- Implementation of the MOFCOM’s decision on concentration of business operators has been specified
- The process of assets or business divestiture is subject to the MOFCOM’s review
The Ministry of Commerce (MOFCOM) promulgated the Interim Regulations on the Assets or Business Divestiture by a Business Operator Participating in a Concentration (Interim Regulations) on 5 July 2010, which went into effect the same day.
According to the Anti-Monopoly Law of the People’s Republic of China (effective as of 1 August 2008), when a business operator’s concentration reaches the filing threshold, it should file an application for concentration to the Anti-Monopoly Bureau of the MOFCOM. In accordance with the Measures for Examination of Concentration of Business Operators promulgated by the MOFCOM in November 2009, when a proposed concentration is approved by the MOFCOM, it could impose three types of restriction conditions. One is assets or business divestiture by the business operator participating in the concentration. Therefore, the Interim Regulations stipulate the specific measures and procedures for implementation of the restriction conditions by the MOFCOM.
According to the Interim Regulations, “assets or business divestiture” (divestiture) refers to the divestiture of assets or business by the business operators participating in the concentration. Such operators have the responsibility to divest their assets or business (divestiture obligor) in accordance with the decision for examination onfconcentration of business operators (decision) issued by the MOFCOM.
The Interim Regulations stipulate two types of divestiture. One is a default divestiture, which means the divestiture obligor finds a proper buyer for its assets or business within the time prescribed by the decision; the other is a trusted divestiture, in which the divestiture obligor fails to find a proper buyer within the time prescribed by the decision and a divestiture trustee is engaged to find a proper buyer. According to the Interim Regulations, the following parties might be involved in a divestiture:
- Divestiture obligor
- Supervision trustee (engaged by the divestiture obligor to supervise the whole process of the divestiture; this could be a natural person, legal person or other entity)
- Divestiture trustee (appearing in a trusted divestiture, engaged by the divestiture obligor to find a buyer and conclude an assets or business transfer agreement; this could be a natural person, legal person or other entity, and could be the same person as the supervision trustee)
The MOFCOM’s role during the whole process is to evaluate the candidates for the supervision trustee, the divestiture trustee and the buyer, as well as the trust agreements, sales agreement and other relevant agreements submitted by the divestiture obligor to determine whether he or she meet the requirements of the decision. The MOFCOM’s evaluation time will not be counted in the time limit for divestiture. Without the approval of the MOFCOM, the divestiture obligor may not give instructions to the supervision trustee or the divestiture trustee.
The list of candidates for supervision trustee must be submitted to the MOFCOM within 15 days following the issuance of the decision, and the candidates for divestiture trustee must be submitted 30 days prior to the commencement of a trusted divestiture. After the supervision trustee or the divestiture trustee has been approved by the MOFCOM, the divestiture obligor shall not rescind or alter the trust agreement with the supervision trustee or divestiture trustee without the approval of the MOFCOM, and the supervision trustee and the divestiture trustee shall be remunerated by the divestiture obligor.
The Interim Regulations also clarify the obligations of each party involved in the divestiture, such as cooperation, reporting and confidentiality obligations. They also set out the requirements for the potential buyers, which shall:
- Be independent from the business operator participating in the concentration;
- Have the necessary resources, ability and willingness to maintain and develop the business being divested;
- Not lead to the exclusion or restriction of competition; and
- Obtain approval from other authorities when required by the divested business.
The Interim Regulations provide a clearer picture for the processing of a divestiture, which will be helpful for each party in implementing the decision issued by the MOFCOM. However, certain issues relating to the divestiture have not been addressed, such as the time limit for the MOFCOM’s evaluation, and the criteria has not been specified. With these uncertainties remaining, the process might extend beyond three months.