Article 8 of the M&A Provisions specifies: “The parties to a merger shall take the result valuated by the asset valuation institution on the value of the share rights under planned transfer or the assets under planned sale as the basis for determining the transaction price.” In terms of the selection of the asset valuation institution, the M&A Provisions requires that the assets appraisers shall adopt the appraisal methods internationally used.
Considering the special state provisions on the transfer of the state-owned assets, the M&A Provisions stipulate that when a foreign investor merges a domestic enterprise, and thus resulting in the modification of the share rights formed from investment of state-owned assets or transfer of the property of state-owned assets, valuation shall be made in accordance with the relevant provisions on the administration of state-owned assets for determination of the transaction price.
It should be focused that the results of the evaluation of the assets valuation institution is only the basis for determination of the transaction prices, but not the price for the actual transactions. On such issue, the M&A Provisions still fully respect the intentional autonomy of the parties concerned and do not require for (and cannot require for) the parties concerned to adopt the valuation price of the asset valuation institution as the transaction price, which may rationally float against the specific valuation results.
N order to prevent the overseas transfer of capital in disguised form, the M&A Provisions specifically stipulates: “Foreign investors are prohibited from diverting capital abroad in a disguised form by transferring share rights or selling assets at a price obviously lower than the valuated one.” The current practice has witnessed the malicious transfer of capital overseas by use of the form of M&A. When China still adopts the regulation and supervision on foreign exchanges under the capital accounts, such behavior is a kind of escape of foreign exchanges to outside China. Thus, the administration of foreign exchanges may prosecute for punishment against such misbehaviors in compliance with the laws and regulations on the administration of foreign exchanges.

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