Corporate mergers and acquisitions essentially involve one company purchasing another. Throughout this process, numerous legal issues arise, primarily concerning China corporate law. The procedure is as follows: once both parties reach an agreement, they first sign a letter of intent. This letter comprises several key sections. The first section is the transaction lock-up agreement. Both parties agree that within a specified period, the seller may not negotiate the sale of company shares with any third party. The second component is a confidentiality agreement, ensuring both parties maintain secrecy regardless of whether the merger ultimately succeeds. The third is price adjustment: after signing the LOI, the buying party will conduct a due diligence investigation (performed by lawyers). If the buyer is dissatisfied with the due diligence investigation result, the transaction price may be adjusted. Next comes the most critical phase of the M&A process: due diligence investigation. Lawyers thoroughly investigate all liabilities, assets, contracts, intellectual property, and other aspects of the target company from its establishment until the M&A negotiations. This includes interviews, site visits, account audits, and inquiries with third-party platforms or government agencies. Due diligence investigation typically accounts for 70% of the entire M&A transaction workload. Upon completion of the D.D., if both parties remain committed to proceeding with the transaction, they will execute a formal share transfer agreement and complete all transfer registration procedures with the relevant government authorities. I am Attorney Lyu from Xuzhou China. If you have any legal inquiries about China law, please feel free to contact me.
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