Global M&A – Know the differences btw PRC and foreign company law
In today’s global corporate world, many conglomerates have complex and layered shareholding structures with multiple entities in various jurisdictions. Each entity must function as part of a cohesive whole within the larger global group, but will still be governed by company laws or other laws of its respective local jurisdiction. In international M&A deals, parties sometimes approach the corporate governance of a foreign entity (and correspondingly, negotiations of shareholders agreements, joint venture agreements and other matters) by using principles and concepts that they are familiar with in their domestic jurisdiction. These cultural differences can cause misunderstandings, complicate negotiations, and create friction during post-completion integration. The differences discussed above will take on additional significance following the upcoming implementation of PRC’s new Foreign Investment Law on 1 January 2020, which will require that all foreign-invested companies in China be governed by the PRC Company Law. This article briefly compares some key differences between PRC companies and common law companies.