在并购交易中的风险管理【外文翻译】.doc

1、本科毕业论文外文翻译外文题目MANAGINGRISKSINCHINESEMATRANSACTIONS出处HTTP/WWWMONDAQCOM/ARTICLEASPARTICLEID54772作者LEFANGONG原文CHINAMANAGINGRISKSINCHINESEMATRANSACTIONS28NOVEMBER2007ARTICLEBYLEFANGONGAGAINSTTHEBACKDROPOFCHINASACCESSIONTOTHEWTOANDTHECONTINUOUSLIFTINGOFRESTRICTIONSONFOREIGNINVESTMENTINMANYINDUSTRIES,CHIN

2、AISGOINGTHROUGHANEXTRAORDINARYPERIODOFMERGERANDACQUISITIONACTIVITYHOWEVER,EXECUTINGMATRANSACTIONSINCHINAISNOTFORTHEFAINTOFHEART,ANDMAKINGSUCCESSFULINVESTMENTSANDSTRIKINGGOODDEALSREQUIREMORETHANAGOLDRUSHMENTALITYINPARTICULAR,TAKINGANOVERLYCAUTIOUSAPPROACHMIGHTRESULTINMISSINGOUTONGREATOPPORTUNITIES,WH

3、ILEANUNDISCIPLINEDOROVERLYOPTIMISTICAPPROACHMIGHTWELLLEADTODISASTERCONSEQUENTLY,ITISESSENTIALTHATDEALMAKERSANDTHEIRCOUNSELTAKEANINFORMED,BALANCED,ANDPRACTICALAPPROACHTOTHEMYRIADANDUNIQUERISKSPRESENTEDBYCHINESEMATRANSACTIONSMATTERSTHATREQUIRECAREFULATTENTIONINCHINESEMATRANSACTIONSINCLUDEREGULATORYRES

4、TRICTIONSONCOMMERCIALENTERPRISE,GOVERNMENTALAPPROVALSTHATAREREQUIREDINCONNECTIONWITHPURCHASESANDSALESOFBUSINESSES,CONFIRMATIONOFTITLETOASSETS,ASSESSMENTOFPOTENTIALLIABILITIES,ANDSTRUCTUREOFPURCHASEPRICEANDOTHERAMOUNTSPOTENTIALLYPAYABLETOTHESELLERCIRCUMSTANCESINCHINATHATTENDTOMAKETHESEMATTERSCHALLENG

5、INGINCLUDEALEGALANDREGULATORYSYSTEMTHATISINASTATEOFFLUX,UNAVAILABILITYANDUNRELIABILITYOFPUBLICRECORDS,UNFAMILIARCUSTOMSANDPRACTICES,A“SELLERSMARKET“CREATEDBYASIGNIFICANTINFLUXOFINVESTMENTCAPITAL,ANDREGULATORYRESTRICTIONSAPPLICABLETODEFERREDPAYMENTSOFPURCHASEPRICETHISCOMMENTARYIDENTIFIESSEVERALKEYARE

6、ASOFRISKASSOCIATEDWITHMATRANSACTIONSINCHINA,WITHTHEAIMOFHELPINGDEALMAKERSIDENTIFYANDADDRESSIMPORTANTISSUESATANEARLYSTAGEASSESSINGREGULATORYRESTRICTIONSANINITIALMATTERTHATAFOREIGNINVESTORNEEDSTOASSESSINSETTINGITSEXPECTATIONISHOWTHECHINESEREGULATORYRESTRICTIONSANDTHEPERSONALVIEWSOFTHEAPPLICABLEAPPROVA

7、LAUTHORITIESMAYAFFECTTHESTRUCTUREANDPROCESSOFTHEDEALONEOFTHEFIRSTTHINGSTHATABUYERMAYWANTTOLOOKINTOISWHETHERTHETARGETCOMPANY,AFTERBEINGACQUIREDBYAFOREIGNINVESTOR,CANCONTINUETOCONDUCTITSBUSINESSANDOPERATIONSINTHESAMEMANNERWITHOUTBECOMINGSUBJECTTOADDITIONALREGULATORYRESTRICTIONSTHEREARESTILLANUMBEROFBU

8、SINESSSECTORSINCHINATHATARENOTFULLYOPENTOFOREIGNINVESTORSANDINWHICHSUCHINVESTORSCANNOTESTABLISHWHOLLYFOREIGNOWNEDENTERPRISES“WFOES“OREVENJOINTVENTURESAFOREIGNINVESTORSHOULDDETERMINEASEARLYASPOSSIBLEWHETHERTHEREAREPERCENTAGELIMITATIONSONPOTENTIALOWNERSHIPINANENTERPRISEINAGIVENINDUSTRIALSECTOR,ASTHISW

9、ILLDIRECTLYAFFECTTHEDEALSTRUCTUREFOREXAMPLE,IFTHETARGETCOMPANYISACONGLOMERATE,SOMEASSETSMAYNEEDTOBECARVEDOUTTOMAKESURETHEPOSTCLOSINGTARGETCOMPANYWILLSTEERCLEAROFTHESECTORSTHATARE“PROHIBITED“OR“RESTRICTED“FORFOREIGNINVESTMENTTHROUGHTHESTATEDEVELOPMENTANDREFORMCOMMISSIONANDTHEMINISTRYOFCOMMERCE,CHINAS

10、CENTRALGOVERNMENTSETSTHEPOLICYANDPACEOFOPENINGUPTHEINDUSTRIALSECTORSANDPUBLISHESANDUPDATESTHEFOREIGNINVESTMENTCATALOGUEEVERYFEWYEARSPROSPECTIVEBUYERSSHOULDIMMEDIATELYFAMILIARIZETHEMSELVESWITHTHISGUIDANCEINADDITIONTOIDENTIFYINGPROHIBITIONSANDRESTRICTIONSONINVESTMENTINCERTAINSECTORS,THECATALOGUELISTST

11、HOSESECTORSWHEREFOREIGNINVESTMENTISENCOURAGED,WHICHCOULDMEANTAXHOLIDAYSANDPREFERENTIALTREATMENTFORFOREIGNINVESTORSIFTHETRANSACTIONPARTIESCANMANAGETOINTERPRETTHEINDUSTRIALTERMSFAIRLYLIBERALLYANDHAVETHEAPPLICABLEAPPROVALAUTHORITIESAGREETOSUCHINTERPRETATIONS,THEEFFORTMAYYIELDSIGNIFICANTBENEFITSWHENTHEC

12、OMPANYFILESITSTAXRETURNSINADDITIONTOTHERESTRICTIONSIMPOSEDBYTHECENTRALGOVERNMENT,ATTENTIONSHOULDBEPAIDTOPOSSIBLEREGULATORYCONSTRAINTSATTHELOCALGOVERNMENTLEVELFORINSTANCE,THESHANGHAIGOVERNMENTREQUIRESLICENSESFORHANDLINGPUBLICSECURITYPROJECTSTHATCANNOTBEISSUEDTOWFOESALTHOUGHITISREASONABLETOASSUMETHATA

13、SHAREACQUISITIONTRANSACTIONWOULDALLOWTHETARGETCOMPANYTOKEEPITSLICENSESANDPERMITSAFTERTHECLOSINGOFTHEDEAL,THECHANCEOFSURPRISESINCREASESWHENDIFFERENTGOVERNMENTAGENCIESAREINVOLVEDINTHEPROCESSTHUS,ITISCRITICALTODETERMINEATANEARLYSTAGEWHETHERTHEREQUIREDLICENSESANDPERMITSCANBERENEWEDOREXCHANGEDFORNEWONESA

14、FTERTHETARGETCOMPANYCONVERTSTOAFOREIGNINVESTEDENTERPRISEASARULEOFTHUMB,THESHAREPURCHASEOREQUITYINTERESTTRANSFERAGREEMENTWOULDNORMALLYTIMETHECLOSINGACOUPLEOFDAYSAFTERALLTHENECESSARYAPPROVALS,NEWLICENSES,ANDPERMITSHAVEBEENOBTAINEDASSUMINGTHATALLOTHERCLOSINGCONDITIONSHAVEBEENSATISFIEDINADDITION,PROSPEC

15、TIVEBUYERSSHOULDNOTBEENTIRELYSURPRISEDIFDUEDILIGENCEINDICATESTHATTHETARGETCOMPANYHASBEENENGAGINGINSOMEOFITSBUSINESSACTIVITIESWITHOUTPROPERLICENSESORPERMITSINTHISCASE,THEBUYERWILLNEEDTOASSESSTHERISKEXPOSUREANDDECIDEWHETHERITSHOULDFORGOTHETRANSACTION,INSISTTHATTHESELLERCURETHEDEFICIENCIESPRIORTOCLOSIN

16、G,ORSTRUCTURETHETRANSACTIONSASANASSETPURCHASEANDAPPLYSEPARATELYFORTHEREQUIREDLICENSESNAVIGATINGAPPROVALPROCESSESCHINASREGULATORYENVIRONMENTISSTILLRATEDAMONGTHETOPCONCERNSFORUSCOMPANIES,ACCORDINGTOARECENTSURVEYBYTHEUSCHINABUSINESSCOUNCIL1FOREIGNCOMPANIESINVESTINGINCHINAHAVETODEALWITHTHEAMBIGUITYOFTHE

17、LAWANDTHECONTRADICTORYVIEWSOFDIFFERENTGOVERNMENTAGENCIESANDOFFICIALSTHESECONDITIONSFREQUENTLYRESULTFROMACOMBINATIONOFEVERCHANGINGLAWSANDREGULATIONSANDFORMALANDINFORMAL“IMPLEMENTATIONRULES“FORINSTANCE,AGOVERNMENTOFFICIALWITHAPPROVALAUTHORITYMAYHAVEHISOWNINTERPRETATIONOFTHELAWANDMAYASSUREANINVESTORORI

18、TSCOUNSELTHATHISAPPROACHISCORRECT,WHILEOFFICIALSINANOTHERGOVERNMENTAGENCYSUGGESTEDOTHERWISEUNANTICIPATED“HIDDEN“RULES,WHICHCANBECREATEDBYBOTHGOVERNMENTALANDQUASIGOVERNMENTALAGENCIES,CANALSOPRESENTCHALLENGESFORINSTANCE,APROPERTYREGISTRATIONCENTER2MAYEMPLOYLOCALUNPUBLICIZEDPROCEDURESTHATREQUIRESHAREPU

19、RCHASEAGREEMENTSOREQUITYTRANSFERAGREEMENTSTOBEINAPRESCRIBEDFORMAVOIDINGTHESELANDMINESDOESNTTAKEMAGIC,JUSTHARDWORKANDVIGILANCEFOREIGNINVESTORSMUSTDOSUBSTANTIALHOMEWORKTODEVELOPKEENJUDGMENTONLEGALCOMPLIANCEANDRISKASSESSMENTINCHINAFOREIGNINVESTORSNOTFAMILIARWITHCHINASHOULDRESISTTHEURGETOMAKE“INNOCENT“A

20、SSUMPTIONSANDSHOULDENGAGESOPHISTICATEDCOUNSELTODETECTANDRESOLVEISSUESASEARLYINTHEPROCESSASPOSSIBLECONFIRMINGTITLETOASSETSINCHINA,THEVERIFICATIONOFTHEOWNERSHIPOFASSETSCANPRESENTSUBSTANTIALCHALLENGESPUBLICLYAVAILABLEINFORMATIONANDGOVERNMENTRECORDS,IFTHEYEXIST,MAYBEINADEQUATEORUNRELIABLEFORPRIVATECOMPA

21、NIES,INTERNALDOCUMENTATIONISUSUALLYNOTWELLKEPTANDORGANIZED,ANDITMAYBEINSUFFICIENTTOSHOWWHATASSETSBELONGTOWHOMFORSTATEOWNEDENTERPRISES,THESITUATIONMAYNOTBESIGNIFICANTLYBETTER,ANDREQUESTSFORINFORMATIONOFTENMEETWITHRELUCTANCEANDTHE“STATEOWNED“CULTUREOFSECRECYITISIMPORTANTTOREALIZETHATATARGETCOMPANYSASS

22、ETSMAYHAVEBEENUSEDINRELATEDPARTYTRANSACTIONSFOREXAMPLE,ONECOMPANYSASSETSMIGHTHAVEBEENPLEDGEDFORANOTHERSBANKBORROWINGS,ANDTHESAMEASSETSMIGHTHAVEBEENUSEDMULTIPLETIMESFORMAKINGREGISTEREDCAPITALCONTRIBUTIONSINDIFFERENTCOMPANIESTHEBUYERALSONEEDSTOBEEXTREMELYCAREFULIFSUBSTANTIALASSETSOFATARGETCOMPANYWEREB

23、OUGHTFROMTHEBANKRUPTCYAUCTIONOFASTATEOWNEDENTERPRISEIFTHEPROCESSWASNOTPROPERLYSUPERVISEDBYTHECOURTANDTHECASEWASNOTEFFECTIVELYCLOSED,THESALECOULDRISKBEINGOVERTURNEDBECAUSEOFAFLAWEDAUCTIONPROCESSFINALLY,PROSPECTIVEBUYERSMUSTBEVIGILANTANDVIGOROUSINTITLESEARCHANDVERIFICATIONMANYSTATEOWNEDENTERPRISES,AND

24、SOMETIMESEVENPRIVATELYOWNEDCOMPANIES,MAYUSEORCLAIMTO“OWN“LANDOFFICIALLYLABELEDAS“ALLOCATEDLAND,“WHICHISPROVIDEDBYTHEGOVERNMENTATNOMINALCOSTORNOCOSTATALLBUTCANNOTBESOLD,TRANSFERRED,MORTGAGED,OROTHERWISEDISPOSEDOFAMARKETABLETITLE,OR“GRANTEDLANDUSERIGHT,“MUSTBEOBTAINEDBEFORESUCHLANDCANBESOLDORTRANSFERR

25、ED,WHICHCOULDREQUIRETHEPAYMENTOFSIGNIFICANTLANDPREMIUMSTOTHELANDBUREAUASSESSINGLIABILITIESCONTINGENTANDOFFBALANCESHEETLIABILITIESMAYPRESENTANOTHERSERIOUSAREAOFRISKFORBUYERSOFCHINESECOMPANIESTYPICALAREASOFPOTENTIALLYSIGNIFICANTLIABILITYEXPOSUREINCLUDETAX,EMPLOYMENT,LEGACYPROBLEMS,ANDENVIRONMENTALISSU

26、ESTAXDUEDILIGENCESHOULDBEANINTEGRALPARTOFANYBUYERSASSESSMENTOFACHINESECOMPANYFAILURETOCAPTUREIRREGULARORILLEGALTAXPRACTICESANDQUANTIFYTHEASSOCIATEDHIDDENLIABILITIESANDDOWNSIDERISKSCOULDLEADTOSERIOUSPROBLEMSINADDITIONTOOVERSTATEDFINANCIALPROJECTIONSANDANINFLATEDPURCHASEPRICE,LATENTPROBLEMSINTHISAREAM

27、AYRESULTINFUTURETAXAUDITS,ASSESSMENTSFORPASTDUETAXES,ANDHEFTYPENALTIESDESPITETHESEVERECIVILPENALTIESANDTHEPOSSIBILITYOFCRIMINALPROSECUTION,ITISNOTUNCOMMONTODISCOVERTAXEVASION,AGGRESSIVEANDIRREGULARACCOUNTINGANDTAXPRACTICES,ANDEVENTAXFRAUDINACHINESECOMPANYSOMECHINESECOMPANIESKEEPTWOORMORESETSOFBOOKSI

28、NORDERTOUNDERSTATETAXEXPOSURERELATEDPARTYTRANSACTIONSARECOMMONPLACEANDSOMETIMESAREBASEDONHANDSHAKESANDORALARRANGEMENTS,WITHTHERESULTTHATTHETRANSACTIONSARENEITHERDOCUMENTEDNORREFLECTEDINTHECOMPANYSBOOKSTHROUGHTHESETRANSACTIONS,PROFITSMAYBESHIFTEDTODOMESTICENTITIESTHATAREINALOSSPOSITIONORTOOFFSHOREENT

29、ITIESSUCHASTHOSEINHONGKONGIFITISDETERMINEDTHATATRANSACTIONHASVIOLATEDPRCTRANSFERPRICINGLAWS,THECOMPANYMAYHAVETOPAYBACKTAXESANDPENALTIESBUYERSSHOULDALSOKEEPINMINDANOTHERIMPORTANTASPECTOFCHINESETAXLAWTHEREISGENERALLYNOSTATUTEOFLIMITATIONSFORTAXLIABILITIESAWARENESSOFTHISCIRCUMSTANCEMAYBEPARTICULARLYIMP

30、ORTANTWHENALLOCATINGTAXEXPOSURESANDENTERINGINTORELATEDINDEMNIFICATIONOROTHERARRANGEMENTSEMPLOYMENTISSUESFREQUENTLYARISEWHENTHETARGETISASTATEOWNEDENTERPRISEWITHSIGNIFICANTLABORREDUNDANCYMAJORLAYOFFSMIGHTTRIGGERWORKERPROTESTSANDOTHERSOCIALUNREST,THEREBYPOLITICIZINGTHETRANSACTIONANDATTRACTINGUNWANTEDAT

31、TENTIONFROMTHELOCALGOVERNMENTAUTHORITIESANOTHERFREQUENTLYENCOUNTEREDISSUEISHOWMUCHOFTHEWORKFORCETHETARGETCOMPANYMAYREDUCEAFTERTHEACQUISITIONTHISISOFTENAHEAVILYNEGOTIATEDISSUE,ANDTHESELLERMAYEVENBRINGITUPAGAINATTHELASTMINUTE,HOPINGTHEBUYERWILLCOMPROMISEGIVENTHEPOLITICALCOMPLICATIONSOFEMPLOYMENTMATTER

32、S,ITWOULDBEPRUDENTFORTHEBUYERTOTAKEAFIRMSTANDABOUTITSPOSITION,NEGOTIATERELENTLESSLYUPFRONT,ANDRESISTTHETEMPTATIONTOLEAVETHISISSUEBEHINDFORFUTURE“FRIENDLYDISCUSSION“ONCETHEDEALISOTHERWISECUT,DISCUSSIONSONCUTTINGBACKTHEWORKFORCEARELIKELYTOBENEITHERPLEASANTNORFRIENDLYFINALLY,ONEOFTHEMOSTDIFFICULTHEADAC

33、HESFORPOTENTIALBUYERSOFCHINESECOMPANIESISTHELEGACYISSUEINHERITEDFROMFORMERSTATEOWNEDENTERPRISESORCREATEDDURINGTHE“REFORMANDRESTRUCTURING“IE,PRIVATIZATIONPROCESSBUYERSOFPRIVATELYOWNEDCOMPANIESTHATWERERESTRUCTUREDORCONVERTEDFROMFORMERSTATEOWNEDENTERPRISESSHOULDBEALERTTOPOSSIBLEVIOLATIONSANDLIABILITIES

34、ASSOCIATEDWITHTHEPRIOR“RESTRUCTURINGS“ORMANAGEMENTBUYOUTSANORMALDUEDILIGENCEINVESTIGATIONFREQUENTLYWILLNOTREVEALMUCHINTERMSOFSUCHLEGACYPROBLEMS,BECAUSEANYPROBLEMATICELEMENTSOFTHECOMPANYSHISTORYARELIKELYTOBEKEPTSECRETUNTILACORRUPTIONSCANDALERUPTSUSUALLYWHENALOCALOFFICIALLOSESHISJOBORGETSINVESTIGATEDI

35、NSUCHCASES,ITFREQUENTLYTURNSOUTTHATTHESELLERDOESNOTHAVECLEANHANDSTOUNDERSTANDTHECOMPANYANDASSESSTHERISKS,THEBUYERSHOULDFULLYENGAGEITSLOCALTEAMSINCLUDINGPRIVATEINVESTIGATORS,IFNEEDEDTOGATHERLOCALINTELLIGENCEANDSNIFFOUTHIDDENISSUESTOTHEGREATESTEXTENTPOSSIBLEIFTHE“SHADOWOFDOUBT“CANNOTBEELIMINATED,THENI

36、TMAYBENECESSARYTOCONSIDERALTERNATIVECOURSESOFACTIONPURCHASEPRICEANDCLOSINGMATTERSTODEALWITHUNCERTAINTIESOVERVALUATIONANDMITIGATETHERISKSASSOCIATEDWITHTHEACQUIREDCOMPANY,ACQUIRERSSHOULDCAREFULLYCRAFTAPURCHASEAGREEMENTWITHANACCEPTABLEPAYMENTARRANGEMENTFORTHEPURCHASEPRICETHATISWORKABLEUNDERPRCLAWUNLIKE

37、MATRANSACTIONSINTHEUS,THEOPTIONSOFESCROWACCOUNTSANDHOLDBACKSINCHINAAREQUITELIMITEDANDUNSATISFACTORYDUETOREGULATORYCONSTRAINTSANDANUNDERDEVELOPEDBANKINGSERVICESMARKETPRCLAWREQUIRESAFOREIGNINVESTORTOMAKEPAYMENTWITHINTHREEMONTHSOFTHEISSUANCEOFTHENEWBUSINESSLICENSEOFTHEACQUIREDTARGETTHEDEADLINEMAYBEEXTE

38、NDED,SUBJECTTOGOVERNMENTAPPROVAL,BUTNOLESSTHAN60PERCENTOFTHEPAYMENTMUSTBEMADEWITHINSIXMONTHSOFTHEISSUANCEOFTHENEWBUSINESSLICENSE,ANDTHEBALANCEMUSTBEMADEWITHINONEYEARTHISEFFECTIVELYMEANSTHATAHOLDBACKARRANGEMENT,IFANY,CANNOTEXTENDFORMORETHANAYEAR,WHICHMAYNOTBELONGENOUGHFORTHEBUYERTODISCOVERCONTINGENTO

39、RHIDDENLIABILITIESASESCROWISAFAIRLYNEWCONCEPTTOMANYBANKSINCHINA,THEYARERELUCTANTTOGETINVOLVEDINSITUATIONSTHATMAYGIVERISETOPOTENTIALDISPUTESALTHOUGHINSOMEEXCEPTIONALCASESBANKSAREWILLINGTOACCOMMODATETHETRANSACTIONPARTIES,SUCHACCOMMODATIONSMAYWELLINVOLVETHEASSESSMENTOFHEFTYFEESIFTHETRANSACTIONCANBEPART

40、IALLYSTRUCTUREDOFFSHOREANDPARTOFTHEPAYMENTCANBEMADETOABANKACCOUNTOUTSIDECHINA,HOLDBACKSANDESCROWFORTHEPURCHASEPRICEMAYBEEASIERTOARRANGE,ASTHEYARENOLONGERSUBJECTTOCHINESEREGULATORYCONSTRAINTSACREATIVEEARNOUTARRANGEMENTCANALSOSERVEASAMECHANISMTOHELPTHEBUYERMITIGATEPOTENTIALRISKEXPOSUREARISINGFROMCONTI

41、NGENTLIABILITIESITCANALSOBEUSEDTOBRIDGEDIFFERENCESBETWEENASELLERANDBUYEROVERVALUATIONOFTHECOMPANYFORINSTANCE,ABUYERCOULDAGREETOMAKEANADDITIONALPAYMENTSEVERALYEARSAFTERTHECLOSINGIFTHEVENTUREACHIEVESASPECIFIEDEARNINGTARGETANDTHEREHASBEENNOMATERIALBREACHOFREPRESENTATIONSANDWARRANTIESBYTHESELLERINADDITI

42、ONTOCAREFULDRAFTINGTOMINIMIZETHERISKOFGAMESMANSHIPINDEFININGTHEFINANCIALTARGETSANDCALCULATIONSOFEARNOUTPAYMENTS,SPECIALCONSIDERATIONNEEDSTOBEGIVENTOCREATINGAMECHANISMTHATISENFORCEABLEANDPRACTICALUNDERPRCLAWIFANEARNOUTISTREATEDASPARTOFTHEPURCHASECONSIDERATION,THENITWILLBESUBJECTTOTHESAMEPAYMENTDEADLI

43、NEAPPLICABLETOTHEPURCHASEPRICE,WHICHISWITHINAYEARFOLLOWINGTHEISSUANCEOFTHENEWBUSINESSLICENSEOFTHETARGETCONSEQUENTLY,ITISNECESSARYTOCRAFTTHEEARNOUTLANGUAGEARTFULLYTOMAKESURETHATANYADDITIONALPAYMENT,INTHEEYESOFREGULATORYAUTHORITIES,JUDGES,ANDARBITRATORS,DOESNOTCONSTITUTEPAYMENTOFAPORTIONOFTHEPURCHASEP

44、RICEFORINSTANCE,ABUYERCOULDINSTEADAGREETOPAYACONSULTINGFEETOTHESELLERIFCERTAINLIABILITIESARENOTTRIGGEREDWITHINTWOYEARSOFTHECLOSINGHOWEVER,THESELLERMAYBEWARYOFTHETAXIMPLICATIONSOFSUCHANARRANGEMENT3ANOTHEROPTIONISABUYBACKARRANGEMENT,WHERETHEBUYERCANREQUESTTHATTHESELLERREPURCHASETHEEQUITYINTERESTSORIGI

45、NALLYSOLDTOTHEBUYERATAFIXEDPRICEUPONTHEOCCURRENCEOFSPECIFIEDEVENTS,SUCHASTHECOMPANYSFAILURETOMEETCERTAINMILESTONESORMATERIALBREACHESOFREPRESENTATIONSANDWARRANTIESBYTHESELLERBUTTHEENFORCEABILITYOFSUCHCLAUSESREMAINSTOBETESTED,ANDTHEYMAYBESUBJECTTOREGULATORYOBSTACLESFIRST,SUCHABUYBACKWILLBESUBJECTTOAPP

46、ROVALAGAINWHENTHECHANGEOFSHAREHOLDERSNEEDSTOBEEFFECTED,ANDTHEREISNOGUARANTEETHATTHEAPPROVALAUTHORITIESWILLENDORSETHEREPURCHASE,ESPECIALLYWHENTHEREISNOCLEARGUIDANCEUNDERPRCLAWONHOWTODEALWITHSUCHASITUATIONSECOND,THEPRCEQUITYJOINTVENTURELAWSTIPULATESTHATTHEUNANIMOUSAPPROVALOFTHEBOARDOFDIRECTORSISREQUIR

47、EDFORMATTERSSUCHASMERGERSANDACQUISITIONSANDCHANGESTOTHEARTICLESOFASSOCIATIONTHUS,INTHECONTEXTOFAJOINTVENTURE,IFTHEDIRECTORSAPPOINTEDBYTHE“SELLER“REFUSETOAPPROVETHEREPURCHASE,ITISANOPENQUESTIONWHETHERTHEFOREIGNINVESTORCANENFORCESUCHACLAUSEINTHEPRCCOURTSTOOBTAINBOARDAPPROVALCONCLUSIONFOREIGNINVESTORSM

48、AYFACEMANYPOTENTIALPITFALLSWHENDOINGDEALSINCHINAHOWEVER,WITHCHINASROBUSTECONOMYCONTINUINGTOATTRACTCAPITAL,THEREWILLBEMOREDEALSANDMORECOMPETITIONINACHANGINGLEGALANDREGULATORYENVIRONMENTASARESULT,INVESTORSWILLNEEDTODEALWITHTHESECHALLENGESINANINFORMED,FLEXIBLE,ANDPRACTICALMANNERWINNINGTHEGAMEWILLREQUIR

49、EADEEPUNDERSTANDINGOFTHEPECULIARITIESOFTHECHINESEPOLITICAL,REGULATORY,ANDBUSINESSENVIRONMENT,COUPLEDWITHTHEABILITYTOADAPTTOTHEPARTICULARCIRCUMSTANCESPRESENTEDEXPERIENCED,CREATIVE,ANDPRACTICALCOUNSELCANPROVIDEINVALUABLEASSISTANCEINENABLINGINVESTORSTOMAKEINFORMEDDECISIONSTHATBALANCETHERISKSANDOPPORTUNITIESINTHECHINAMARKETFOOTNOTES1SEERESULTSOFTHE2006USCBCMEMBERPRIORITIESSURVEY,AUGUST30,2006,AVAILABLEATHTTP/WWWUSCHINAORG/PUBLIC/DOCUMENTS/2006/08/MEMBERPRIORITIESSURVEYPDF2THISISAQUASIGOVERNMENTALAGENCYTHATISRESPONSIBLEFORTHEREGISTRATIONOFLEASESANDREALPROPERTYTITLE,SALE,ANDPURCHASETR