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Many domestic and foreign investors are paying great attention to the issues of real estate enterprises’ listings and M&As within China. The Chinese supervisory authorities have made an effort to regulate the capital markets relating to the real estate industry in order to improve transactional efficiencies and management of real estate development and investment activities. This chapter discusses the circumstances of the real estate industry’s initial public offerings (IPOs), both domestically and overseas, based on an analysis of related laws and regulations issued by competent authorities. Some critical M&A matters in the real estate industry are also presented in this chapter to help readers understand the scenarios and situations before making plans to invest in real estate in China.
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Article 11 “Where a domestic company, enterprise or natural person intends to take over its domestic affiliated company in the name of a company which it lawfully established or controls, it shall be subject to the examination and approval of the MOFCOM. The parties concerned shall not dodge the aforesaid requirements by making investments within China through the foreign-funded enterprise, or by other ways.”
Refer to Article 9, 12, and 26 of Measures for the Administration of Initial Public Offering and Listing of Stocks.
Article 13: as of the day when change of control occurs, the total assets purchased by a listed company from the acquirer and the affiliates thereof account for 100% or more of the ending total assets as specified in the listed company’s audited consolidated financial statements for the preceding fiscal year prior to the change of control; in addition to satisfy the requirements specified in Articles 11 and 43 of the Measures, the company listed on the main board (or the SME board) shall ensure that the target business entity is a stock limited company or limited liability company and shall meet other offering conditions as set out in the Measures for the Administration of Initial Public Offering and Listing of Stocks (Order No. 32, CSRC). If the assets purchased by the listed company are in the financial, venture capital, or any other specified industry, the governing provisions shall be separately developed by the CSRC. A company listed on the Growth Enterprise Market may not have the trading behavior specified in the preceding paragraph.
Section 1. An overseas institution or individual shall, when investing in China to purchase any not-for-self-use real estate, abide by the principles of commercial presence and apply, according to the relevant provisions on foreign investment in real estate, for establishing a foreign investment enterprise and may, upon obtaining the approval of the relevant department as well as completing the relevant registration, engage in the relevant operation according to its approved business scope.
Article 4. Overseas investors engaging in the real estate development or operation business in China shall observe the principle of commercial presence, apply for establishing foreign-funded real estate enterprises according to law and engage in the relevant business within the authorized business scope.
Article 6. No administrative department of foreign exchange or designated bank of foreign exchange may handle formalities for the sales and settlement of foreign exchange under the capital account for any foreign-funded real estate enterprise that fails to go through the formalities for filing with the Ministry of Commerce for record or failing to pass the annual joint inspection on foreign-funded enterprises.
Article 1. The Ministry of Commerce shall authorize the competent provincial departments of commerce to check the archival materials on foreign investment in the real estate industry. After legally approving the matters on foreign investment in real estate (including but not limited to formation of enterprise, increase of capital or shares, share transfer, merger and acquisition), the competent local departments of commerce shall submit the materials, which should be submitted to the Ministry of Commerce for archival purposes, to the competent provincial departments of commerce for checking.
Article 3. The merger of or investment in domestic real estate enterprises by way of return on investment (including the same actual controller) shall be placed under strict control. No overseas investor may evade from subjecting foreign investment in the real estate industry to examination and approval by means of changing the actual controller of any domestic real estate enterprise. Where the administrative department of foreign exchange finds out that any foreign-funded real estate enterprise is illegally established by adopting such illegal means as malicious evasion or false statement, the department shall investigate its behaviors of illegally remitting outward capital and the incomes therefrom and subject it to the liabilities for obtaining foreign currency under false pretenses and not turning over foreign currency owed to the government.
Article 2. The competent provincial departments of commerce shall check the legality, authenticity and accuracy of the following materials in accordance with the requirements of Documents No. 171 and 50 and the relevant provisions:...4. The materials provided by the company prove that the foreign shareholder is not a company formed abroad by a domestic company/natural person and all shareholders of the company are not affiliated each other, or subject to the same actual controller.
Article 4. Commerce departments across the country shall, jointly with the State Administration of Foreign Exchange and other relevant departments, carefully sort out and strictly examine and approve real estate enterprises that engage in round-tripping investments and strictly control the establishment of domestic real estate enterprises in the form of round-tripping investments.
Article 37. Transfer of real estate shall mean the move of the ownership of a real estate from the original owner to another person through sale, donation and other lawful means. Article 38. Real estate with following conditions shall not be transferred: (1) The acquirement of the right of land use through lease does not comply with conditions as prescribed in Article 39 of this law; (2) The title to the real estate has been sealed up or restricted in any form upon ruling or deciding of judicial authorities or administrative departments in accordance with the law; (3) The right of land use has been taken back in accordance with the law; (4) Without a written consent of other owners as under joint ownership; (5) There are disputes on the title; (6) Those which have not been registered and obtained title certificates in accordance with the law; and (7) Other condition that the transfer is forbidden according to the law or administrative rules.
Article 39. The transfer of real estate with the right of land use shall comply with the following conditions: (1) All the fees concerned with the lease of the right of land use have been paid in accordance with provisions prescribed by the contract for the lease and the certificate of the right to use the land has been obtained; and (2) Investment and development have been done in accordance with the provisions prescribed by the contract for the lease; for housing construction projects, 25 percent of the total investment has gone through; for development of large tracts of land, land has been available for the construction of industrial or other projects. When a real estate is transferred with a finished building, title certificate for the building is also needed.
The Ministry of Finance and the State Administration of Taxation issued the Notice on Doing a Good Job on Full Implementation of Pilot Program of Replacing Business Tax With Value-added Tax (No.32  of The Ministry of Finance and the State Administration of Taxation) on March 7, and the State Administration of Taxation issued the Notice on Carefully Executing the Full Implementation of Pilot Program of Replacing Business Tax With Value-added Tax (No.32  of the State Administration of Taxation) on March 8.
- Listings and M&As of Chinese Real Estate Enterprises
- Springer International Publishing
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