Linklaters/Model Answer

To be used for training only

Model Answer

Dear Amy,
We received your voicemail regarding your queries on merger review filing requirements in Mainland
China and Hong Kong.
You are right that, in the agreed terms for this deal, filing needs to occur in Mainland China but not in
Hong Kong. This is correct according to merger review rules in both jurisdictions – filing is
required in Mainland China but is not required in Hong Kong. There is currently no general
merger review requirement in Hong Kong.
Below is a summary of the general filing requirements for acquisitions in the two jurisdictions.
Merger review filing requirements in Mainland China
Acquisitions like our current one need to be filed in Mainland China if (a) the acquisition constitutes a
“concentration of undertakings”, and (b) one of the turnover thresholds is met.
A concentration means the creation of a lasting change in the legal control of an undertaking (as
defined below). The concept of an undertaking is used in competition law around the world. It
(generally) includes the act of two companies merging or one being acquired by another. An
undertaking means any entity engaged in an economic activity (i.e. an activity consisting in
offering goods or services on a given market) regardless of its legal status and the way in
which it is financed. This definition is broader than a legal entity, meaning a parent company
and its subsidiary can be, in certain circumstances, regarded as the one undertaking.
Under Article 20 of Mainland China Anti-Monopoly Law (the AML), a “concentration of undertakings”
includes mergers of undertakings such as the merger proposed by this acquisition.
The turnover threshold is met when either (or both) of the following occur:

 the combined aggregate worldwide turnover of all undertakings to the concentration in

the last financial year is more than RMB 10 billion and the turnover within Mainland
China of each of at least two of the undertakings to the concentration in the last
financial year is over RMB 400 million; and/or
 the combined aggregate Mainland China turnover of all the undertakings to the
concentration in the last financial year is more than RMB 2 billion and Mainland China
turnover of each of at least two undertakings to the concentration in the last financial
year was over RMB 400 million.
It is helpful to note that, with our Shanghai Free Trade Zone Joint Operation with Zhao Sheng Law
Firm, we can provide seamless international and Chinese legal advice on joint matters unlike
many other law firms. In practice, it would be very easy to speak to our colleagues at Zhao
Sheng to confirm Mainland China’s position here.
Merger review filing requirements in Hong Kong
Merger review in Hong Kong currently only applies to mergers which involve carrier licensees in the
telecommunications sector. The Competition Ordinance does not set out any specific filing
thresholds. Rather, it prohibits mergers which have the effect or likely effect of substantially
lessening competition in Hong Kong (Competition Ordinance Cap. 619, Schedule 7, paragraph
3).
I hope this helps. Please do let me know if you would like to discuss in more detail.
Kind regards,
Trainee