Sanctions and trade compliance considerations in M&A transactions in China

January 2021

Sanctions and trade compliance regulations in China are constantly evolving and maturing. In years past, China’s trade regulatory schemes were primarily focused on revenue protection with a secondary focus on national security concerns. China’s approach to sanctions laws is to comply, within reason, with the United Nations (UN) Security Council sanctions passed with international consensus. Nevertheless, as China’s economy continues to evolve and move up the value chain, its own domestic demand has necessarily reduced the focus of trade regulations on traditional revenue protection, with average duty rates continuing to fall. Concurrently, with higher value-added technology and product development being the focus of China’s industrial policy, national security has necessitated an evolution of its approach to sanctions, which remains a work in progress, as discussed further below.

What this means for parties to M&A transactions in China is that an approach to due diligence and risk assessment must take a wider view of potentially impactful regulations. In addition, a fundamental understanding of China’s corporate law and registration requirements will assist in implementing a prudent approach to managing quasi-successor liability concerns in Chinese M&A deals.

Tiang & Partners has recently published an article for Lexology on sanctions and trade compliance considerations in M&A transactions in China, providing an overview of the relevant regulations and provides some insights into how these regulatory schemes can assist in driving due diligence, agreement drafting and post-completion implementation.

Reproduced with permission from Law Business Research Ltd. This article was first published in January 2021.

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