Global Private M&A Guide - Baker Mckenzie

As in other jurisdictions, the acquisition of a business in Hong Kong may be structured either as a sale of shares or as a sale of assets (or a combination of the two). Particularly, the buyer may purchase the shares in the company operating the business from its shareholders or purchase the assets of the business directly from that company.

Auction processes are quite common in Hong Kong. They often involve a two-stage bid process, using nonbinding bid letters at the indicative offer stage and binding bid letters at the final offer stage.

Broadly defined, a merger involves the absorption of one company (that ceases to exist) into another that retains its own identity and acquires the assets and liabilities of the former. Hong Kong provides for a simple, court-free amalgamation procedure for effecting the merger of Hong Kong companies as long as the companies are sister companies or parents-subsidiaries and the statutory requirements can be satisfied. Complex amalgamations may be effected through a court-sanctioned scheme of the arrangement, though this is rarely used in practice. The court-free amalgamation procedure was introduced in March 2014 and the authorities have since provided guidance on the treatment of key elements, such as tax and employees. Where the legal position is unclear(e.g., whether employees transfer automatically), a more conservative approach is recommended. The economic results of a merger can also be achieved through:

− transfer of one company's business assets to another company, followed by liquidation or disposal of the transferor company;

− establishment of a new company that acquires the assets of two or more entities, which, following the transfer of assets, are liquidated or disposed of; or

− transfer of one company's (Company A) shares to another company(Company B), followed by liquidation of Company A and distribution of its assets in their present form to company B.

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Link for download: Global Private  M&A Guide - Baker Mckenzie

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