PRINT THIS PAGE Guide to mergers & acquisitions: Hong Kong16/08/2006. Source: Baker & McKenzie.
Mergers and acquisitions are extremely common in Hong Kong and continue to represent a significant means by which corporations pursue the objectives of economic growth, expansion, diversification and wealth realisation, says Baker & McKenzie. Hong Kong law does not provide for a pure merger of companies, they add. i.e. the absorption of one company by another, whereby the latter retains its own name and identity and acquires the assets and liabilities of the former, which ceases to exist as a separate business entity.
However, in the absence of a specific merger law, the same economic result can be achieved through:
- The transfer of one company's business assets to another company, followed by the liquidation or disposal of the transferor company; or
- The establishment of a new company which acquires the assets of two or more entities which, following the transfer of assets, are liquidated or disposed of; or
- The transfer of one company.s (Company A) shares to another company (Company B), followed by the liquidation of Company A which, in turn, is followed by a distribution of its assets in specie to Company B. Following the transfer of sovereignty over Hong Kong to the People.s Republic of China on 1 July 1997, and the implementation of .one country, two systems. under the Basic Law of the Hong Kong Special Administrative Region, the law governing mergers and acquisitions in Hong Kong comprises the following principal elements:
- The common law of contract (which is heavily based on the English common law of contract) as interpreted by the courts of Hong Kong;
- Specific Hong Kong legislation or regulations which apply depending upon the nature of the transaction and the relevant industry involved; and
- Where publicly listed companies are involved, regulations such as the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, the Code on Takeovers and Mergers, and decisions of the Securities and Futures Commission (the .SFC.), as well as certain specific legislation.
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