Is a VIE an Obstacle to a Merger Filing in China?

Jul 30, 2020
Scott Yu, Frank Jiang, Rachel Li, Emily Xu and Derek Liu of Zhong Lun Law Firm discuss a recent joint venture between Yum China and Mininglamp that the firm advised on involving a variable interest entity (VIE) structure that received unconditional clearance from the State Administration for Market Regulation (SAMR), which is the first case of its kind in China. They also highlight key issues arising in a merger filing involving a VIE structure and offer some key practical guidance for VIE structured companies

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This was the first case involving a VIE structure that has been formally docketed and unconditionally cleared by the Chinese antitrust authority since its conditional clearance of Walmart’s acquisition of Yihaodian in 2012…

On July 16, 2020, SAMR unconditionally cleared the establishment of a joint venture between Shanghai Ming Cha Ze Gang Management Consulting Co., Ltd. (an affiliate of Mininglamp) and Huansheng Information Technology (Shanghai) Co., Ltd. (an affiliate of Yum China) (the M/H Case).  This was the first case involving a VIE structure that has been formally docketed and unconditionally cleared by the Chinese antitrust authority since its conditional clearance of Walmart’s acquisition of Yihaodian in 2012 (for more detail on the Walmart/Yihaodian Case, see the Announcement of the Ministry of Commerce (MOFCOM) on the Decision to Impose Restrictive Conditions on the Concentration of Undertakings of Wal-Mart Stores, Inc.’s Acquisition of 33.6% Equity in Niuhai Holding Ltd., at http://www.mofcom.gov.cn/article/b/g/201209/20120908362132.shtml).

The following is a discussion of the key issues in a merger filing in China involving a VIE structure.

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