transaction.

  • Potential competition concerns.

  • Prospect and timeline of PRC merger clearance.

Collect the information required to support the preliminary assessment, including:

  • Basic deal structure.

  • Turnover of the parties concerned.

  • Products and territories concerned.

  • Major market players and their market shares.

Obtain advice from local PRC counsel regarding the impact of Chinese merger control legislation on relevant deal clauses such as conditions precedent and long stop dates.

In an auction sale, whether a PRC merger filing will be required and the likelihood of receiving unconditional clearance from MOFCOM are among the key factors in first round bids assessment so it is important for the parties to be able to take a confident position on these issues from the outset.

A pre-filing consultation procedure has been made available for the transaction parties to obtain greater clarity about the notifiability of any specific operation and other substantive or procedural issues in connection with the merger review. MOFCOM is generally cautious and often advises that operations must be notified unless it is comfortable with the positions taken by the notifying parties.

Information collection and groundwork

If a PRC merger filing is necessary, due to the lead time required between submission of the MNF and MOFCOM's decision, it is important to undertake preparation at least five to six weeks before the likely signing of the deal.

Organize a dedicated and well co-ordinated corporate task force comprised of appropriate business, marketing or finance staff, as well as external consultants.

Prepare a customized information collection questionnaire based on the requirements of the MNF:

  • Organisational information.

  • Transaction related information.

  • Competition analysis related information.

  • Compliance related information.

  • Administrative documents.

Assign the collection tasks to different responsible parties based on the nature of the information requested. Prepare a project timeline, work streams list or group contact list to facilitate the work process and communications.

Prepare follow-on questionnaires if required after reviewing the initial information collected.

Leverage the information collected during the transaction from the following channels to streamline the MNF information collection process:

  • Preliminary assessment.

  • Legal due diligence.

  • Public sources.

  • Company's previous filings.

Cite the original data source of any market or business figures provided. MOFCOM tends to give more weight to data from public sources during the merger review process.

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China Glossary

Demystify Chinese legal language with clear definitions for nearly 100 commonly-used Chinese legal terms, regulatory authorities and types of agreement, in English and written Chinese

View extract:

Chop (seal) (扒(封))

All Chinese government authorities, institutions, and companies have an official chop or seal, the use of which binds the organisation legally. An impression of the chop must be registered with the public security authorities. The making of an entity's chop is closely regulated. Chops are used in addition to and sometimes instead of the signature of the legal representative ( In addition to its official chop, a company generally also has both a finance and a contract chop. The legal representative has a personal chop, which is also registered with the public security authorities and local Administration of Industry and Commerce ( (AIC). Prudence dictates strict controls over the use of company chops to prevent fraud.

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Delve deeper and examine local law for yourself with integrated links to up-to-date legislation on Westlaw China*

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China country Q&As

Q&A overviews to help you get up to speed on the essentials of Chinese law, fast. Overviews are written in clear, plain English by leading lawyers from international law firms and come with an innovative Q&A comparison tool so you can instantly compare the law in China with that in other jurisdictions. China country Q&As are part of Practical Law multijurisdictional guides and are available to all Practical Law subscribers.

About Practical Law China

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- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

Our team of experts put their years of experience at your service

Sophie Cameron

Sophie Cameron, Director of International Content

Sophie Cameron, Head of International Content and Head of Practical Law China Sophie was an editor for a magazine publisher before training as a solicitor in Freshfields Bruckhaus Deringer’s London office, where she qualified into the litigation department and completed a secondment to Reuters’ legal department.

Sophie then moved to the employment department of Bates, Wells & Braithwaite, where she specialised in contentious and advisory employment work for individuals and charities and regularly appeared in the employment tribunal.

Sophie was also a Visiting Research Fellow at the Fawcett Society in 2005 and co-authored a report on the reform of gender equality legislation. Sophie joined Practical Law in 2004 as an editor for PL Employment and was Head of PL Public Sector from 2008 and 2012. Since 2012 she has focussed on our international content, launching PL China in 2013 and now managing the China, EU and international transaction guides teams. She has been managing our China service since its inception. Sophie studied at Cambridge University, City University and the College of Law. Sophie is currently a non-practising solicitor.

Vivian Yuan

Vivian Yuan, Head of Practical Law China

Vivian joined the team in September 2014 from Mayer Brown JSM where she had worked since 2004 in the Shanghai office and once completed a secondment to the firm’s Hong Kong office between 2005 to 2007 and also a secondment to the legal department of Dow Chemical Greater China subsequently in 2010. While with Mayer Brown JSM, she had built up her expertise and knowledge with practice areas focused on PRC real estate investment, project finance, foreign direct investment and general corporate matters. She also once worked on hospitality and leisure projects and employment law matters.

Prior to her private practice, Vivian was an auditor in Deloitte Touche Tohmatsu’s Shanghai office between 2001 to 2003. Vivian was admitted to the PRC Bar in 2004 and the New York State Bar in 2010 and is currently non-practising in both jurisdictions. She speaks native Mandarin and fluent English.

Helen Liao

Helen Liao, Practical Law China Senior Editor

Helen joined the team in January 2015 from Mayer Brown JSM. She has more than ten years' experience advising clients on employment and social security law in the PRC. Prior to joining the firm, Helen worked with a top-tier PRC firm advising big state-owned companies and multinational corporations on non-contentious and contentious employment matters. She has been recognised by the World Bank as an expert on PRC employment law.

Helen holds an LLB in Economic Law from the China University of Political Science and Law in Beijing and an LLM in Commercial Law from the University of Bristol. She was admitted as a lawyer in PRC in 2006 and in Hong Kong in 2015 and is currently non-practising in both jurisdictions. Helen speaks native Mandarin, Cantonese and fluent English.

Helen is based in Hong Kong.

Jay Chen

Jay Chen, Practical Law China Senior Editor

Jay joined the team in March 2016. She was admitted to PRC bar in 2005 and is currently a non-practising lawyer. Jay was trained and qualified with King & Wood (now King & Wood Mallesons), focusing on M&A transactions, foreign investment and securities projects. After her private practice, she has worked as an in-house legal counsel in a multinational firm and an Asian luxury retail group in Hong Kong for more than 8 years where she has extensive experience in handling general corporate matters, contractual issues, commercial transactions, compliance, employment, intellectual property rights, risk management, claims and litigations across the regions.

Jay speaks native Mandarin, Cantonese and fluent English.

Vicky Cheung

Vicky Cheung, Practical Law China Senior Editor

Vicky joined the team as in October 2016 from a Hong Kong listed leading satellite operator in Asia, where she worked as a legal counsel. Before that, Vicky worked at The Securities and Futures Commission of Hong Kong in the Corporate Finance and Intermediaries Divisions, with experience in the regulation of primary and secondary listings of shares on The Stock Exchange of Hong Kong Limited and supervision of intermediaries holding licence for advising on corporate finance.

Prior to her in-house experience, Vicky worked as an offshore counsel at Ogier, Hong Kong and a corporate associate at Herbert Smith, Hong Kong (now Herbert Smith Freehills), where she gathered significant experience in equity capital markets, M&A transactions, takeovers and general corporate and commercial matters.

Vicky holds a LLM from King’s College London and a LLB from The University of Hong Kong. She was admitted as a lawyer in Hong Kong in 2008 and is currently a non-practising solicitor. Vicky speaks native Cantonese and fluent Mandarin and English.

William Steinberg

William Steinberg, Practical Law China Senior Editor

William joined the team in September 2016 after working as an in-house counsel and compliance officer in Hong Kong since 2011 at a top-tier financial institution and leading proprietary trading firm. He provided comprehensive legal and compliance advisory support for hedge fund and proprietary trading desks trading in markets across the Asia-Pacific region, and has extensive experience in regulatory analysis, legal risk management, compliance monitoring, review of trading practices, general corporate matters and drafting and negotiating a wide variety of contracts.

Prior to his in-house experience, William was an attorney in Shearman & Sterling's Hong Kong office from 2006 to 2011, focusing on capital markets equity and debt transactions and a variety of asset management work, with an emphasis on the Greater China region. He also completed a secondment to Morgan Stanley during 2009. He was admitted to the New York bar in 2007 and currently is a non-practicing lawyer.

William speaks native English and fluent Mandarin.

Jane-May Cross

Jane-May Cross, Practical Law China editor

Jane-May trained and qualified with Reed Smith. In 2008, she joined Practical Law as an editor in the Cross-border department, managing projects such as the Life Sciences, Corporate Real Estate and Investment Funds multi-jurisdictional guides. Jane-May was appointed a Practical Law China editor in September 2011. She speaks Cantonese, is learning Mandarin, is fluent in French, and holds a French law diploma.

Jane-May studied at the University of Leicester, Université Jean Moulin (Lyon III) and the College of Law. Jane-May is currently a non-practising solicitor.

Ni Kewei Nico

Nico Kewei Ni, Practical Law China Editor

Before Nico joined the team, she worked in the corporate finance industry for five years with licences (types 1 & 6) under the Securities & Futures Commission of Hong Kong. She accumulated experience and knowledge of Hong Kong Listing Rules and the Takeovers Code in the different corporate finance activities such as IPO, M&A, restructuring, asset recovery for Hong Kong listed companies and mainland China corporates.

Nico completed a Masters degree study in International Journalism from Hong Kong Baptist University and she holds a Bachelor degree in Law from the law school of South China University of Technology. Nico was also a freelance writer for Hong Kong Trade Development Council. She speaks Mandarin, English and Cantonese.

Andre Brown

Andre Brown, Senior International Commissioning Editor

Andre joined Practical Law in 2004 as a research editor for the Which lawyer? directory and headed the team from 2008 until 2012. During this time, he had a strong focus on the Asia Pacific and Middle Eastern markets. Andre is now a Senior Commissioning editor and works with our contributors to create Practical Law resources, as well as developing and maintaining our contributor relationships.

Consultant editors

Brad Herrold

Brad Herrold, Practical Law China Consultant

Before joining Practical Law as a consultant in, Brad lived and worked in Beijing for nearly 20 years, first in private business and then as a lawyer in private practice with several major law firms, including Baker & McKenzie and Hogan Lovells. He has developed extensive experience advising multinational clients on a broad range of transactional and compliance matters, including inbound acquisitions, joint venture projects, and technology licensing and other transfer arrangements. Brad is currently an inactive member of the California Bar and lives in the US. He is fluent in Mandarin.

Erik Leyssens

Erik Leyssens, Practical Law China Consultant

Erik Leyssens has worked in legal services for about 20 years during which time he was based at the China and Hong Kong offices of firms such as Baker & McKenzie, Deacons and Mallesons. Erik has extensive experience in Greater China and the APAC region advising on cross-border M&A, corporate, commercial and compliance matters. He completed many foreign direct investment and M&A transactions, acting for both international private equity funds as well as strategic investors in the establishment, acquisition and restructuring of, and exit from, investments. He also advised clients in the region on best practices for ensuring compliance with general and sector-specific legal requirements and assisted with the formulation and establishment of compliance manuals and systems.

Erik has written and spoken regularly about various aspects of investment law and M&A transactions in the Asia-Pacific.Erik holds MAs in Sociology and Chinese Studies from the Catholic University of Leuven and an LLB Honours from Wolverhampton University. He was admitted as a solicitor in New South Wales in 2003 and in Hong Kong in 2010.

About Practical Law China

The best way to experience Practical Law China is to try it

"I have always considered Practical Law resources to be of the highest quality. I particularly like their plain English approach, which is of critical importance in China."

- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

The Practical Law China Consultation board advises on the direction of the service and ensure that it stays at the leading edge of practice

Strategic Partner

Practical Law and Zhong Lun Law Firm formed a strategic partnership to create Chinese legal know-how resources in 2011. Zhong Lun Law Firm was the first top-tier Chinese law firm to set up a London office in May 2012.

Our professional support team has worked closely with Zhong Lun lawyers to produce China standard documents on cross-border China M&A transactions.

Contributing firms

We work with leading Chinese and international firms on some of our resources, including the following:

Bird & Bird
DLA Piper
Goodwin Procter
Han Kun
Herbert Smith Freehills
Jun He
King & Wood Mallesons
Norton Rose Fulbright
Risk Advisory Group
Rouse & Co International

For a full list of contributors, please see the China contributors page

About Practical Law China

The best way to experience Practical Law China is to try it

"I have always considered Practical Law resources to be of the highest quality. I particularly like their plain English approach, which is of critical importance in China."

- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

Case study: inbound M&A transaction

A stage-by-stage case study demonstrating how Practical Law China resources can help a law firm to advise on the acquisition of a domestic Chinese company for a foreign client, from the initial engagement through to completion.


A multinational corporation that supplies plastic injection molds used in the manufacturing of automobile parts is considering buying a company based in South China which manufactures a different set of injection molds, with a view to expanding its product range and also to gain access to the target’s local Chinese customers. The multinational, which is making its first acquisition in China, has engaged your firm to advise on the transaction and, if necessary, to recommend and coordinate with local counsel.

Scoping the engagement

Assuming that there are no conflicts (or if time is short, sometimes while waiting for conflicts to clear), the first thing the team will need to do is to walk the client through the likely transaction timetable and provide an indicative fee estimate.

As clients may be waiting on the lawyer to revert before progressing the deal, they will want a quick response. However, it can be very damaging to client relations, not to mention embarrassing to the in-house counsel who has to manage the legal budget, if estimates are exceeded. As a result, clients rightly expect assurances that the estimate reflects not just the firm’s internal experience but also wider market circumstances.

At this stage you will need to:

  • Demonstrate to your client that your estimates are in line with market practice.
  • Guard against avoidable errors in a highly time-sensitive environment.
  • Double check your initial estimates in light of recent changes in law.

The Practical Law solution:

Drafting and negotiating the term sheet

After the client has agreed to proceed on the basis of the timetable and fee estimate, the next step is for the parties to sign a term sheet (also known as a memorandum of understanding, letter of intent, heads of terms or framework agreement) to describe the main terms of the transaction.

Although in China the term sheet is usually expressly not legally binding except for certain immediate concerns such as confidentiality and no-shop clauses, the dynamics driving the Chinese party, and in particular the fact that its lead negotiator will probably need to obtain various layers of internal approvals based on the term sheet language, mean that future deviations from it are likely to present more of a problem than in other jurisdictions.

One thing, however, is the same in China as in any other jurisdiction. Lawyers are often not involved until after the broad strokes have been agreed, and may have a very limited window in which to draft or comment on the term sheet. At this stage speed is critical, and firms that can put the term sheet together quickly without missing any key points will have a significant competitive advantage.

At this stage you will need to:

  • Prepare a term sheet that is clear on key points (for example, the scope of due diligence and the need for international-standard warranties).
  • Flag up important provisions (for example, your termination rights) in clear language, as the Chinese party may be operating under different assumptions and it will be difficult to revisit this later.
  • Do this all as quickly as possible to maintain deal momentum.

The Practical Law solution:

  • Check that the precedent term sheet you are working from is appropriate and that no key points have been accidentally omitted by comparing it with our China inbound M&A model form letter of intent.
  • This is also a great starting point to save time if you aren’t lucky enough to be working with an in-house precedent that is regularly maintained.

Quick and easy access to primary law

You need to find out whether your client’s proposed business line is permitted. You task a recent joiner to your firm with checking. You get a confident email back that states that it is (or isn’t) permitted solely on the basis of a no-names call with a contact of theirs who is now working at MOFCOM.

Result: time has been incurred that may not be recoverable and more work now needs to be done to back up the answer, while the client is growing impatient waiting for a response.

When you need both the answer and the authority for it, Practical Law China can help. All our practice notes, such as our popular overview of applicable Chinese foreign direct investment law, link directly to primary Chinese legislation with accompanying English translations, available to subscribers who also subscribe to Westlaw China.

Due diligence

Conducting good due diligence into acquisition targets in China is hard, compared with targets in Europe or North America. Little information on acquisition targets is publicly available. Business culture can sometimes be short-term, leading sellers to conclude it makes more sense to hide bad news than to risk reducing their company valuation (this may also be helped by a perception that it will be difficult in practice for buyers to enforce representations and warranties). Sellers can regard penetrating questions as evidence of a lack of trust on the part of the buyer, and take offence. The state owns or is invested in many of the most attractive acquisition targets, bringing them within the scope of laws that can classify key commercial data as ‘state secrets’.

This leads to a range of issues, from targets operating without proper licenses under unofficial arrangements that may not survive the change of ownership, or failure to contribute to mandatory funds for the benefit of employees, to internal controls that are weaker than the incentives to engage in bribery or other corrupt behaviour, or side arrangements for the benefit of sellers that may cause problems after completion.

At this stage, the parties are not yet committed to the transaction or to incurring the costs involved in taking it forwards. As a result, legal due diligence in China is frequently highly fee-sensitive, and efficient use of time is key.

At this stage you will need to:

  • Know the key general M&A and region-specific due diligence issues.
  • Communicate expectations for responsiveness and regular progress reports to the client and target.
  • Conduct or oversee due diligence, including document review, questions for management and reporting. This often involves coordinating with advisors from other disciplines (for example, auditors).
  • Keep time incurred to a minimum until the parties have made a firm decision on whether to proceed.

The Practical Law solution:

Deal documents

There is a belief widespread among businesspeople in the PRC that once the term sheet is agreed and due diligence is complete, the bulk of the legal work on the transaction is done and what remains is essentially clerical in nature. It can therefore often come as a surprise when buyer’s counsel sends through the first draft of the M&A documents. In particular, long lists of representations and warranties can elicit a very emotional response in a seller which has already gone through what feels like a very extensive due diligence process.

Buyer’s counsel can set the right tone for negotiations and avoid antagonising the seller by providing a first draft that is appropriate to the market and the transaction (that is, one which is shorter and written in plainer language than is typical in European or North American transactions). At this stage, buyer’s counsel should also anticipate issues that may arise after closing, for example, the need to make filings and registrations or obtain government approvals, and include contractual wording that commits the seller to assisting with these tasks.

As signing and completion draw nearer, there is also a significant project management element to the deal lawyer’s job, as signature packs will need to be prepared, signatories identified and chased down, and closing sets managed and circulated.

At this stage you will need to:

  • Draft (or review) a set of deal documents that offer reasonable protection to the buyer whilst being appropriate for the market and the deal.
  • Negotiate effectively from a familiar set of documents and be prepared for the typical arguments and counter-arguments on each clause.
  • Understand the framework for different types of Chinese corporation to validly execute legally binding documents and plan signing and closing effectively.
  • Be aware of key problem points (for example, the need to obtain internal or government approvals, or last minute uncertainty over payment bank accounts) and plan accordingly.

The Practical Law solution:


After completion, the role of transaction counsel will scale down significantly, usually being limited to ad hoc assistance with any filings, registrations or reporting requirements falling on the parties or any further work flowing from the initial engagement. In the unfortunate event that matters do take a turn for the worse for the new investment, our materials on arbitration and dispute resolution in China can help the transactional expert to accurately assess the situation and brief or coordinate with litigators efficiently.

As more law firms enter the Greater China market and local competitors become more sophisticated, M&A practitioners in the region can expect to face increased pressure to run transactions efficiently and to make in-firm know-how resources go further. Added to these fee pressures will be an ever increasing reluctance to pay premium rates for the work done by junior lawyers, a practice that has traditionally been key to defraying the cost of training new entrants to the high standard of professionalism that clients require. In the difficult legal market of 21st century China, making full use of services such as Practical Law China can help you to meet these challenges without sacrificing the quality that distinguishes your practice.

About Practical Law China

The best way to experience Practical Law China is to try it

"I have always considered Practical Law resources to be of the highest quality. I particularly like their plain English approach, which is of critical importance in China."

- Robert Lewis, International Managing Partner, Zhong Lun Law Firm

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