Corporate and M&A in China

Corporate and M&A in China at a glance

Corporate and M&A in China now runs on a rebuilt legal foundation. The revised Company Law took effect on 1 July 2024, the five-year transition that required older foreign-invested enterprises to adopt Company Law governance ended on 31 December 2024, and the securities regulator has spent 2024 to 2026 loosening the rules on listed-company deals. For an acquirer, investor or joint venture partner, the practical question is no longer whether a China transaction is possible but how to structure it so that approvals, capital, control and exit all work together.

Most transactions involving a Chinese business touch at least four bodies of rules at once: corporate law (how the target is governed and how shares change hands), foreign investment rules (what foreign capital may own), regulatory clearances (merger control, national security review, sector licences, data and export controls) and the rules of whichever offshore jurisdiction holds the deal together, often Hong Kong, the Cayman Islands, Singapore or a European holding company. Good deal work starts by mapping all four before a term sheet is signed.

This page gives a general overview of the legal environment for M&A, private equity, joint ventures and corporate governance in mainland China, and explains how our Shenzhen representative office supports clients alongside licensed PRC law firms.

Corporate and M&A in China: the regulatory landscape

The building blocks below apply to most inbound and domestic transactions. Each has its own timetable, and the slowest one usually sets the closing date.

Primary texts are available through the NPC national law database, and the merger thresholds are set out in the State Council notification provisions. Alongside these sit the data rules (cross-border data flow provisions of March 2024 and the network data security regulations in force from 1 January 2025), export controls and the Anti-Foreign Sanctions Law framework, all of which increasingly shape due diligence and conditions precedent.

Registered capital and the 2027 deadline

State Council Decree No. 784 requires limited liability companies registered before 30 June 2024 whose remaining contribution period runs beyond five years from 1 July 2027 to shorten it by 30 June 2027. Buyers of companies with large unpaid subscribed capital therefore need to price in the cash call, and the Company Law now makes transferors and transferees of unpaid equity answerable in defined circumstances.

Our corporate and M&A work, topic by topic

Each topic below has its own page with a more detailed overview.

• Cross-border M&A in China: inbound acquisitions of Chinese businesses and outbound deals by Chinese buyers, including onshore and offshore structures, approvals and closing mechanics.
• Private equity and venture capital transactions: minority and growth investments, preferred rights, valuation adjustment arrangements and RMB and USD fund dynamics.
• Joint ventures in China: forming, re-papering and exiting joint ventures under the post-2024 Company Law, with deadlock and control design.
• Listed company M&A and takeovers: A-share and Hong Kong acquisitions, disclosure thresholds, tender offers and strategic investment by foreign investors.
• Take-private transactions: delisting Chinese companies from US and Hong Kong markets, special committees, financing and relisting paths.
• Strategic M&A and special situations: carve-outs, distressed acquisitions, state-owned asset transactions and contested situations.
• PE exits: trade sales, IPO exits, share reduction rules, secondary sales and continuation vehicles.
• Corporate governance and the Company Law: boards, audit committees, director duties and the liabilities of controlling shareholders.
• Group restructuring and reorganisation: intra-group transfers, mergers and divisions, holding company changes and tax-neutral routes.
• Liquidation and deregistration of foreign-invested enterprises: winding up China subsidiaries, creditor procedures, simplified deregistration and repatriation of remaining funds.
• Warranty and indemnity insurance in China deals: using W&I cover to bridge risk allocation between buyers and sellers.
• General counsel and retained legal support: ongoing support for in-house teams running China operations.
• Commercial contracts and outsourcing: supply, distribution, licensing and outsourcing arrangements with Chinese counterparties.

How a China deal typically runs

Every deal is different, but most inbound acquisitions follow a recognisable sequence. Understanding the critical path early avoids the common problem of signing a deal whose long-stop date cannot be met.

1. Structuring and approvals map. Decide whether to acquire onshore equity, an offshore holding company or assets, and list every clearance: merger control, security review, sector licences, state-owned asset procedures and, for listed targets, securities regulator and exchange steps.
2. Due diligence. Beyond the usual legal, financial and tax review, China diligence focuses on licences, unpaid capital, related-party arrangements, social insurance and housing fund contributions, data handling, export-control exposure and the authenticity of company seals and records.
3. Documentation. Offshore deals are usually documented under English, Hong Kong or New York law with arbitration in Hong Kong, Singapore or another neutral seat; onshore equity transfers also need Chinese-language agreements suitable for registration.
4. Signing to closing. Merger control review can run up to 180 days in a complex case, plus any time the regulator stops the clock, while simplified cases are usually cleared far faster. Registration of the share transfer with the market regulator, foreign exchange registration and payment of withholding tax on the seller's gain are closing workstreams in their own right.
5. Integration. Board reconstitution, changes to the legal representative, control of company seals and bank mandates, and alignment with group compliance policies.

Pricing mechanics need their own attention. Locked-box and completion-accounts structures both work in China, but onshore payments in RMB, foreign exchange registration of the purchase price and the buyer's withholding obligations on a non-resident seller's gain affect when and how money can move.

Escrow arrangements are often held with an offshore bank, or with an onshore bank under an escrow agreement that the bank is prepared to operate. Where the seller is a founder or a state-owned shareholder, the timing of payments may also need to fit valuation, appraisal or listing procedures. Warranty and indemnity insurance, deferred consideration and earn-outs are increasingly used to bridge gaps in risk appetite between foreign buyers and Chinese sellers.

Common mistakes in China deals

• Signing before the approvals map is complete. A long-stop date that ignores merger control, security review or a sector licence is the most frequent cause of renegotiation.
• Treating registered capital as paid. Unpaid or inflated capital now carries real consequences for buyers under the revised Company Law and the 2027 deadline.
• Relying only on the share register. The register at the market regulator, the seals, the bank mandates and the identity of the legal representative all need to change hands at closing.
• Importing foreign deal terms unchanged. Drag-along, redemption and liquidation preference clauses may need different mechanics to work in a PRC company's articles.
• Leaving data and export controls to the end. Where a target holds important data or controlled technology, filings or licences can sit on the critical path.

Corporate and M&A in China: structures and cross-border angles

The first structural choice in corporate and M&A in China is what to buy. Each route changes which approvals apply, what liabilities transfer and how the price is paid.

Outbound deals by Chinese companies

For Chinese buyers investing abroad, outbound direct investment generally involves filings or approvals with the NDRC and MOFCOM (or their local branches) and foreign exchange registration through banks under SAFE rules, with additional procedures for state-owned enterprises and sensitive sectors. These onshore steps need to be built into the timetable of the foreign deal, and sellers increasingly ask for evidence of progress or a reverse break fee to cover the risk that they are not completed.

Hong Kong, the US, the EU and ASEAN

• Hong Kong remains the most common holding and financing platform for inbound and outbound deals, with familiar common law documents and arbitration under the HKIAC and the arrangements for mutual enforcement with the mainland.
• United States: Chinese acquirers face CFIUS review of sensitive US businesses, while US investors in Chinese targets must screen against the outbound investment rules and export control and sanctions lists.
• European Union: foreign direct investment screening in member states and, for larger deals, notification under the Foreign Subsidies Regulation can apply to Chinese buyers alongside ordinary merger control.
• ASEAN: supply-chain relocation has made Vietnam, Indonesia, Thailand, Malaysia and Singapore frequent destinations for Chinese outbound deals, each with its own foreign ownership limits and approval processes.

Our cross-border M&A page explains how these regimes are sequenced in a single transaction.

Corporate and M&A themes in 2025 and 2026

Listed company reform

Following the CSRC's September 2024 policy package on M&A reform, the May 2025 amendment to the Material Asset Restructuring Measures introduced staged payment of share consideration (with a registration valid for 48 months), a simplified review route for qualifying deals, and reverse-linked lock-ups that cut the lock-up for qualifying private funds holding for at least 48 months from 12 to 6 months in third-party transactions. Listed companies also had to replace supervisory boards with board audit committees before 1 January 2026.

Foreign investment incentives

The revised Strategic Investment Measures opened A-share strategic investment to foreign natural persons and tender offers, and a reinvestment tax credit of 10% of qualifying reinvested profits (for profits reinvested from 2025 to 2028 in encouraged industries and held for five years) supports onshore expansion by existing investors.

Security, data and geopolitics

US outbound investment restrictions in force since January 2025, export controls on both sides and Chinese countermeasures mean that deal teams now run sanctions and technology-transfer analysis alongside antitrust. Data transfer approvals or filings can also become conditions to closing where a target holds significant personal information.

Private Economy Promotion Law

The Private Economy Promotion Law, in force since 20 May 2025, sets out in statute the principle of equal treatment of private enterprises in market access, financing and public procurement, and addresses issues such as late payment by public bodies and large enterprises. For buyers of, and partners with, privately owned Chinese businesses it is a useful policy signal, although its practical effect will depend on implementing measures and local enforcement.

Exits and restructuring

Slower IPO markets have pushed sponsors towards trade sales, secondary transactions and continuation funds, while some multinationals are restructuring or exiting China subsidiaries. Both trends increase the importance of clean governance records and of planning deregistration well before operations stop.

What to watch in 2027

Several deadlines and reviews will shape corporate and M&A in China over the next year. Limited liability companies must have aligned their contribution periods by 30 June 2027, so diligence on capital will remain prominent. Practice under the May 2025 restructuring rules will show how often staged consideration and the simplified review route are used. Investors should also watch any revision of the Negative List, further implementing rules under the Private Economy Promotion Law, and the continuing interaction between US and EU investment controls and Chinese countermeasures.

Where corporate work meets other practices

Deals rarely stay within one discipline. Merger filings are covered under merger control filings; sensitive inbound deals may need foreign investment security review; tax structuring sits with M&A and restructuring tax; and data issues in diligence are discussed under data compliance in IPOs and M&A. Offshore holding structures are explained under red-chip and VIE structures.

People issues are often the hardest part of integration. Employee transfers, redundancies and changes to working conditions follow PRC employment rules and may require consultation with a trade union or employee representatives; see layoffs, transfers and restructuring.

Where a transaction leads to a dispute, whether over earn-outs, warranties or a deadlocked joint venture, the dispute resolution clause chosen at signing decides the forum, which is why corporate and M&A in China should always be documented with enforcement in mind; see shareholder and corporate disputes. Finally, competition rules apply beyond merger control: information exchange between competitors during diligence, and non-compete clauses that go beyond what is needed to protect the value of the business, can raise their own antitrust questions.

How TRW & Co helps

Our Shenzhen representative office works on the international side of corporate and M&A in China. We advise on the laws of the jurisdictions in which our lawyers are qualified and on international deal practice, design cross-border structures, negotiate offshore transaction documents, and run the overall project timetable.

We explain how the Chinese legal and regulatory environment is likely to affect a deal, and we identify, instruct and coordinate licensed PRC law firms wherever PRC legal advice, opinions, filings or representation are needed, so that onshore and offshore workstreams move as one. Typical clients are foreign acquirers and investors, Chinese companies investing abroad, and sponsors managing portfolio companies. To discuss a transaction, contact our team.