Circular on the Establishment of the State Security Review System concerning Merger and Acquisition of Domestic Enterprise by Foreign Investors (State Council Circular No.6)
Released on February 3, 2011 and effective on March 3, 2011
On February 3, 2011, the Office of the State Council promulgated a circular on the Establishment of the State Security Review System concerning Merger and Acquisition of Domestic Enterprise by Foreign Investors ("Circular").
A foreign investor is subject to the state security review for its merger or acquisition of domestic enterprises in the following situations:
- the target engages in military or military support business, locates near important and sensitive military enterprise, or its business is related to national defense; OR
- the target’s business is related to the important agricultural products, important energy and resources, important infrastructure, important transportation service, key technology, or significant equipment manufacturing, and after the merger or acquisition the foreign investor will have the control right of the target.
According to this Circular, a multi-authority joint committee will be established for the state security review under the leadership of the State Council. Ministry of Commerce ("MOFCOM") and National Development and Reform Commission ("NDRC") will take the lead of the state security review together with other authorities governing relevant industries. If a merger or acquisition transaction is subject to the state security review, the project timeline may be extended by 40 to 70 working days.