Laws of Takeover and Mergers in the US and China
Question
Introduction
Reaction paper III
Write a Reaction Paper III Assigned 3pages.
Discuss one of the following topics:
- Who is responsible? We have come to value the business opportunities that exist on an international basis and take pride in our companies being labeled “global”. Yet, what is considered permissible or impermissible behavior by corporate executives in the United States may not be perceived the same in another country.
Take one aspect of business behavior by corporate officers and directors in the United States and compare it to how the same behavior would be judged within another country’s legal system of your choosing. You will describe what the law is in the United States on the topic and then compare it to what the law is on the same topic in another country. You may consider writing on, but you are not restricted to: (thus, you can choose a topic as well!)
- What is the law on silent partnerships in a country of your choosing and compare that to the law in the United States on silent partnerships. What ethical, business and legal ramifications are there with regards to the liability of the partners in such an arrangement? What are the advantages to a silent partnership and should they be permitted? Include a legal case in your paper on this topic.
- The legal and ethical ramifications concealment of assets by an business in another country (compare the laws in the US to that of another country)
- The use of corporate funds by a company to influence political regimes-what laws apply to regulate this? What is the company’s possible liability? compare the laws in the US to that of another country
- The law surrounding takeovers or mergers in the United States versus similar laws in another country
- The use of American bankruptcy protection or dissolving a corporation to avoid corporate liability for personal injuries sustained by employees in a work-related accident or liability to the public for injuries sustained from use of the company’s product in the U.S. Compare that to such laws (if there are some) in another country.
- The use of golden parachutes and so –called excessive executive compensation in U.S. and another country-are there any legal limits? What are the non-legal ramifications of this type of compensation?
- Compare the duties and personal liabilities of directors and officers of a company within the United States and the EU
- Compare the law on liability of an internet provider for the content of postings (like twitter, Facebook or U Tube postings) in the United States and England, Thailand or France. What if the content shows children beating up other children? Suggestive material with what looks like children or postings that are racists, anti-gay or anti-Semitic
- What are the human rights obligations of corporations under international law? Discuss a lawsuit in which an American corporation have been brought to court for alleged violations of human rights.
For example such cases include lawsuits currently against such multinationals as Shell (for its alleged role in the events that led to the execution of Ken Saro-Wiwa), Chevron (for its alleged role in supporting violent government suppression of protestors on an off-shore platform in Nigeria), Unocal and Total (for allegations of using slave and forced labor in Burma), and Texaco (for claims of destroying the Ecuadorean rain forest), among others. You may write on one of these cases or one of your choice.
- Although, U.S. federal courts do not apply the doctrine of universal jurisdiction, Joel & Dolly M. E. Filártiga v Américo Norberto Peña-Irala 630 F.2d 876 (2d Cir., June 30 1980), interpreted the Alien Tort Statute, 28 U.S.C. 1350 in such a way to extend the jurisdiction of United States courts to tortuous acts committed by non –American citizens around the world. Discuss the case and its implications for business
- Discuss two (2) of the following acts or legal principles and their application to companies doing business overseas. Give an example of a legal case(s) that analyze or whose decision discusses these laws/principles.
- The General Agreement on Tariffs and Trade (GATT)
- Foreign Corrupt Practices Act
- Sovereign immunity
- The Act of State doctrine.
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Solution
Laws of Takeover and Mergers in the US and China
Takeovers have become a common phenomenon in the United States since the 1960s. However, the phenomenon is quite new in China since no such events took place two decades ago. The first takeover and merger recorded in China took place in 1993. However, acquisition and takeovers became common in 20002 following the Chinese entry into the World Trade Organization (WTO) (Wang, p.4). Since then, acquisitions and mergers in China have attracted people's attention worldwide. Mergers and acquisitions are known to play an important role in business today. Although the practice is at its peak in the US, it is still growing in China. A gap exists in China regarding acceptable standards, policies, and practices due to the lack of experience. Nonetheless, the Chinese government has made efforts to speed up legislation regarding acquisition and mergers due to the desire to improve the corporate governance of state-owned domestic companies through takeover transactions (Wang, p.5). The study examines the laws surrounding takeovers and mergers in the United States and similar laws in China.
To begin with, the United States operates a federal system of government, and as such, the jurisdiction of laws on mergers and takeover fall not only under the federal government but also the governments in individual states. However, in general terms, the federal government is charged with regulating the transfer of securities and trade issues. The federal government regulates issues regarding takeovers and mergers through the Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ). The two government agencies regulate issues pertaining to competition (Yaghoubi et al., p.6). The risk to the national securities in the US imposed by foreign investors is overseen by the Committee on Foreign Investment. The federal agencies have relied on a more interventionist approach in dealing with issues of mergers and takeovers. Federal agencies impose additional legislation concerning takeovers and mergers in certain regulated industries.
Issues regarding tender in the United States are regulated under the Securities Exchange Act 1934. However, takeovers are regulated through the laws of individual states in which the company is incorporated. Nonetheless, soliciting votes to approve the takeover and merger must comply with federal laws. When bidders offer securities to consider the shareholders of the targeted company, the application of registration requirements through the Securities Act 1933 must take effect (Yaghoubi et al., p.6). Most of the states which have incorporated most of the largest companies, such as Delaware, have since rejected takeovers through statutes. Two forms of statutes are found in most states with anti-takeover and merger laws, including business combination statutes and control share acquisition statutes. The business combination statutes demand that when obtaining shares in a given company over a specified percentage, the shareholder is not permitted to enter into business with the target company for a specified period unless approved by the majority of stakeholders.
On the other hand, in China, laws on mergers and takeovers pertain to regulating hostile and recommended bids, present market activities, pre-bid formalities, agreements and stake-buildings, and procedures for making and announcing offers. More importantly, the country imposes nationwide laws that pertain to all incorporated firms. Takeovers and merges by the Chinese firms, both public and private but not the outbound firms, dropped greatly in 2019, reaching the lowest number of transactions since 2014. Tightened liquidity and the China-US trade wars are among the factors that contributed to this decline (Deng & Yang, p.159). Nonetheless, the Chinese government has introduced several legislations to restore the status. The laws include Foreign Investment Law, procedures to simplify foreign exchange administration, expanding mixed-ownership reforms encouraging private firms' participation in state-owned enterprises (SOE), and amending the Security Law to rejuvenate the stock market.
Under Chinese law, hostile bids are allowed, although mostly not used in practice due to great uncertainties and cost. However, the acquirer lacks non-public information concerning the public companies (Deng & Yang, p.167). Takeovers and mergers are often regulated through the Company Law (1993). However, other laws such as Measure for Administration of the Takeover of Listed Companies issued by CSRC (2006) and Securities Law also govern takeover and mergers. Other relevant laws include Measure for Administration of the Takeover of Listed Companies issued by CSRC (2006) and Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by MOFCOM (2006). Similar to the United States, China has also enacted the Anti-trust Law (2007). Just as in the United States, government agencies in China, such as CSRC, Shanghai Stock Exchange (SSE), and SAMR, are responsible for regulating takeovers and acquisitions. Under the law, there is no restriction regarding the due diligence of the target company concerning the public company as in the United States. Besides, security has to be ensured until the bid is made.
In conclusion, many similarities and differences can be noticed regarding takeover and acquisition laws in China and the US. Besides, it is also evident that China has less experience in takeovers and mergers than the US, although recent efforts have proven fruitful. One major difference in applying laws about takeover and mergers in the two nations is that incorporated companies adhere to federal and state regulations. However, the national government is fully responsible for regulating takeovers and mergers in China. The similarity is that both nations rely on their government agencies to regulate takeovers and mergers.
Works Cited
Deng, Ping, and Yang, Monica. "Cross-border mergers and acquisitions by emerging market firms: A comparative investigation." International Business Review 24.1 (2015): 157-172.
Wang, Xiaofan. Takeover law in the UK, US and China: A comparative analysis and recommendations for Chinese takeover law reform. University of Salford (United Kingdom), 2013.
Yaghoubi, Reza, et al. "Mergers and acquisitions: a review. Part 1." Studies in Economics and Finance (2016).
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