M & A in Asia

Guide to mergers and acquisitions
in Asia
Published by White Page

in association with Freshfields Bruckhaus Deringer
Foreword
We are delighted to be publishing this third edition of the Guide to

mergers and acquisitions in Asia with Freshfields Bruckhaus Deringer.
After a sharp decline in 2002 and into the first half of 2003, M&A
activity across the region is now on the rise – especially in China,
Hong Kong and Japan. Moreover, although deal activity has been
slow, the pace of development in Asian M&A has accelerated in the
three years since we published the last edition of this guide.
As advisors on many of the region’s most groundbreaking deals,

Freshfields Bruckhaus Deringer, and its relationship firms across
Asia, have played a lead role in many of these developments. This
combined wealth of expertise, spanning the ten Asian jurisdictions
covered in this guide, ensures that the authors’ analysis of each legal
and regulatory regime benefits from a fusion of hands-on,
transactional experience and market-leading professional
capability.
Nigel Page, Director

White Page Ltd
Contents
Introduction 2
Robert Ashworth, Head of corporate group, Asia
Freshfields Bruckhaus Deringer
Hong Kong 7
Robert Ashworth
Freshfields Bruckhaus Deringer, Hong Kong
Indonesia 16
Miranti M Ramadhani, Carmen B Soedarmawan,
Emir Kusumaatmadja
Mochtar, Karuwin & Komar, Jakarta
Guide to mergers and acquisitions in Asia
Japan 26
Consulting Editor: Robert Ashworth,
Timothy Wilkins, Nobuo Nakata, Mami Karatsu,
Freshfields Bruckhaus Deringer
Mikiko Hayashi
Editor: Callie Leamy
Freshfields Law Office, Freshfields Foreign Law Office, Tokyo
Production: Mathew Lyons, Annette Joyce
Printing and binding: Garden House Press
Malaysia 35
Lim Kar Han, Richard Ding
Published by White Page Ltd
17 Bolton Street Zaid Ibrahim & Co, Kuala Lumpur
Mayfair
London W1J 8BH People’s Republic of China 43
Tel: +44 20 7408 0268 Douglas Markel, Huang Cheng
Fax: +44 20 7408 0168 Freshfields Bruckhaus Deringer, Beijing
First published 1999 Philippines 54

Third edition 2004 Andres B Sta Maria, Annalisa J Carlota
ISBN: 0-9535345-7-X SyCip, Salazar, Hernandez & Gatmaitan, Manila
Guide to mergers and acquisitions in Asia Singapore 64

© Freshfields Bruckhaus Deringer and Elaine Williams, Gary Pryke, Kate Strickland
White Page Ltd 2004
Freshfields Drew & Napier, Singapore
Freshfields Bruckhaus Deringer wishes to thank
each of the law firms contributing chapters to this
South Korea 73
Guide to mergers and acquisitions in Asia.
Copyright in individual chapters vests with the KS Jeon, Douglas Lee, CS Hwang
authors. No photocopying: copyright licences do Kim & Chang, Seoul
not apply.
Taiwan 78
This publication is intended to provide a general Sophia HH Yeh, CV Chen, Kwan-Tao Li
guide to the main legal implications of merger control
Lee & Li, Taipei
regulation in the individual jurisdictions described.
The information and opinions which it contains are
not intended to be a comprehensive study, nor to Thailand 85
provide legal advice, and should not be treated as a Elaine Williams, Veeranuch Thammavaranucupt
substitute for specific advice concerning particular
Freshfields Bruckhaus Deringer, Bangkok
situations (where appropriate, from local advisers).
This publication is written on the basis of law and
practice as at 31 December 2003. Freshfields Bruckhaus Deringer author profiles 94
Guide to mergers and acquisitions in Asia 1

Introduction Robert Ashworth
Freshfields Bruckhaus
Deringer
In the introduction to our last Guide to mergers and acquisitons in Asia in 2001, we noted the
dramatic evolution of mergers and acquisitions activity in Asia over the previous two years. If
anything, the pace of change since then has become even more frenetic. As legal advisors on some
of the most groundbreaking deals across Asia, we have seen our own M&A practice advance in line
with new developments — and have been well-placed to speed the introduction of new techniques
and concepts to the region.
However, while the pace of development has been buoyant since 2001, one could not say the same
of the level of market activity. Starting from 2001, a combination of the dot.com bust, global political
and economic uncertainty and falling valuations saw deal sizes and volumes decline sharply through
2002 and into the first half of 2003. A combination of caution on the part of buyers, and vendors’
unwillingness to reduce their price expectations to realistic levels, saw the flow of deals slow to a trickle.
The seeds of recovery
However, even as M&A activity in Asia plumbed the depths, growing causes for optimism were
emerging. China’s accession to WTO represents the region’s most significant economic
development for several years, and has already seen China make significant steps towards
dismantling commercial barriers.
At the same time, the financial and regulatory shockwaves from the corporate disasters in the US
have seen several major Asian economies start to embrace higher standards of corporate
governance, reflecting unwillingness among investors and debt financiers to accept opaque
management practices, and governments’ growing realisation that poor corporate governance will
restrict their future ability to do business on the world stage.
While these trends have been accompanied by a degree of regulatory change, including the impact of
the US Sarbanes-Oxley legislation, it is shifts in corporate attitude and mindset amongst family-owned
businesses that are having the greatest impact on Asian businesses, notably in Korea and mainland
2 Guide to mergers and acquisitions in Asia Copyright © Freshfields Bruckhaus Deringer 2004
Introduction
China where organisations have increasingly come to accept the need for transparency in their management and business
dealings. Further signs of progress include China’s move to introduce new regulations governing the M&A market in general,
and investment in state-owned companies in particular, alongside new anti-trust rules.
It is still early days, but all these changes have helped to put a platform in place for a soundly-based and sustainable
upturn in Asian M&A. A number of international investors have already taken the opportunity to invest in Chinese
companies up to the limits allowed by the WTO rules, and inevitably these companies will develop governance and
management practices more in line with Western norms.
Geographical shifts – and a new groundswell of deals
A further significant change during the past three years has been the continuing evolution of the marketplace’s
geographical orientation. Shanghai’s rapid development means it makes more and more sense as a base for China work.
Hong Kong remains the key hub for the rest of North Asia, and is set to hold on to that position for the foreseeable future.
On the basis of recent and emerging trends, there is real cause for optimism that we are on the verge of a significant
bounce-back in M&A activity — especially in China, Hong Kong and Japan. While the prospects are increasingly bright
across the Asia region, they are particularly exciting in these economies.
A number of recent deals on which Freshfields Bruckhaus Deringer has advised indicate that this upturn is already under
way. In June 2003 Tesco, the biggest supermarket operator in the UK, completed a friendly takeover of a Tokyo-based
retail chain, C Two-Network. This US$286 million deal, executed by way of a tender offer, was hugely significant as a
reflection of the increasing opportunities now open to inbound acquirers in Japan.
Finance sector mergers under way
The beginnings of renewed M&A activity are also evident in Hong Kong. Corporate finance activity there is increasingly
buoyant, driven particularly by efforts from Hong Kong-based financial institutions to gear themselves up to address the
massive mainland China market. With the Closer Economic Partnership Agreement (CEPA) offering Hong Kong
institutions relatively favourable entry terms to China, the Hong Kong Monetary Authority (HKMA) has been openly

Introduction
encouraging a process of consolidation among Hong Kong banks as a way for them to reach the capital thresholds
stipulated by Chinese regulators.
Again, Freshfields Bruckhaus Deringer has been directly involved in this trend. In August 2003 we helped to create the
fourth largest Hong Kong-based listed bank, when we advised Wing Hang Bank on its acquisition of Chekiang First Bank
from Mizuho for a total consideration of US$613 million. We also advised Wing Hang on a US$275 million subordinated
debt issue the following month, the proceeds from which were used in part to finance the Chekiang acquisition.
In December 2003, we represented Fortis Bank on the disposal of its Hong Kong banking operations to ICBC.
M&A deals are also on the up in other areas of the finance sector, underlining the scope of the nascent recovery. In May 2003,
Freshfields Bruckhaus Deringer advised Millea Group, an affiliate of the Tokio Marine and Fire Insurance Co, on its US$127
million purchase of a 24.9 per cent stake in Sino Life Insurance Co. And in October 2003 the firm acted for ABN AMRO Asia
Securities on its US$99 million tender offer for Asset Plus Securities, to create Thailand’s largest fully-integrated securities firm.
Supporting the recovery
Various other developments are converging to support the pick-up in Asian M&A. PRC-headquartered mega-companies
are beginning to flex their muscles internationally, particularly in power and telecoms. Actual deals will inevitably follow in
Asia, the US and Europe, as these companies grow in confidence.
Another increasingly active participant in M&A across Asia is the US venture capital industry. The Asian private equity
scene is still relatively underdeveloped, presenting big opportunities for early entrants. Recent deals such as Newbridge
Capital’s purchase of Korea’s Hanaro Telecom in partnership with AIG, Carlyle Group’s rival tie-up with LG Group for the
same target, and Ripplewood’s acquisition of Japan Telecom’s fixed-line business from its major shareholder, Vodafone,
all herald more activity to come.
Meanwhile, contested bids — for so long a virtual non-starter in Asia — are now coming onto the agenda. While to date
there have been very few hostile takeovers even attempted in Asia, the fact now is that greater commercial focus, coupled
with a growing recognition that family ownership is not always the best structure for long-term expansion and value
creation, are creating conditions in which such bids may succeed.
4 Guide to mergers and acquisitions in Asia

Introduction
More generally, the importance of M&A to the future economic well-being and dynamism of the region is
increasingly appreciated by managements and policymakers because — when done properly — it is demonstrably
value-enhancing and provides greater strategic focus. We remain some distance from the emergence of a
fully-fledged public M&A market in Asia. But at least the development of such a market is now in sight, and the
fundamentals are in place.
Towards the uplands
With the performance statistics for 2003 now finalised by Thomson Financial, there are conflicting signs of
recovery for the Asian market. In Japan, there was a surge of activity during 2003, translating into a massive
53.5% increase in the value of announced deals (as compared with 2002 totals). With announced deal value
of US$74.9 billion, and number of deals totalling 1,816 (compared with 1,587 deals announced during 2002), the restructuring
boom in Japan has generated very substantial deal activity. That said, the number of completed deals in Japan only rose by
1.5% over the same period, with US$71.8 billion in completed M&A deals. Ex-Japan, the picture for 2003 was less rosy, with
announced M&A activity declining by 13.33% to US$98.7 billion, from US$113.9 billion in the previous year.
These figures bear witness to the fact that 2003 was a difficult year for everyone involved in Asian M&A . Ex-Japan, the
China market was the busiest in terms of target nation with a total of 1,504 M&A transactions for the full-year 2003
resulting in US$28.5 billion total deal value. South Korea was the second-most active with 236 deals totalling
US$13.8 billion, and the third was Hong Kong with 567 transactions representing US$10.2 billion of business. The
telecoms industry was once again the most active sector overall, creating activity worth US$15.4 billion from 123 deals.
This was followed by the Commercial Banks and Bank Holding Company sector, and by the Investment & Commodity
Firms sector.
Despite the challenging conditions for deal-making across the region, Freshfields Bruckhaus Deringer is delighted to have been
placed first for announced and completed deals in Thomson Financial’s 2003 league table for Asia (ex-Japan). The firm advised
on US$15.97 billion of transactions from 38 announced deals (and advised on US$6.11 billion of business from 34 completed
transactions). Looking ahead, we expect to be well placed to advise on anticipated future M&A opportunities, as the market
incorporates ever more innovative financing methods, such as structured finance and derivatives.

Introduction
Certainly, the Asian M&A market, like its global counterpart, has been through a tough three years. There are,
however, encouraging signs that these challenging times, coupled with parallel political and economic developments,
have left the market superbly positioned for a robust and long-term revival in activity. Building on its top-ranked
performance and reputation across the region, Freshfields Bruckhaus Deringer looks forward to playing a full and active
role in driving that recovery forward.

Hong Kong Freshfields Bruckhaus Deringer
1 Are there any restrictions on foreign ownership of shares?
There are no restrictions on foreign ownership that are generally applicable to investments in the
shares of companies incorporated in Hong Kong. However, ownership restrictions do apply to a
small number of sectors and industries, including the following:
(a) Banking
No person may become a majority shareholder controller or minority shareholder controller of an

authorised institution (eg banks and deposit-taking companies) incorporated in Hong Kong unless
the prior approval of the Hong Kong Monetary Authority (HKMA) has been obtained.
A majority shareholder controller is a person who controls more than 50 per cent, and a minority
shareholder controller is a person who controls at least 10 per cent, but not more than 50 per cent,
of the voting power of the institution.
(b) Insurance
In relation to an authorised insurer incorporated in Hong Kong, no person may exercise, or control
the exercise of, 15 per cent or more of the voting power at any general meeting of the insurer unless
that person has complied with the relevant statutory obligations (discussed below).
(c) Television
Persons not ordinarily resident in Hong Kong are unqualified voting controllers and are
prohibited from acquiring or holding 2 per cent or more of the voting control of a television
licensee without the prior approval of the Broadcasting Authority (BA). In addition, if the
aggregate number of shares held by all unqualified voting controllers exceeds 49 per cent, the
total number of votes they are entitled to cast at shareholders’ meetings is capped at 49 per cent.
Other classes of persons (eg newspaper publishers and broadcasters) require approval

Hong Kong • Freshfields Bruckhaus Deringer
from the Chief Executive in Council to hold office in, or control more than 15 per cent of the voting
shares of, the licensee.
(d) Sound broadcasting
There is also a 49 per cent cap on the ownership of shares in a sound broadcasting licence holder
by persons not ordinarily resident in Hong Kong. Certain other classes of persons (eg advertising
agents and broadcasters) require approval from the Chief Executive in Council to control 15 per
cent of voting rights or 15 per cent of the board composition of a sound broadcasting licensee.
Interests in shares exceeding 15 per cent of voting shares in a licensee may not be transferred or
acquired (directly or indirectly) within three years following the grant of the licence, unless the
consent of the BA has been obtained.
(e) Others
Certain business areas and companies are owned directly by the Government of the Hong Kong
SAR. Outside investment in these areas and companies is, therefore, not possible. Examples are
the Kowloon-Canton Railway Corporation and Radio Television Hong Kong.
2 What is the relevant legislation relating to foreign ownership and who enforces it?
(a) Banking
The restrictions on ownership of authorised institutions are contained in the Banking Ordinance.
The HKMA regulates the banking sector in Hong Kong.
(b) Insurance
The Insurance Companies Ordinance contains the restrictions on ownership of authorised insurers.
The regulator of insurance companies in Hong Kong is the Office of the Commissioner of Insurance
(OCI), which has been appointed the Insurance Authority under the Ordinance.
(c) Television
The restrictions relating to television are contained in the Broadcasting Ordinance. This area is
supervised by the BA.
(d) Sound broadcasting
The restrictions in the sound broadcasting field are found in the Telecommunications Ordinance and
are enforced by the Office of the Telecommunications Authority and the BA.

Freshfields Bruckhaus Deringer • Hong Kong
3 What approvals are needed and how long does it take to obtain them?
(a) Banking
Before becoming a majority shareholder controller or minority shareholder controller of an authorised

institution incorporated in Hong Kong, notice has to be given to the HKMA. Approval will be duly
obtained once the HKMA gives its consent (which may be conditional), or when three months has
passed since notice was given without a notice of objection being served by the HKMA.
(b) Insurance
Notice has to be given to the OCI of any proposal to acquire 15 per cent or more of an insurance
company incorporated in Hong Kong. Approval will be duly obtained once the the OCI gives a
notice of no objection, or when three months has passed since notice was given without a notice
of objection being served by the OCI.
(c) Television
The Broadcasting Ordinance does not contain specific provisions relating to the time it takes the
BA to approve an acquisition of a shareholding of 2 per cent or more of a television licensee.
4 Are there any exchange control laws or restrictions on the repatriation of profits?
There are no exchange control laws or restrictions on the repatriation of profits in Hong Kong.
5 What rules govern takeovers or mergers of listed companies and who enforces them?
Takeovers and mergers affecting public companies in Hong Kong or companies with a primary
equity listing in Hong Kong are subject to the provisions of the Hong Kong Code on Takeovers and
Mergers (Code). Although the Code does not have the force of law, it applies, in practice, to all
public takeovers and mergers in Hong Kong. The Code is administered by the Securities and
Futures Commission (SFC) through its Executive.
Takeovers and mergers of Hong Kong-listed companies also need to be carried out in compliance
with the listing rules (Listing Rules) issued by The Stock Exchange of Hong Kong Limited
(Stock Exchange).
6 What is the level of disclosure for shareholdings? Does a memorandum of understanding relating to the
acquisition of shares need to be disclosed?
(a) Securities and Futures Ordinance
The legal obligations concerning the disclosure of interests in shares listed in Hong Kong are
imposed by the Securities and Futures Ordinance (SFO). The disclosure obligation is triggered when
the relevant interest increases to 5 per cent or more in nominal value of shares that carry voting

rights, or decreases to below 5 per cent. Disclosure must be made to the Stock Exchange and the
company within three business days (save where the Code applies — see below). Subject to certain
exceptions, disclosure is also required if the notifiable interest changes by a whole percentage point
— for example, from 10.9 per cent to 11.2 per cent.
In some circumstances, there may be an additional duty to disclose the obtaining or disposing of
any short position of 1 per cent or more in voting shares of the target company.
The information required to be disclosed is specified in the SFO and includes such items as the date
of the relevant event, the total number and class of shares held and the nature, as well as the
highest and average amount, of consideration payable or receivable for the acquisition or disposal
of the interest in shares. With respect to on-exchange transactions, the highest and average prices
the shareholder paid for the interest acquired must be disclosed.
An unlisted corporate substantial shareholder will also be required to disclose the details of any
person in accordance with whose directions or instructions it or its directors are accustomed
(whether legally or otherwise) to act. This is intended to reveal the “real” person who stands behind
a substantial shareholder.
The disclosure provisions are also meant to identify concert party agreements, whereby a
controlling shareholder (meaning a person holding 30 per cent or more in voting rights) or a director
of a listed target company provides any loan or security to another person on the understanding,
or with the knowledge, that the loan or security will be used or applied for the acquisition of
an interest in that target company, unless the financing is provided in the controlling shareholder’s
or director’s ordinary course of business as a qualified lender. Compliance with the disclosure
provisions may reveal the warehousing of shares by controlling shareholders and helps to
avoid breaches of the minimum public float requirement applied to a listed company under the
Listing Rules.
An obligation may also arise under the SFO in response to an investigation made by the company
into its own ownership. For this obligation there is no percentage threshold. The extent of the
disclosure required depends, in this case, upon the form of the enquiry, and disclosure must be
made to the company within whatever “reasonable” time it specifies. It should be noted that
additional disclosure obligations apply to directors and chief executives of listed companies.
(b) The Code
The Code imposes disclosure obligations during the offer period. All parties to a takeover or merger
transaction and any of their associates are required to disclose their dealings in relevant securities
during the offer period. Associates include persons acting in concert and also persons who, or who
as a result of any transaction, own or control at least 5 per cent in relevant securities of the offeror
or the target.

Disclosure under the Code is required to be made to the company, the SFC and the
Stock Exchange not later than 10.00 am on the business day following the date of the acquisition
or disposal.
Persons who manage investment accounts on a discretionary basis and persons who trade as
principals in securities may apply to the SFC for “exempt fund manager” or “exempt principal trader”
status, respectively. Exempt fund managers will not be presumed to be acting in concert with any
offeror or the offeree company and will not be required to disclose their dealings publicly (although
private disclosure to the SFC will still be required). Subject to public disclosures and other restrictions,
exempt principal traders who conduct trading in their ordinary course of business, particularly arbitrage
or hedging related activities, will be exempted from the concert party presumption.
(c) Disclosure of memorandum of understanding (MOU)
A non-legally binding MOU relating to an offer or possible offer does not automatically need to be
announced. However, where such an MOU is entered into and not announced, details need to be
disclosed to the SFC. In addition, if a Hong Kong-listed company is party to an MOU it would need
to consider whether to disclose it to the public, as part of the company’s general obligation to keep
shareholders informed of any material and potentially price-sensitive information.
If the MOU constitutes a binding agreement to acquire shares (whether conditional or not), it will be
taken into account in determining whether a discloseable interest is held for the purpose of
disclosure under the SFO.
7 Are there any rules restricting the acquisition of shares in a listed company?
The Code regulates the acquisition of shares in public companies in Hong Kong. There is no
equivalent in Hong Kong of the Substantial Acquisition Rules issued by the Takeover Panel in the
United Kingdom. The Listing Rules issued by the Stock Exchange include a requirement for at least
a prescribed percentage of any class of listed securities to be held by the public. The percentage
depends on the market capitalisation of the company in question.
8 What are the key conditions attaching to a takeover offer?
Except with the consent of the SFC, all offers which are subject to the Code must be conditional
on the offeror having received acceptances in respect of shares which, together with shares
acquired or agreed to be acquired before or during the offer, will result in the offeror and persons
acting in concert with it holding more than 50 per cent of the voting rights of the offeree company.
A voluntary offer may contain additional conditions, including an acceptance level of shares carrying
a higher percentage of the voting rights. However, offers governed by the Code may not normally
be made subject to conditions which depend on judgments by the offeror or the fulfilment of which

is in its hands. Care needs to be taken in framing any conditions which depend on the offeror’s
due diligence.
Once an offer has become or is declared unconditional, it must remain open for not less than a
further 14 days. Consideration cheques must be dispatched to accepting shareholders within 10
days of the later of the following two events: (i) the offer being declared unconditional and (ii) the
date the shares are tendered to the offeror.
9 Is there a level at which a mandatory general offer is required? What are the consequences of reaching it?
Under the Code, a mandatory general offer is required if one of the following conditions is met:
Initial percentage stake Trigger point
Less than 30 per cent Acquisition of additional shares which gives the offeror and any
person acting in concert with it after the acquisition an aggregate
holding of 30 per cent or more of the voting rights in the company
Between 30 per cent Acquisition of additional shares which results in a percentage

and 50 per cent increase in the interest in voting rights of the offeror and any person
acting in concert with it of more than 2 per cent from the lowest
percentage holding in the preceding 12-month period
A mandatory offer must be in cash (or be accompanied by a cash alternative — see below) and may
only be conditional upon receiving acceptances which, together with voting rights already held by the
offeror and any person acting in concert with it, amount to more than 50 per cent of the voting rights
of the offeree company.
Occasionally, a person or group of persons acquiring more than 50 per cent of the voting shares of
a company will thereby acquire or consolidate control (meaning 30 per cent of the voting rights) in a
second company because the first company itself has effective control of the second company. The
SFC will not normally require a mandatory general offer for the second company unless:
• the shareholding in the second company is significant in relation to the first company: relative
values of 60 per cent or more will normally be regarded as significant; or
• one of the main purposes of acquiring control of the first company was to secure control of the
second company.
10 Are there any provisions which establish a minimum price for a takeover offer?
Generally, where an offeror (or its concert parties) has purchased shares in the offeree company (i) within
3 months prior to the offer period or (ii) during the interval between the offer period and the

announcement of firm intention to make an offer, the offer must be on no less favourable terms than
those applying to his purchase.
Furthermore, if after an announcement of firm intention to make an offer and during the offer period, the
offeror (or its concert parties) purchases shares in the offeree company at above the offer price, then
the offer price must be increased to a level not lower than the highest price (excluding costs) paid for
such shares.
The consideration for a voluntary general offer can be in cash or some form of security, such as shares
in the offeror. However, if the offeror (or any person acting in concert with it) has acquired for cash shares
in the offeree company, which carry 10 per cent or more of the voting rights, during the offer period and
within six months prior to the commencement of the offer, the general offer must be in cash, or be
accompanied by a cash alternative, at not less than the highest price paid by the offeror (or any person
acting in concert with it) for shares of the same class during that period.
A mandatory offer must be in cash, or be accompanied by a cash alternative, at not less than the
highest price paid by the offeror or any person acting in concert with it for shares carrying voting
rights during the offer period and within six months prior to its commencement.
11 Does a 75 per cent shareholder achieve effective control? If not, why not?
Subject to any provision to the contrary contained in a company’s constitutive documents, a 75 per
cent shareholder has effective control of a Hong Kong-incorporated company, as he is able to
procure that all resolutions are passed at a meeting of the company, whether ordinary resolutions
(which require a simple majority of members present and voting) or special resolutions (which
require a three-quarter majority).
12 Can a purchaser compulsorily acquire or squeeze out a minority?
Under the Companies Ordinance, where an offeror has, within four months of the date of a takeover
offer for a Hong Kong-incorporated company, acquired or contracted to acquire by virtue of the
offer 90 per cent or more (in value) of the shares to which the offer relates, the offeror may acquire
the remaining shares from minority shareholders compulsorily. A set procedure for compulsory
acquisition is set out in the Companies Ordinance.
In addition, where the Code is applicable, an offeror must have acquired the shares of 90 per cent
of disinterested shareholders (ie shareholders other than the offeror and its concert parties) before
it is able to acquire compulsorily the remaining shares.

13 What is the takeover timetable for achieving full control?
The timetable for a voluntary general offer under the Code is set out below. Variations to this
timetable may be permitted, depending on the circumstances.
Date Particulars
Announcement Offeror notifies offeree of firm intention to bid
Day 0 Posting date of offer document:

• within 21 days of announcement (cash offer)
• within 35 days of announcement (securities offer)
Day 14 Last day for board of the offeree to send circular to advise shareholders of its views with
respect to offer
Day 21 First permitted closing date:

• if successful — press announcement, announcing offer unconditional
• if unsuccessful — board meeting of offeror to consider extending and/or revising offer
Day 39 Last day for offeree company to release new information (eg trading results, profit
forecasts, asset valuations, major transactions, etc)
Day 42 Assuming closing date is Day 21, right of withdrawal arises for acceptor if offer is not
unconditional
Day 46 Last day for voluntary revision of offer
Day 60 Last day for offer to become or to be declared unconditional
Day 70 Last day for settlement of consideration if offer unconditional on Day 60
14 What alternatives are there for achieving control, eg scheme of arrangement with shareholders?
A listed company incorporated in Hong Kong may be taken private by way of a scheme of
arrangement under the Companies Ordinance. The principal advantage of such a scheme is that
once it is approved by the appropriate shareholders’ resolutions and duly sanctioned by the court,
it is binding on all shareholders and the company. In most cases, a scheme will involve a
cancellation of the shares held by the minority shareholders in return for a fixed price payment, a
corresponding reduction of the share capital representing those minority shares and an issue of new
shares to the offeror that equals the reduced share capital.
In order to be effective under the Companies Ordinance, a scheme must be approved by a majority
in number representing 75 per cent in value of the shareholders present and voting at a general
meeting. In addition, the Code requires the scheme to be:
• approved by at least 75 per cent of votes cast by disinterested shareholders (ie shareholders
other than the offeror and its concert parties) in person or by proxy at a meeting of these
shareholders; and
• not disapproved by more than 10 per cent of votes attached to disinterested shares.

Under the Code, these requirements also apply to proposals to delist a company.
In addition to shareholders’ approval, the scheme must be approved by the court.
15 What is needed in order to delist a company?
A delisting generally takes place in connection with either a general offer or a scheme of
arrangement. In addition to the requirements for these procedures outlined above, the Listing
Rules provide that an issuer which has no alternative listing on another stock exchange
recognised by the Stock Exchange may not voluntarily withdraw its Hong Kong listing without the
permission of the Stock Exchange unless shareholders’ approval is obtained in advance. As from
31 March 2004, the relevant shareholders’ resolution must be:
• approved by at least 75 per cent of votes cast by independent shareholders (ie shareholders
other than those holding 30 per cent or more in voting rights) in person or by proxy at a meeting
of these shareholders; and
• not disapproved by more than 10 per cent of votes attached to independent shares.
16 Are there any anti-competition or monopoly laws?
There are no generally applicable anti-competition or monopoly laws, although restrictions do

exist in certain sectors such as broadcasting and telecommunications.
17 What stamp duties or other taxes apply to a transfer of shares?
Stamp duty at the rate of 0.2 per cent of the amount of the consideration or the value of the shares
is payable on transfers of shares of Hong Kong-listed companies or Hong Kong-incorporated
companies. The seller and the buyer usually pay this in equal proportions. No stamp duty is payable
on transfers between members of the same group (a 90 per cent ownership threshold applies).
Hong Kong does not tax capital gains arising from the disposal of shares.
Contact: Robert Ashworth, Teresa Ko
11th Floor Tel: + 852 2846 3400
Two Exchange Square Fax: + 852 2810 6192
Central Email: robert.ashworth@freshfields.com
Hong Kong teresa.ko@freshfields.com

Indonesia Mochtar, Karuwin & Komar
The purchase of shares of Indonesian companies by foreign parties remains subject to many
administrative consents and limitations on foreign ownership. Certain areas are closed to foreign
investment altogether under the so-called ‘Negative List’ of capital investment, most recently set
forth in Presidential Decree No 96 of 2000 as amended by Presidential Decree No 118 of 2000,
which contains a reduced number of activities. In general, any area not listed therein is open to
foreign and domestic investment. Certain key segments of the economy remain the domain of
Indonesia’s many state-owned entities, and applicable industry-specific laws may require any
permitted foreign investment in such areas to be in various forms of joint operation or cooperation
with such entities. Pursuant to regulations enacted in 1998, retail and wholesale trading are now
substantially open to foreign investment upon application for the required authorisations.
In the finance sector, the maximum foreign ownership allowed is 85 per cent of unlisted companies
and 100 per cent of listed companies, up previously from 49 per cent. Exceptions are unlisted
insurance and securities companies and listed banks. Foreigners may own a maximum of 80 per cent
only of an unlisted insurance company. For securities companies, foreign entities engaged in finance
services other than securities trading may own a maximum of 85 per cent of an unlisted securities
company. If the foreign entity is a securities company, it may own up to a maximum of 99 per cent of
an unlisted securities company. The government allows a maximum of 99 per cent foreign ownership
in the shares of a listed bank. Banks and securities companies may only list on the stock exchange
99 per cent of their issued shares, and foreign investors are allowed to own up to 100 per cent of the
total listed shares. Under previous laws, maximum foreign ownership of publicly listed general
commercial banks and joint venture banks was limited to 49 per cent and 85 per cent, respectively.
Foreign investment in banks is now regulated by regulations issued pursuant to the banking law, Law
No 10 of 1998, which also relaxed the prevailing bank secrecy restrictions and transferred licensing
authority from the Ministry of Finance (MOF) to the Bank Indonesia (BI), the central bank.

Mochtar, Karuwin & Komar • Indonesia
The government has enacted a new Oil and Gas Law, Law No. 22 of 2001, which has been
effective as of 23 November 2001. The basic purpose of the new Oil and Gas Law is to create an
overall statutory framework for a fundamental restructuring of the oil and gas regime. This is
principally an ending to the Pertamina (which is a state-owned enterprise) monopoly in upstream oil
and gas and liberalisation of the domestic oil and gas markets.
Under this new law, the oil and gas activities are divided into two main categories, ie upstream and
downstream activities. Upstream activities consist of exploration and exploitation, while
downstream activities encompass processing, transporting, storage and commerce.
Foreign investment in upstream oil and gas is carried out through production sharing contracts or
other forms of cooperation contracts with the designated government entity. As also permitted
under the preceeding law (the 1960 Oil and Gas Law), foreign legal entities through their permanent
establishments are permitted to engage in upstream activities pursuant to such contracts without
the obligation to form an Indonesian legal entity.
Downstream oil and gas is in principle open for direct foreign investment. However, the regulation
framework is still to be established. As to oil and gas supporting services (specialised services), in
the past foreign companies were permitted to operate in Indonesia through a branch operation, but
then over the years the government gradually encouraged them to convert their operations to an
Indonesian limited liability company (PMA company). Branch operations are still permitted, but
these would be limited to certain categories of highly specialised services.
Foreign investment in most other areas of the Indonesian economy is conducted through PMA
companies established under the Foreign Investment Law, Law No 1 of 1967, as amended (the FIL).
These PMA companies are entitled to certain government facilities discussed below. In the
economic sectors open to foreign PMA company investment, 100 per cent foreign share ownership
is permitted by law, except for a number of key infrastructure areas where foreign ownership is
limited to 95 per cent.
There are no special regulatory bodies in Indonesia responsible for regulating merger and
acquisition activity by foreign investors as such. Several government bodies responsible for
regulating particular business sectors have the power to regulate mergers and acquisitions within
those sectors, which for these purposes can be broadly divided into:
(i) finance, meaning commercial banking, securities, non-bank finance and insurance;
(ii) oil and gas; and
(iii) any sector other than finance and oil and gas; each of which is subject to a different regulatory regime.

Indonesia • Mochtar, Karuwin & Komar
The most important of these regulatory bodies is the Capital Investment Co-ordinating Board
(BKPM), the entity responsible for licensing foreign investment in most sectors of the Indonesian
economy, other than finance and oil and gas. The BKPM is a non-departmental government
institution in that its authority is mainly derived from the authority of the technical ministry that has
jurisdiction over the particular economic sector at issue. Foreign investment in the finance sector is
regulated by the MOF (except for securities companies, which are regulated by the Capital Market
Supervisory Agency (BAPEPAM)), in the case of banks and venture capital firms it is regulated by
BI and in the oil and gas sector by the Ministry of Energy and Mineral Resources (MEMR), the
Upstream Operating Board (BP-Migas), the Downstream Regulatory Board (BPH-Migas) and
BKPM (for a PMA company).
The primary legislation governing mergers and acquisitions is the Company Law, Law No 1 of 1995
(the Company Law) and its implementing regulations, particularly Government Regulation No 27 of
1998 (GR27/1998) concerning mergers, acquisitions and consolidations. The Company Law
applies to all locally incorporated limited liability (Perseroan Terbatas or PT) companies generally,
listed and private, regardless of the economic sector in which they operate, and is policed by the
Ministry of Justice and Human Rights (MOJHR). Most private sector business activity in Indonesia
is conducted through PTs, and in many fields of business activity forming a PT is a government
requirement. Indonesian partnerships are rare and are not available to foreign investors.
Except in the finance and oil and gas sectors, where industry-specific laws and their implementing
regulations provide the main source of regulation of foreign investment, the basic law applicable to
foreign investment generally is the FIL and its various implementing regulations. Mergers and
acquisitions of publicly listed companies are regulated primarily by BAPEPAM, which is under the
jurisdiction of the MOF and is responsible for stock market regulation and investor protection,
pursuant to the Capital Markets Law, Law No 8 of 1995 (the Capital Markets Law) and its
implementing regulations. Purchases of listed shares may be conducted through the stock exchange
(Jakarta or Surabaya), where the shares are listed, or outside the stock exchange, and if conducted
through the stock exchange are also subject to the rules of the stock exchange authorities.
Acquisitions of shares in a securities company require the consent of BAPEPAM. In addition, a

purchase by a foreign party of shares in a wholly Indonesian-owned company in the finance sector
generally triggers a higher level of required share capitalisation under the business licence
regulations. Post-acquisition reporting requirements also exist. Foreign investment in those segments
of the oil and gas sector open to foreign investment generally requires the approval of the MEMR.
With respect to the remainder of the economy subject to the FIL, the purchase by foreign parties
of shares in unlisted non-PMA companies (which will also require such companies to be converted

to PMA companies) and the merger between unlisted companies where any foreign share
ownership is involved require BKPM approval, as does any transfer of shares in PMA companies or
any dilution of an Indonesian shareholding in a joint venture PMA company engaged in certain
infrastructure areas, whether by share transfer or increase in share capital.
Additionally, foreign acquisitions of unlisted companies in various sectors may also require the
approval of the applicable technical ministry, which together with BKPM may take steps to protect
existing shareholders, including limiting share purchases by, or imposing other conditions on, the
buyer. Speaking generally, the liberal foreign shareholding permitted by the aforementioned
regulations has historically been coloured by the exercise of administrative policy discretion, which
may operate to limit foreign investment in individual cases to some lesser percentage. Additionally,
various ancillary consents and permits will be required from functional ministries to implement the
approved acquisition. Acquisitions of shares or other assets from shareholders of banks taken over
by the Indonesian Bank Restructuring Agency (IBRA) may require the IBRA’s consent.
Pursuant to the Company Law, any issuance of new shares of a PT company will require the
approval of the general meeting of shareholders (GMS), as will the sale of all or a majority part of
the assets of a company. In order for a PT company to issue new shares to other parties, the PT
company must first conduct a rights offering to its existing shareholders proportionately. The PT
company must then offer some number of shares that were not taken up to the employees of the
PT company. This requirement is presently not yet effective unless contained in the PT company’s
articles of association and is to be addressed by future regulation. Acquisitions of assets also
require approval of the BKPM if any government import or tax facilities attach to the assets.
Under the Company Law and GR27/1998, a merger, acquisition or consolidation can only be
carried out to further the interests of the companies concerned and those of their shareholders and
employees, and to enhance the public interest. A formal proposal for a merger, consolidation or
acquisition, as the case may be, must be prepared and obtain approval of at least 75 per cent of
the votes cast at the GMSs of the companies concerned. Such GMSs must be attended by at least
75 per cent of the total voting shares. These voting requirements may be subject to any higher
voting requirement in the companies’ articles of association. The proposal must state, inter alia, the
reasons for and terms and conditions of the transaction, the procedure for converting the shares of
each company into shares of the surviving company and the treatment of employees and dissenting
shareholders. There are various publication and notice requirements, including the requirement to
give creditors 30 days’ notice prior to the notice of the GMS. Any unresolved objection by creditors
will block the transaction. These acquisition procedures are not intended to apply to normal share
transfers directly from a shareholder to a third party, even where a majority interest is transferred,
but rather to takeovers, mergers and other acquisitions of control instigated by management.

As noted above, mergers and acquisitions of listed and unlisted companies must take into account
the interests of employees and their intended treatment must be disclosed in the required
transaction documentation. As to any staff reductions following an acquisition, dismissal of more
than 10 employees in any calendar month requires prior approval from the Central Committee for
Settlement of Labour Disputes, or ‘P4P’, an independent administrative court under the political
authority of the Ministry of Manpower and Transmigration, which will often seek to negotiate
adjustments to the acquiror’s redundancy programme.
As a general matter, and subject to certain exceptions, such as in the case of BKPM approval,
applicable regulations do not require any administrative bodies whose consent must be obtained to
render their approval within any time periods, which can vary in practice.
No such restrictions exist. The Government by virtue of Law No 24 of 1999 regulates a foreign
exchange management regime. However, Law No 24 of 1999 does not stipulate restrictions on
repatriation of profits.
Note, however, cross border remittances of rupiah funds are prohibited. There are reporting
requirements on foreign exchange transactions carried out by or through a bank or non-bank
financial institution by the relevant bank or non-bank financial institution.
There are also periodic reporting requirements on transactions by companies which meet certain
asset or annual revenue thresholds, which are not conducted through onshore banks or non-bank
financial institution, but through overseas accounts, inter-company or office accounts, and other
means, affecting offshore financial assets and/or offshore financial obligations, and periodic
reporting of offshore asset and financial obligation positions of a company. Companies subject to
these reporting requirements are those having total assets of at least IDR100 billion (Indonesian
rupiah), or total annual gross revenues of at least IDR100 billion. This also applies to Indonesian
permanent establishments of foreign companies.
We note that foreign PMA investors receive government assurances that if foreign exchange
controls are adopted, the foreign investors will have access to foreign exchange made available by
the Government on a pari passu basis with all other foreign investors similarly situated for
repatriation of invested equity capital, repayment of offshore debt up to the limits approved in the
investment licence issued by BKPM, and for certain other approved transfers. The government
does not, however, guarantee that it will make sufficient foreign exchange available to cover any of
such transfers, and the implementation of this guarantee is untested in practice.

Non-PMA companies which acquire foreign ownership must convert to PMA status. Mergers or
amalgamations of listed companies are addressed by the Company Law provisions noted above
requiring GMS approval, and by the Capital Markets Law and BAPEPAM Regulation No IX.G.1
attached to BAPEPAM Decree No 52 of 1997 which require submission of a plan of merger or
amalgamation to BAPEPAM for its approval, disclosing the purpose of the combination, the terms
of the transaction, including the share conversion procedures and the treatment of dissenting
minority shareholders and employees of the companies involved, whose interests must be taken
into account pursuant to applicable law. Here again, there are notice and publication requirements.
The proposed merger or amalgamation must also follow the applicable stock exchange rules.
Acquisitions of listed companies are addressed by the Company Law provisions noted above
requiring GMS approval and by BAPEPAM Regulation No IX.H.1 attached to BAPEPAM Decree No
5 of 2002 which requires the acquiring party to make a tender offer if the acquisition transaction will
result in a change of the controlling party. A controlling party is defined in Regulation No IX.H.1 as
a party owning 25 per cent or more of the issued shares of a listed company, unless such party can
otherwise prove it does not have control; or the ability to, directly or indirectly, control a listed
company by way of influencing the appointment and dismissal of a director or commissioner, or by
way of amending the articles of association of the listed company. The tender offer, if applicable,
shall be made in accordance with the procedures as set forth in BAPEPAM Regulation No IX.F.1
attached to BAPEPAM Decree No 4 of 2002 pursuant to which a tender offer plan must be
prepared and published and must disclose, among other things, the terms and conditions of the
tender offer and the number of shares of the target company held by the tender offeror. The text of
the announcement and thereafter a tender offer statement must be submitted to BAPEPAM, the
stock exchange authorities and other parties, and must be publicly published. Technical ministry
approval of foreign acquisitions of listed shares is generally not required, although exceptions exist.
The pre-emptive rights granted to shareholders and employees by the Company Law as noted
above are qualified in the case of listed companies by BAPEPAM regulations which provide that in
certain circumstances, where the company is in financial distress, or outstanding debt is to be
converted into equity, no rights offering is required.
6 What is the level for disclosure of shareholding? Does a memorandum of understanding relating to the
A director, commissioner or any party owning 5 per cent of the total issued shares of a listed
company is obliged to report to BAPEPAM and the stock exchange authorities its shareholding and
any subsequent change in its shareholding (in the shares). BAPEPAM also requires an insider of a
listed company and any party making a transaction in shares with an insider to report to BAPEPAM

the transaction. In addition, a listed issuer or the share administration bureau holding the issuer’s
share register must periodically report to BAPEPAM a party with ownership of 5 per cent of the
equity of a company. Additionally, an issuer and a public company must report to BAPEPAM any
‘material and important’ information which could affect the shares, including a change of control.
Such reporting obligation could theoretically require the disclosure of a memorandum of
understanding relating to a share acquisition, although if the document is non-binding or subject to
material conditions precedent, no disclosure should be required.
These are addressed in paragraph 5 above.
The Capital Market Law recognises two types of companies subject to the Capital Market Law, ie
(i) an Issuer, defined as a company which offers its shares through an Initial Public Offering process
and subsequently listed on the stock exchange; and (ii) a Public Company, defined as a company
having 300 or more shareholders with issued capital of at least IDR3 billion but does not list any
shares on the stock exchange.
Regulation No IX.H.1 deals with takeovers of Issuers and Public Companies. As addressed in
paragraph 5 above, if a party intends to acquire a controlling stake (ie by way of purchasing 25 per
cent or more of the issued shares or equity securities of a listed company), then the party is required
to make a tender offer for the remaining shares owned by the non-controlling shareholders. As a
general rule, pursuant to BAPEPAM Regulation No IX.F.1, the minimum tender offer price is the greater
of the highest tender offer price made in the previous 180 days, or the highest trading price over the
previous 90 days. A number of exceptions to the general rule are provided in BAPEPAM Regulation
No IX.H.1. First, if the takeover offer is made directly in respect of shares of a Public Company that
are not listed or traded on any stock exchange, the offer price should at least be the same as the price
the buyer paid to the “selling shareholder” in the direct sale transaction (Acquisition Price), or a fair
price determined by an independent appraiser, whichever is greater. Second, if the takeover offer is
made directly in respect of shares of the target company that are listed and traded on a stock
exchange but have not been traded for the last 90 days or trading has been temporarily suspended,
the offer price shall be at least the greater of the highest trading price over the past 12 months or the

Acquisition Price. Third, if the takeover offer is made directly in respect of shares of the target company
that are listed and traded on an exchange, the price of the Tender Offer is to be the greater of the
highest traded share price over the past 90 days or the Acquisition Price.
Other exceptions are in the event the takeover is made indirectly. First, if the takeover is made indirectly
in respect of shares of the target company that are listed and traded on exchanges but within 90 days
have been temporarily suspended, the price of the Tender Offer is to be the highest traded share price
over the past 12 months. Second, if the takeover is indirectly in respect of shares of the target
company that are listed and traded on an exchange, the price of the Tender Offer is to be at least the
same as the highest traded share price over the past 90 days.
Beyond the tender offer context, purchases of listed shares can be conducted by way of a direct
negotiation between the seller and buyer through the negotiation market, where the continuous
auction system applicable to regular trading does not apply. The price is to be determined by the
seller and the buyer, taking into account the closing price on the regular auction market. Although
no regulation imposes a maximum deviation from the market price for a direct negotiation
transaction (except for transactions done through one broker), substantial deviation may be
scrutinised by BAPEPAM and the stock exchange authorities.
Applicable capital market regulations broadly define control as the ability to decide, directly or indirectly,
by any means, the management policy of the company and ownership of 25 per cent or more of the
listed shares is deemed to constitute control. Beyond this, and except where the law mandates GMS
approval of a specific percentage for certain corporate actions, no provisions of Indonesian law confer
statutory control on shareholders holding any particular minimum percentage of shares.
No. On the contrary, the Company Law explicitly grants a number of protections to the minority
shareholder, including the right to require the company to purchase his shares at a fair price, if the
shareholder does not approve of any sale or exchange of all, or a majority part, of the company’s
assets, or the merger or acquisition of the company. The Company Law also gives minority
shareholders holding at least 10 per cent of the shares of a company a number of other statutory rights.
Additionally, in the case of listed companies, where a conflict of interest in a transaction exists, the
consent of a majority of the independent (disinterested) shareholders will be required for the proposed
transaction.
Not applicable.

Aside from the direct acquisition of shares or assets and the modification of the control provisions
of the organisational documents of the acquired entity, various other means have been used by
foreign parties to achieve de facto control of Indonesian companies. Principal among these are
the use of nominee shareholder arrangements and technical assistance or similar agreements,
together with the secondment of foreign managerial personnel, with the control provisions
established by contract. Both present significant legal problems.
15 What is needed to delist a company?
Under the stock exchange regulations, a listed company may apply for a voluntary delisting, upon
obtaining approval from the GMS. The Jakarta Stock Exchange requires approval from at least
two-thirds of the non-controlling shareholders. While the Surabaya Stock exchange requires
approval from only one half of the non-controlling shareholders. The stock exchange authorities
can also delist a company for a number of reasons, including adjudication of bankruptcy,
violations of law, trading inactivity and incurring business loss for specified periods. Additionally,
BAPEPAM may freeze or cancel the registration of any security should events occur which
endanger the interest of investors, or prevent normal exchange transactions for that security.
In response to the fact that many listed companies met the criteria for delisting, in the year 2000
the Jakarta stock exchange authorities created a second-tier board to accommodate companies
which did not meet the then applicable listing criteria.
Law No 5 of 1999 on the Prohibition of Monopoly Practices and Unfair Business Competition,
which became effective 5 March 2000, prohibits various anti-competitive activities, including price
fixing, cartels, boycotts, monopolisation, anti-competitive mergers and acquisitions, and various
other anti-competitive exercises of market power. The law also restricts the ability of parties to
control a dominant market position in a relevant market. Various arrangements are exempted
from the law. This anti-monopoly law is administered by an independent Business Competition
Supervisory Commission which reports to the President directly.
The payment of nominal stamp duties (at present IDR6,000 per document) is necessary in order
for any document, including share transfer documents, to be enforced in Indonesia.
Indonesian companies are subject to corporate tax on income from all sources, including capital
gains arising from a transfer of shares or assets. Special rules apply to capital gains arising from

a sale of publicly listed and non-publicly listed shares, and also to companies in the energy and
mining industries, and various other industries. The top marginal corporate tax rate is 30 per cent
while the personal tax rate is currently 35 per cent.
Dividends paid to shareholders are normally subject to withholding tax for individual Indonesian
residents and non-residents of 15 per cent and 20 per cent, respectively, subject to reduction
pursuant to most double tax treaties to 15 per cent or 10 per cent. Dividends paid to PT company
shareholders are not subject to withholding tax.
In response to the economic crisis, the government has promulgated or is in the process of
promulgating a great number of new laws and regulations, some of which are noted above,
evidencing a general trend to further open up the economy to foreign investment. The government
has also taken a number of measures to attack the corporate debt overhang which may clear the
way for corporate acquisitions, including the establishment of the ‘Jakarta Initiative’ set of voluntary
rules to facilitate out-of-court debt restructuring under the auspices of an interdepartmental team.
Furthermore, the government is continuing to privatise a number of state-owned companies and,
through BI and IBRA, has completed the consolidation of state-owned banks and is continuing with
a program to sell down the government’s interest in a number of banks that it has taken over
through IPOs as well as private placements.
Mochtar, Karuwin & Komar
Contacts: Emir Kusumaatmadja, Miranti M Ramadhani, Carmen B Soedarmawan
14th Floor Tel: + 62 21 571 1130

Wisma Metropolitan II Fax: + 62 21 571 1162
Jalan Jenderal Sudirman Kav 31 + 62 21 570 1686
Jakarta 12920 Email: ek@mkklaw.net
Indonesia mirantimr@mkklaw.net
Website: www.mkklaw.net csoedarmawan@mkklaw.net
Mailing address: PO Box 2844, Jakarta 10001, Indonesia

Japan Freshfields Law Office
Freshfields Foreign Law Office
There is no general restriction on foreign ownership of shares. However, there are some industry-
specific restrictions as described in section 2 below.
The Foreign Exchange Law – restrictions on investment
The Foreign Exchange and Foreign Trade Law (Foreign Exchange Law), the primary legislation
controlling foreign investment in Japan, was amended in 1992 to substantially liberalise foreign
investments. Enforced by the Ministry of Finance, the law requires that any investment classified
as an inward direct investment be followed 15 days after the acquisition by a report to the Bank
of Japan filed by the investor. Inward direct investment is defined to include any acquisition of
shares in a closely-held corporation or an acquisition of more than 10 per cent of a publicly listed
company’s outstanding shares.
Prior notification requirements for inward direct investment, however, still apply to investments from
certain countries (eg Iraq and North Korea) or to investments in certain industries including those in
Table 1 (overleaf).
For these types of investments, the investor must not complete the transaction until 30 days after the
Ministry of Finance and the Minister in charge of the competent supervising government office (the
Ministers) receive notification. The Ministers may reduce the period, or extend it to up to four months.
Where appropriate, the Ministers may announce during the waiting period a prohibition on, or
conditions to, the proposed investment.

Freshfields Law Office/Freshfields Foreign Law Office • Japan
Industry Competent supervising government office

Aircraft manufacturing Ministry of Economy, Trade and Industry
Atomic power
Explosives manufacturing
Leather products manufacturing
Space development
Weaponry manufacturing
Agricultural, forestry and fishery Ministry of Agriculture, Forestry and Fisheries
Public transportation Ministry of Land, Infrastructure and Transport

Supply of electricity, gas and heating
Type I Telecommunications and Broadcasting Ministry of Public Management, Home Affairs, Posts
and Telecommunications
Vaccine production Ministry of Health, Labour and Welfare
Private security services National Police Agency
Air transportation Ministry of Land, Infrastructure and Transport

Water transportation
Restrictions on foreign ownership
Levels of foreign ownership in companies in some government regulated industries are limited by
law. For telecommunications companies, all such restrictions have been lifted, with the exception
of NTT, the national telephone company, which must be less than one-third foreign owned.
Additionally, domestic airline companies and their holding companies must be less than one-third
foreign owned. Finally, in principle, there are restrictions to the foreign ownership of broadcasting
enterprises. Such enterprises must be less than one-third or one-fifth foreign owned, depending on
the type of business they are engaged in. It is therefore advisable to seek legal advice before
investing in a company that operates in such an industry.
In these industries (ie NTT, television and radio broadcasting and domestic airlines), a person who
is not a Japanese national cannot be appointed as a representative of a company.
Please refer to section 2 above.
The Minister of Finance may prohibit, in very limited circumstances, the transfer of money overseas.
Generally, however, there is no restriction on the repatriation of profits, other than the procedures
designed to prohibit money laundering, which include the identification of the parties to be paid.

Japan • Freshfields Law Office/Freshfields Foreign Law Office
5 What rules govern takeovers of mergers of listed companies and who enforces them?
In addition to the Foreign Exchange Law discussed above in section 2, the Commercial Code,
Securities and Exchange Law and the Anti-Monopoly Law all govern takeovers and mergers in
Japan. The Financial Services Agency (FSA) enforces the Securities and Exchange Law with
respect to takeovers, while the Fair Trade Commission (FTC) applies the Anti-Monopoly Law with
respect to mergers. In addition, the Tokyo Stock Exchange enforces its own regulations. For details,
see section 8 for takeovers and section 16 for mergers.
6 What is the level for disclosure of shareholdings? Does a memorandum of understanding relating to the
The Securities and Exchange Law requires a shareholder to report to the Minister of Finance within
five days after its (and its related parties) combined shareholdings in a listed company exceed
5 per cent or there is any subsequent movement in its shareholding or 1 per cent or more. If the
combined holdings of shareholders who have agreed to vote as a block exceed 5 per cent, the
same obligations are triggered. A report is required not only where shares are acquired, but also
where a person enters into an agreement or arrangement to acquire shares. The report must
include the principal terms of the agreement or arrangement. In certain circumstances, therefore,
the existence and major terms of any memorandum of understanding between the buyer and the
seller may also be required to be disclosed.
In addition, every publicly listed company must disclose its 10 largest shareholders.
There are no general restrictions on the acquisition of shares in a listed company through the stock
market. Banks, however, may not own more than 5 per cent of another company, and insurance
companies may not own more than 10 per cent. Listed shares may only be acquired outside a
stock exchange subject to tender offer rules contained in the Securities and Exchange Law.
Any acquisition of more than 5 per cent of a publicly held company’s shares that occurs outside the
stock market must comply with the tender offer rules below. Excepted from these rules are
acquisitions that would result in ownership of no more than one-third of a company’s shares and
which are made from not more than 10 sellers within a 60-day period.
A tender offer is an offer to the general public, made by public notice, to acquire shares in a company
outside the stock market or over-the-counter market and must be subject to the following conditions:

(a) the purchase price must be uniform in relation to all shares to be purchased;
(b) any change made to the original terms of the offer must be to the advantage of the
shareholder;
(c) a shareholder is entitled to cancel an agreement to sell shares at any time during the offer
period without penalty; and
(d) the offer may be conditional upon the offeror acquiring more than a certain number of shares,
or the offeror may limit the number of shares to be acquired. If the number of shareholders
accepting the offer exceeds the limit placed on the offer, then the offeror must purchase the
shares on a pro rata basis from each accepting shareholder.
There is no level at which a mandatory general offer is required. However, if a purchaser wishes to
acquire at one time a holding from a specified group of sellers which triggers a requirement for a
tender offer, in practice it may be necessary to acquire the whole company since the accepting
shareholders would be entitled to participate in the offer on a pro rata basis.
If a tender offer is required, the price must be no less than the highest price paid outside of the
market in the last 60 days. Otherwise, there are no minimum price requirements.
Yes, in fact a holder of two-thirds of the aggregate outstanding shares in a company will achieve
effective control since a two-thirds majority in a general shareholders’ meeting is sufficient to amend
the Articles of Incorporation, remove directors, transfer all or a major part of the business, dissolve
the company and approve a merger. However, there are a limited number of matters that require
approval from more than two-thirds of the shareholders, such as the conversion of equity from one
class of stock to another and the discharge of a director’s liability to the company.
No. However, if commercially justified and subject to the directors’ fiduciary duties, this may be
effected by transferring the business of the target company to another company, thereby leaving
the target shareholders with a company stripped of its assets.
In addition, recent regulatory changes now allow several methods by which a company can
squeeze out minority shareholders under certain circumstances. For example, stock-for-stock
exchanges allow a company to effectively squeeze out dissenting shareholders. The dissenting

shareholders’ stock is exchanged for stock in the purchasing company, giving the purchasing
company 100 per cent ownership of the target company and the dissenting shareholders a minority
stake in the purchasing company.
First, it must be noted that a tender offer under Japanese law does not necessarily achieve full
control since dissenting shareholders cannot be forced to give up their shares. The timetable for the
tender offer process is as follows:
(a) The offeror begins the offer process by placing a public notice of the offer in at least two
newspapers or more. The offeror must file a takeover bid statement and basic financial
information about itself with the appropriate local finance bureau and deliver copies to the
target company and the relevant stock exchange.
(b) The offer must be open for acceptance by shareholders for a given period of between 20 and
60 days (the Offer Period).
(c) Detailed terms of the offer are sent to target shareholders who express an interest in selling.
The offeror may modify the terms of the offer, including the price, subject to the same
requirements as described in (a) above. Shareholders who have accepted an offer are entitled
to the benefit of any improved terms.
(d) The target company, or a director thereof, may announce its opinion on the offer during the
Offer Period. A report must be filed with the appropriate local finance bureau and copies must
be delivered to the offeror and the relevant stock exchange.
(e) After the expiry of the Offer Period, no further acceptances of the offer are permitted.
(f) On the day after expiry of the Offer Period, the offeror places a public notice of the results of
the offer in a newspaper. The offeror files a report with the appropriate local finance bureau,
with copies to the target company and the relevant stock exchange.
(g) All administration in relation to the offer must be completed without delay (the end of the
offer process).
An amalgamation (Gappei) is an alternative to an acquisition of shares. There are two types of

Gappei under Japanese Law: merger (Kyushu Gappei) and consolidation (Shinsetsu Gappei). In
either case, the parties must execute an amalgamation agreement and have it approved at their
respective general meetings and their class’s shareholders’ meetings, if applicable, by a two-thirds
majority. The corporate identity of one party survives and the corporate identity of the other party is

extinguished in the case of a merger. The corporate identity of both parties will be extinguished and
a new company will be formed in the case of a consolidation. The shareholders of the company
that has been extinguished in an amalgamation are entitled to shares in the amalgamated company,
or the new company, as the case may be, together, in some cases, with a cash payment. A
shareholder who objects to the proposed amalgamation may request the company to purchase his
shares at a fair price.
Another alternative for gaining control is through a business transfer. The parties must have the
business transfer approved at their respective general meetings by a two-thirds majority.
New provisions of the Commercial Code facilitating demergers (kaisha bunkatsu) became effective
on 1 April 2001. These streamlined the legal procedures which companies seeking to restructure
through demergers must follow. Under this new law, the recipient of a spun-off business must be
either a new corporation or an existing corporation, and the recipient of the newly-issued shares
must be either the transferor corporation (split-up) or the shareholders of the transferor corporation
(spin-off). In the split-up process, a shareholding relationship occurs between a demerged company
and a recipient company, thus this can also be used as an alternative.
There are many factors that can lead to the delisting of a company from Japan’s principal stock
exchanges. Although the factors are generally similar among the different exchanges, each
exchange has its own rules and may, in particular, set different numerical thresholds for the
events triggering a delisting. For example, a company may be delisted from the Tokyo Stock
Exchange (inter alia) if:
(a) the average monthly trading volume is less than 10 shares or 10 units of shares, if applicable;
(b) there has not been a sale for three consecutive months;
(c) the company’s liabilities have exceeded its assets for more than one year;
(d) 75 per cent or more of the outstanding shares are held in aggregate by the 10 largest
shareholders, company officers (including their relatives) and affiliated companies;
(e) there are fewer than 4,000 shares, or 4,000 units of shares, if applicable;
(f) there are fewer than 400 shareholders and less than 10,000 shares, or 10,000 units of shares,
if applicable; or
(g) there are fewer than 600 shareholders and less than 20,000 shares, or 20,000 units of shares,
if applicable.
A company may also, with the approval of its board of directors, apply to be delisted.

Substantive provisions
The Law Concerning Prohibition of Private Monopolies and Preservation of Fair Trade (the Act in this
section) regulates, among other matters, (i) an acquisition of shares; (ii) an acquisition of businesses;
and (iii) a merger or demerger, which would substantially reduce competition in a market in Japan.
These provisions used to apply only to Japanese companies or businesses operated in Japan.
Since 1999, the provisions also apply to foreign companies. The filing requirements in these
situations are explained below.
Reporting and prior notification requirements
A financial institution is, in general, restricted from holding more than 5 per cent (or 10 per cent for
insurance companies) of the shares in a Japanese company.
An acquiring company (other than a financial institution) is required to file with the FTC a report of
its shareholdings in an issuing company each time the shareholding level of the acquiring company
in the issuing company crosses the 10, 25 and 50 per cent thresholds. In each case this must be
done within 30 days of crossing the relevant levels. For these purposes, an acquiring company is
defined as a company (including a foreign company) that itself has total assets of more than
¥2 billion (Japanese yen) and, together with its subsidiaries and any Japanese parent, has total
consolidated assets of more than ¥10 billion. An issuing company is a Japanese company which
has total assets of more than ¥1 billion, or a foreign company which, in combination with its
subsidiaries, has aggregate sales in Japan (combined domestic sales) of more than ¥1 billion.
The Act also requires prior notification of an acquisition of a business or fixed assets to be filed with
the FTC where the transferee has consolidated total assets of more than ¥10 billion and,
(a) where the transferor is a Japanese company, either (i) the transferor has total assets of more
than ¥1 billion, in the case of a transfer of its whole business, or (ii) the transferred business
has sales of more than ¥1 billion or,
(b) where the transferor is a foreign company, the transferred business has combined domestic
sales of more than ¥1 billion.
An amalgamation of two Japanese companies requires prior notification when one has
consolidated total assets of more than ¥10 billion, and the other has consolidated total assets of
more than ¥1 billion. Prior notification is also required for an amalgamation of two foreign companies
when one has consolidated domestic sales of more than ¥10 billion and the other has consolidated
domestic sales of more than ¥1 billion.

Prior notification is also required for certain types of demergers that result in the combination of
all/or part of two companies’ businesses. Such notification is required if the joint foundation
demerger or the acquisition demerger is conducted between:
(a) a company that has total assets of more than ¥10 billion (if its entire business is combined)
or has sales of more than ¥10 billion with respect to the combined business; and
(b) a company that has total assets of more than ¥1 billion (if its entire business is combined) or
has sales of more than ¥1 billion with respect to the combined business.
Business transfers also require prior notification when the transferee company has consolidated
total assets of more than ¥10 billion and the transferred business has sales of more than ¥1 billion
or, if the entire business is transferred, has total assets of more than ¥1 billion.
The FTC’s powers
Where prior notification is required, the parties must not complete the transfer of business,
amalgamation, or demerger within the 30-day period (or other period specified by the FTC) after the
filing. The FTC may announce its decision to prohibit or impose conditions on such transactions
only during this period. Where such transactions have been completed without the FTC’s
permission (even where it was only necessary to file a report after the acquisition), the FTC may
order the parties to restore competition in the relevant market through a divestment of all or a part
of the shares of the businesses or a demerger (although such orders are extremely rare).
Japan levies no stamp duties on share transfers and the Securities Transaction Tax Act was
eliminated in April 1999, so there are no taxes that particularly apply to the transfer of shares.
However, capital gains are taxable just like any other corporate profits.

Recent developments
Japanese M&A actively has increased in such areas as management buy-outs (MBOs), foreign
acquisitions of ailing Japanese companies and hostile takeovers. Japanese companies, often
backed by foreign private equity investors, have shown a strong preference for MBOs rather than
hostile takeovers. Foreign private equity funds have acquired failed banks, such as Lone Star’s
purchase of Tokyo Sowa Bank’s assets in 2001 and Ripplewood Holding’s acquisition of Long-Term
Credit Bank in 1999. In addition, there have been several high profile acquisitions of Japanese
companies by foreign companies. In 1999, Renault SA purchased more than one-third of Nissan
Motor Company to become the carmaker’s largest shareholder. Chiyoda Mutual Life Insurance was
purchased by AIG out of civil rehabilitation and resumed business in April 2001 as an AIG subsidiary.
Roche of Switzerland acquired a majority share in one of Japan’s leading drug companies, Chugai
Pharmaceutical, in October 2002.
Contact: Naoki Kinami, Timothy Wilkins, Nobuo Nakata
Freshfields Law Office Tel: + 81 3 3584 8500
Freshfields Foreign Law Office Fax: + 81 3 3584 8501
Ark Mori Building Email: naoki.kinami@freshfields.com
18th Floor timothy.wilkins@freshfields.com
1-12-32 Akasaka Minato-ku nobuo.nakata@freshfields.com
Tokyo 107-6018
Japan

Malaysia Zaid Ibrahim & Co
Two government bodies generally regulate foreign ownership of shares: the Foreign Investment
Committee (FIC) and the Malaysian Ministry of International Trade and Industry (MITI). MITI exercises
control by imposing equity conditions on licences granted to manufacturing companies, while the
FIC imposes equity conditions in the following circumstances:
(a) acquisitions of assets or interests exceeding MYR10 million (Malaysian ringgit); or
(b) acquisitions of 15 per cent or more of the voting power of a Malaysian company by a foreign
interest or associated group; or
(c) acquisitions by foreign interests in the aggregate of 30 per cent or more of the voting power
of a Malaysian company.
In addition, there are some publicly listed companies in Malaysia (PLCs), deemed to be of strategic
national interest, whose memorandum and articles of association contain provisions restricting the
level of foreign ownership in the PLC concerned.
On 31 May 2003, the Malaysian Government announced an economic stimulus package, which included
a liberalisation of the FIC Guidelines. On 17 June 2003, it announced its decision to fully liberalise equity
holdings in all manufacturing projects. Please refer to the section 18 for further details of the liberalisations.
The equity conditions imposed by the FIC are derived from a set of administrative guidelines known
as the ‘Guidelines for the Regulation of Acquisition of Assets, Mergers and Takeovers’ (FIC
Guidelines). MITI has the power, pursuant to Section 4(4) of the Industrial Co-ordination Act, 1975,
to impose any conditions when issuing a manufacturing licence and MITI has used this provision to
impose equity conditions on manufacturing licences.

Malaysia • Zaid Ibrahim & Co
An application to the FIC or MITI generally takes up to three months for approval. When a PLC is
involved, a submission to the Securities Commission (SC) for approval may also be required.
Depending on the nature of the transaction, the approval process may take up to nine months.
Exchange control is governed by the Exchange Control Notices issued by Bank Negara, the central
bank of Malaysia under the Exchange Control Act, 1953.
Generally, a resident may pay any sum of money not exceeding MYR10,000, or its equivalent in foreign
currencies, to a non-resident for any purpose, other than for the import of goods and services. For the
repatriation of any sum above MYR10,000, or its equivalent in foreign currencies, compliance with
certain procedures and/or the prior written approval of Bank Negara is generally required.
All payments by non-residents for the purchase or subscription of Malaysian registered securities
must be made in foreign currency or in Malaysian ringgit from an external account (ie a ringgit
account maintained with a licensed financial institution) or by way of a share swap, which is subject
to the prior approval of the Controller of Foreign Exchange.
The Malaysian Government had in 1998 pegged the Malaysian ringgit at MYR3.80 to US$1.00. This
peg remains in force.
Foreign investors are freely allowed to repatriate their investments, including capital, profits,
dividends and interest, without being subject to any capital control levy. Where relevant, withholding
tax is still applicable on interest, royalties, fees payable for technical advice or assistance and rent
or other payments for the use of any movable property.
The Malaysian Code on Take-Overs and Mergers, 1998 (the Code), which came into operation on
1 January 1999, governs the takeovers and mergers of the following companies:
(a) PLCs;
(b) public companies; and
(c) private limited companies, with either shareholders’ funds or a paid-up capital of MYR10
million or more based on the latest audited accounts (on a consolidated basis, if applicable)
and a purchase consideration that is MYR20 million or more over a period of 12 months
before the date of written notice and announcement pursuant to the provisions of the Code.
The SC is currently the regulatory authority enforcing the rules.

Zaid Ibrahim & Co • Malaysia
Takeovers and mergers of public companies, whether listed or not, are also governed by the
Securities Commission Act, 1993. Certain provisions of the Companies Act, 1965 (CA) may also be
relevant to takeovers and mergers of listed companies.
The CA imposes an obligation on a substantial shareholder of a PLC or a public company to give notice
in writing to the company and the Kuala Lumpur Stock Exchange (KLSE) of the full particulars of the
voting shares in the company in which he has an interest. A person has a substantial shareholding in a
company if he has a direct or indirect interest in the voting shares in a company amounting to not less
than 5 per cent of the aggregate of the nominal amounts of all the voting shares in the company.
The Registrar of Companies may at any time request information and particulars of any
shareholding in any company, including private limited companies, from any persons. In addition, all
substantial shareholders of a PLC are required to disclose their interests to the SC.
Generally, a memorandum of understanding executed by a PLC should be disclosed due to the

provisions of Chapter 9 of the KLSE Listing Requirements and the insider trading laws in Malaysia
pursuant to the Securities Industries Act, 1983, which advocate immediate disclosure of price
sensitive information, and the provisions governing public disclosure of material information as set
out in the KLSE Listing Requirements. A memorandum of understanding executed by a company
other than a PLC would not need to be disclosed to any authorities or to the public.
If there is a swap transaction, approval from the SC (and the KLSE, if there is an issue of new shares
in a PLC) is required. The approval of the FIC will be required for cash acquisitions of shares in a
PLC, where the acquisition is not carried out by stockbrokers through the KLSE. Approval may
contain equity conditions, which affect the party acquiring the shares.
Pursuant to the Code, an offeror must include the following condition in the offer document: the
takeover offer shall be subject to the offeror having received acceptances which will result in the
offeror and all persons acting in concert with the offeror holding in aggregate more than 50 per cent
of the voting shares to which the takeover offer relates (the 50 per cent Condition).
In the case of mandatory offers, the offeror may not include any other condition without the prior
written approval of the SC.

Pursuant to the Code, a mandatory general offer is required under the following circumstances:
(a) when a person obtains control in a company (‘control’, in relation to the acquisition of shares, is
defined in the Securities Commission Act, 1993 to mean the acquisition or holding of, or entitlement
to exercise or control the exercise of, voting shares of more than 33 per cent in a company); or
(b) when a person holding more than 33 per cent but less than 50 per cent of the voting rights
of a company acquires additional shares carrying more than 2 per cent of the voting rights
during any six month period.
Total ownership of shares includes acquisitions by persons ‘acting in concert’, ie persons who,
pursuant to an agreement, arrangement or understanding (whether formal, written, express or
having legal or equitable force or otherwise), cooperate, to:
(a) acquire jointly or severally voting shares of a company for the purpose of obtaining control of
that company; or
(b) act jointly or severally for the purpose of exercising control over a company.
In accordance with the Code, a mandatory offer must generally be in cash at not less than the
highest price paid or agreed to be paid by the offeror, or persons acting in concert with it, within six
months prior to the beginning of the offer period for shares to which the takeover offer relates.
A 75 per cent shareholder can be said to have achieved effective control over a company as he can
pass ordinary resolutions, as well as the special resolutions that are required for more important
matters, such as amendments to the company’s constitutional documents or a resolution to reduce
the capital of the company or to wind it up. Notwithstanding this, the provisions of the CA relating
to remedies in cases of oppression of minority shareholders must be noted.
A purchaser may compulsorily acquire or squeeze out a minority where an offer made to the holders
of all of the shares in a company is accepted by holders of not less than nine-tenths in nominal value
of those shares (other than shares already held at the date of the offer by, or by a nominee for, the
transferee company or its subsidiary) within four months of the making of the offer. In these cases,
the offeror may at any time within the two months after the offer has been approved give notice to
any dissenting shareholder that it wishes to acquire his shares. When that notice has been given
the offeror may acquire those shares.

The takeover timetable for achieving full control pursuant to the provisions of the Code is as follows:
(a) A person who proposes to make a takeover offer must immediately announce the fact by a
press notice and notify the board of directors of the target company, the KLSE (if it involves
a PLC) and the SC (Date of Written Notice).
(b) Within four days after the Date of Written Notice, the offeror must submit the offer document
and other relevant information to the SC for its consent.
(c) The offer document should then be posted by the offeror to the board of directors of the offeree
and offeree’s shareholders within 35 days of the Date of Written Notice (Date of Posting).
(d) The offer must initially be open for at least 21 days after the Date of Posting and, if revised, it
must be kept open for at least 14 days from the date of posting to the shareholders a written
notification of the revision.
(e) The offer shall lapse if the 50 per cent Condition (refer to section 8 above) is not fulfilled by
5.00 pm on the 60th day from the Date of Posting (Expiry Date).
(f) Where an offer has become or is declared unconditional as to acceptances:
(i) before the 46th day from the Date of Posting, the offer must remain open for acceptance
for not less than 14 days, but no later than the 60th day from the Date of Posting; or
(ii) after the 46th day from the Date of Posting, the offer must remain open for acceptance
for not less than 14 days, but no later than the 74th day from the Date of Posting.
(g) Paragraph (f) above does not apply where the offeror has given at least 14 days’ notice in writing
to the offeree’s shareholders that the offer will not be open for acceptance beyond the Expiry Date.
For a PLC, there is generally no alternative method of achieving control. This is because a person
may be construed as acting in concert with existing shareholders if he enters into any agreement
with them, triggering the mandatory offer provisions discussed in section 9 above. Only in
exceptional circumstances would the government authorities allow some form of shareholders
agreement to subsist in a PLC.
For the takeover of a private limited company that does not fall within the Code, however, it may be
possible to have shareholders’ agreements, technical assistance agreements and consulting
agreements as alternative means of achieving effective control over the company.

Generally, the steps required would involve a substantial shareholder making a general offer for the
shares in the PLC and upon the completion of the general offer convening a shareholders’ meeting
resolving to delist the PLC. Once the resolution is approved an application is made to the relevant
authorities to delist the PLC.
In the case where the substantial shareholder concerned is interested in acquiring all the shares in
the PLC, the provisions of the CA dealing with compulsory acquisition (discussed in section 12
above) may be invoked to acquire the remaining minority interest.
There are no anti-competition or monopoly laws that are generally applied to all industries or services
in Malaysia. However, with the coming into force of the Communications and Multimedia Act 1998
(CMA), licensees under the CMA (including broadcasters, telecommunication companies and
internet access providers) are now subject to a form of anti-competition law, the scope of which
remains to be tested. Section 133 of the CMA states as follows: “A licensee shall not engage in any
conduct which has the purpose of substantially lessening competition in a communications market.”
Stamp duty
The transfer of any shares in a company is subject to an ad valorem stamp duty of MYR0.30 for
every MYR100 or fractional part of MYR100 computed on the price or value of the sale as of the
date of the transfer of shares. A share sale agreement is subject to stamp duty of MYR10. Stamp
duties are payable by the purchaser of the shares.
Real property gains tax
The seller of shares in a company (other than a PLC) may sometimes be subject to real property
gains tax if there is a disposal of shares in a real property company, ie a company which fulfils the
following criteria:
(a) 75 per cent or more of its total tangible assets comprise real property and/or shares in
another real property company; and
(b) it has not more than 50 members and is controlled by not more than five persons.
The rate of tax ranges from 5 to 30 per cent depending on the length of time between the
acquisition and subsequent disposal of the shares. Please refer to the section 18 below for details
on the current exemption from real property gains tax.

Recent developments
Economic stimulus package
The Malaysian Government announced on 21 May 2003 an economic stimulus package for the
Malaysian economy. The package focused on four main strategies and comprised 90 measures.
The four main strategies were:
(a) promoting private investment;
(b) strengthening Malaysia’s competitiveness;
(c) developing new sources of growth, so as to reduce Malaysia’s dependence on external

factors; and
(d) enhancing the effectiveness of the civil service delivery system in order to ensure expediency
and effective implementation of national development policies and strategies.
The following are some of the key measures announced in the package:
Liberalisation of foreign investment committee guidelines
For acquisitions by Malaysian or foreign interests of Malaysian companies (as opposed to landed
properties), the only equity condition imposed will be Bumiputera equity of at least 30 per cent. In
the case of acquisitions by foreign interests, the remaining equity can be held either by foreign
interests or jointly by foreign and Malaysian interests.
The threshold for acquisitions by foreign and Malaysian interests that are exempted from having to
obtain the FIC’s approval has been raised from MYR5 million to MYR10 million.
The processing of proposals for acquisitions of licensed manufacturing companies will be

centralised at MITI and at the SC for proposals from companies which require their approval. These
proposals will no longer require the FIC’s consideration.
Foreign interests will be allowed to acquire landed properties exceeding MYR150,000 per unit.
For acquisitions exceeding MYR100 million, companies can apply for exemptions from the FIC
Guidelines, subject to the approval of the Minister of Finance and on a case-by-case basis. This
exemption is given for applications received before 31 May 2004.
Income tax exemption to existing operational headquarters (OHQs)
An OHQ is a locally incorporated company that carries on a business in Malaysia, which provides
‘qualifying services’ to its offices or its related companies outside Malaysia. New OHQs established
after the 2003 Budget are given 100 per cent exemption from income tax for 10 years. All existing
OHQs will be given 100 per cent exemption from income tax for the remaining exemption period.

Real property gains tax exemption
Real property gains tax will not be levied for a period of one year, effective from 1 June 2003 up to
31 May 2004. This exemption will be granted for sale and purchase agreements that are executed
on or prior to 31 May 2004.
Liberalisation of the equity policy and expatriate employment in the manufacturing sector
The Malaysian Government announced on 17 June 2003 a full liberalisation of equity holdings in
all manufacturing projects. This will allow foreign investors to hold 100 per cent of all investments
in new projects, as well as in investments in expansion or in diversification of projects by existing
companies. Previous restrictions based on the level of exports and types of product or activity have
also been removed.
Effective from 17 June 2003, the policy on the employment of expatriates in the manufacturing
sector has been liberalised. Manufacturing companies with foreign paid-up capital of US$2 million
and above are given automatic approval for up to 10 expatriate posts, while those with for foreign
paid-up capital of more than US$200,000, but less than US$2 million are given automatic approval
for up to five expatriate posts. Expatriates can be employed in executive posts for up to a maximum
10 years and for five years in non-executive posts.
Zaid Ibrahim & Co
Contact: Lim Kar Han, Richard Ding
Level 19, Menara Milenium Tel: + 60 3 2087 9999
Jalan Damanlela Fax: + 60 3 2094 4888
Pusat Bandar Damansara + 60 3 2094 4666
50490 Kuala Lumpur Email: kar.han.lim@zaidibrahim.com.my
Malaysia richard.ding@zaidibrahim.com.my

People’s Freshfields Bruckhaus Deringer
Republic
of China
1 Are there any restrictions on foreign ownership of companies?
Yes. Foreign ownership is restricted by both the industrial or service sector and the type of
investment vehicle. Restrictions on foreign investment are in flux, with the government taking steps
to overhaul its foreign investment regulatory regime in conjunction with the entry of the People’s
Republic of China (PRC) into the World Trade Organisation (WTO).
Industry specific restrictions
The first port of call for any investor contemplating an investment in the PRC should be the Foreign
Investment Industrial Guidance Catalogue, most recently revised on 1 April 2002. The Catalogue
reflects the PRC’s industrial policy and accordingly sets out the parameters for permitted foreign
investment. The Catalogue divides industries into four categories for foreign investment:
encouraged, permitted, restricted and prohibited.
• For most industries falling within the encouraged category the establishment of wholly foreign-
owned enterprises (WFOEs) is permitted. Nevertheless, the category includes a few sectors
where foreign investors may only establish joint ventures and specifies a handful of sectors where
joint ventures must be controlled by the Chinese party.
• The permitted category also allows for wholly foreign-owned enterprises. The permitted category
is the default position: if a sector is not covered by any of the other three categories then a project
is deemed to be permitted.
• Projects involving industries within the restricted category may take the form of wholly foreign-
owned enterprises in some sectors, but may need to undergo a stricter approval process than
that prescribed for encouraged industry projects.

People’s Republic of China • Freshfields Bruckhaus Deringer
• Foreign investment is off limits in the prohibited category. The list currently bans foreign
investment in industries such as broadcasting, the construction and operation of power
networks, weapons production and gaming.
The Catalogue will need to be revised as China carries out its market-opening commitments
pursuant to its entry into the WTO.
Foreign investment vehicles
In general, foreign investors are permitted to invest in two corporate forms: limited liability
companies and limited liability companies limited by shares. As the names suggest both corporate
forms provide investors with limited liability, but differ with respect to the number of shareholders
permitted and the manner in which they are established and governed.
Limited liability companies
A limited liability company may have a maximum of 50 equity holders and must be governed by a
board of directors. It must have a minimum registered capital of between 100,000 RMB and
500,000 RMB, depending on the industry in which it is classified. Limited liability companies do not
issue shares.
A foreign invested limited liability company typically takes the form of an equity joint venture,
a cooperative joint venture or a wholly foreign-owned enterprise. Further to recent legislative
changes, in almost all sectors foreign investment in a limited liability company means that that
company is considered a foreign invested enterprise (FIE) and subject to approval by the Ministry
of Commerce (MOFCOM, formerly the Ministry of Foreign Trade and Economic Cooperation
(MOFTEC)) or its provincial or local counterparts. FIE status automatically confers the right to import
inputs used in production by the FIE and to export finished products. Where the foreign party
holds an interest of 25 per cent or more in a manufacturing venture, tax holidays and reductions
are available.
In an equity joint venture, the relationship between the investors is governed by a joint venture
contract (a shareholders agreement) and the company’s articles of association, and profits and
losses are shared according to each investor’s percentage interest in the company. In contrast, in
a cooperative joint venture the parties may share profit in a manner unrelated to the ratio of equity
ownership on terms agreed in the joint venture contract. A wholly foreign-owned enterprise, as the
name suggests, is entirely owned by a foreign investor(s), and its activities will be governed by the
company’s articles of association.
Companies limited by shares
Companies limited by shares must be established by at least five promoters of whom more than
half must be domiciled in the PRC. The minimum registered capital is 10 million RMB. As there is

Freshfields Bruckhaus Deringer • People’s Republic of China
no upper limit on the possible number of shareholders, this is the corporate form of PRC publicly
listed companies.
Under recent legislation foreign investors are also permitted to set up FIEs and acquire the assets
of PRC companies through such vehicles.
MOFCOM and its counterparts at the provincial and local levels have primary responsibility for
regulating foreign investment in the PRC. The key legislation includes:
• industrial sectors: Regulations on Foreign Investment Guidelines and the Foreign Investment
Industrial Guidance Catalogue (amended 2002);
• equity joint ventures: Sino-foreign Equity Joint Venture Law (amended 2001) and the
accompanying Implementing Rules (amended 2001);
• cooperative joint ventures: Sino-foreign Cooperative Joint Venture Law (amended 2000) and the
accompanying Implementing Rules (1995);
• WFOEs: Wholly Foreign-owned Enterprise Law (amended 2000) and the accompanying
Implementing Rules (amended April 2001);
• acquisitions: Provisional Rules on the Mergers with and Acquisitions of Domestic Enterprises by
Foreign Investors (April 2003) and Interim Regulations on the Reorganization of State-owned
Enterprises By Using Foreign Investment (January 2003); Notice on the Relevant Issues
Regarding Transferring State-owned Shares and Legal Person Shares to Foreign Investors (1
November 2002); and
• companies limited by shares: Provisional Regulations on Certain Issues Concerning the

Establishment of Companies Limited by Shares with Foreign Investment (1995) and Certain
Opinions on Relevant Issues Regarding Listed Companies Involving Foreign Investment (effective
on 5 November 2001).
In addition, there is considerable legislation in the securities area that pertains to foreign investment
in listed companies, which is administered by the China Securities Regulatory Commission (CSRC),
and foreign exchange controls, which are administered by the State Administration of Foreign
Exchange (SAFE).
Investors in traditional FIEs, such as joint ventures or WFOEs, are generally required to first obtain
planning approval from the National Development and Reform Commission or its local

counterparts, followed by approval of the contractual arrangements by MOFCOM or its local

counterparts depending on the size of the investment. Following the MOFCOM approval a business
license is then issued by the State Administration of Industry and Commerce (SAIC). A similar
approval regime is applied to acquisitions of domestic companies which are to be converted
into FIEs.
Regulations require MOFCOM to issue its approval within 45 days for cooperative joint ventures and
90 days for equity joint ventures or WFOEs. The SAIC is required to issue its approval within 30
days. In practice, however, the time for approvals varies widely. Similar times are prescribed for the
establishment of foreign invested companies limited by shares and the acquisitions of domestic
companies. In certain industries other approvals are required in place of, or in addition to, the
MOFCOM approval. Foreign investment in banks, for example, requires the approval of the China
Banking Regulatory Commission (CBRC) instead of MOFCOM, while foreign investment in shipping,
accounting and advertising companies requires other approvals in addition to MOFCOM approval.
Foreign investors are permitted to repatriate after tax profits in foreign exchange with relevant
supporting documentation. The PRC’s foreign exchange control system is administered by SAFE.
The Chinese renminbi is convertible on the current account, but capital account transactions are
subject to SAFE approval. Under this system, a company that needs foreign exchange in order to
pay a dividend or distribute profits to a foreign investor may withdraw funds from its foreign
exchange account at designated banks. When these funds are insufficient, usually the company
may purchase additional foreign exchange from designated banks, subject to the production of
relevant supporting documents.
Takeovers of listed companies are primarily governed by the recent Administrative Measures for the
Acquisition of Listed Companies (December 2002). The CSRC, which issued the rules, has primary
responsibility for enforcing them. Other ministries or agencies may also have a role depending on
the nature of the acquisition.
As yet there are no specific regulations on mergers of listed companies. Mergers of listed
companies are generally governed by PRC Company Law and PRC Securities Law.
Shareholdings that reach 5 per cent of the company’s total outstanding shares must be
disclosed. Beyond that threshold, increases or decreases of 5 per cent of the outstanding shares

must also be disclosed, although this is reduced to 2 per cent for changes in shareholdings of B-
shares only.
The general rule is that listed companies are obligated to disclose “information which may have
a substantial effect” on the share price of the listed company. Listed companies are also obligated
to disclose letters of intent and memoranda of understanding for the acquisition of shares,
regardless of whether there are “any additional conditions or time limits” which form part of the
letters or memoranda.
Foreign investors are permitted to acquire the following types of shares in PRC companies limited
by shares:
• shares publicly traded on an overseas stock exchange (such as Hong Kong or New York);
• B-shares publicly traded on the Shanghai or Shenzhen stock exchanges;
• shares publicly traded on the Shanghai or Shenzhen stock exchanges, but only through a
qualified foreign institutional investor (QFII) licensed by the CSRC;
• unlisted state-owned or “legal person” shares in listed companies; and
• foreign funded shares in unlisted companies limited by shares or foreign ownership of shares in
foreign invested companies limited by shares (FICLS).
Restrictions vary depending on the type of shares.
• Listed A-shares: With the exception of qualified foreign institutional investors, foreign investors
may not purchase listed A-shares.
• State-owned shares and “legal person shares”: Acquisitions must be consistent with the
industrial policy guidelines set out in the Foreign Investment Industrial Guidance Catalogue and
are subject to approval by MOFCOM. For state-owned shares, official confirmation of the
purchase price and the transaction must also be obtained from the State Assets Administration
and Supervision Commission.
Prior to extending the offer a prospective acquirer must submit to the CSRC a Report on the
Acquisition by Offer (Acquisition Report) and instruct a law firm to opine on its “truthfulness,
accuracy and completeness”. The acquirer must also retain a financial advisor to evaluate and
opine on the acquirer’s ability to carry out the offer. The board of the target must also retain an
independent financial advisor or other professional advisors to analyse the financial condition of the

company and opine on the “fairness and reasonableness” of the terms of the acquisition offer and
the possible impact of the acquisition on the company.
Within 10 days of the acquirer extending the offer, the board of the target is to report to the CSRC
with, among other things, the board’s recommendation to shareholders. The independent directors
are also to issue a separate independent recommendation.
For cash acquisitions the acquirer is required to deposit a sum of not less than 20 per cent of the
total amount of the acquisition price as a performance bond in a bank account designated by the
relevant branch of China Securities Depositary and Clearing Corporation Limited at the time the
acquisition announcement is made.
Offers must remain open for between 30 and 60 days, during which time they may not be
withdrawn. Amendments are subject to CSRC approval.
Upon expiration of the offer period, the acquirer is required to purchase all the shares in respect of
which the offer has been pre-accepted in accordance with the terms of the offer. If the number of
shares which are the subject of pre-acceptances exceeds the pre-determined number of shares to
be acquired, the acquirer must acquire the shares which are the subject of pre-acceptances on a
pro rata basis.
The threshold is 30 per cent of the total issued shares of the target. Where an acquiror enters into
an agreement or extends an offer, which would result in its ownership or control reaching or
exceeding this level, a mandatory general offer for all of the outstanding shares is required unless the
CSRC grants a waiver from such obligation.
The Administrative Measures for the Acquisition of Listed Companies provide for minimum prices
which differ by class of shares.
The offer price for listed shares of a particular class may not be less than the higher of:
• the maximum price the purchaser actually paid for the target’s listed shares of that class during
the six months prior to the initial announcement of the offer; or
• 90 per cent of the arithmetic mean of the daily weighted average price of the target’s listed shares
of that class for the 30 trading days prior to the initial announcement of the offer.

The offer price for unlisted shares may not be less than the higher of:
• the maximum price the purchaser actually paid for the target’s unlisted shares during the six
months prior to the initial announcement of the offer; or
• the target company’s audited net asset value per share as most recently audited.
For companies limited by shares, a 75 per cent shareholder can generally achieve effective control,
subject to minority shareholder protection provisions contained in the company’s articles of
association. PRC Company Law provides that shareholders’ resolutions regarding routine corporate
issues need only be approved by a majority of shareholders, while more important matters
concerning merger, division or dissolution of the company or amendments to its articles of
association must be adopted by more than two-thirds of the voting rights of the shareholders in
attendance at a shareholder meeting.
For limited liability companies, whether a 75 per cent shareholder may achieve effective control
depends on the company’s articles of association and joint venture contract (if any). Furthermore,
laws governing equity and cooperative joint ventures require that the board must unanimously
consent to proposals involving mergers, changes in registered capital, amendments to the articles
of association and dissolution.
PRC law does not provide for compulsory acquisitions or squeeze outs.
The Administrative Measures for the Acquisition of Listed Companies provide that takeover offers
must remain valid for a minimum of 30 working days and a maximum of 60 working days unless a
competing offer is made.
Other than acquiring shares or equity interests, in some cases it may be possible to enter into a
“share management” arrangement with a controlling shareholder and exercise control through
such shares.

PRC Securities Law provides for mandatory delisting where an offeror acquires through a tender
offer 75 per cent or more of the target company’s share capital. Companies may also be delisted
for serious accounting or reporting irregularities, serious violations of law, failure to meet ongoing
listing requirements, incurring losses over a period of three consecutive years, or bankruptcy. On
30 November 2002, the CSRC issued a revised version of the Implementing Measures for the
Suspension of Listing and Delisting of Listed Companies Suffering Losses. Among other things
these measures set out detailed procedures for the delisting of a company after three consecutive
years of losses. The stock exchanges are authorised to decide whether a company is to be
delisted. However, the final decision rests with the CSRC.
The Provisional Rules on Mergers with and Acquisitions of Domestic Enterprises by Foreign
Investors issued in April 2003 provide for compulsory notification of nearly all types of onshore
foreign acquisitions of domestic or foreign-invested assets or companies if any of several triggers
is met:
• business turnover in the Chinese market of a party to the merger or acquisition in the current year
exceeds 1.5 billion RMB;
• share of the Chinese market of a party to the merger or acquisition has reached 20 per cent;
• the merger or acquisition will result in the share of the Chinese market of a party to the merger
or acquisition reaching 25 per cent; or
• the aggregate number of mergers and acquisitions of domestic and foreign-invested companies
in the relevant industry in China exceeds 10 within one year.
The reach of the Provisional Rules on Mergers with and Acquisitions of Domestic Enterprises by
Foreign Investors extends offshore as well. For offshore transactions the notification triggers are:
• assets owned by a party to the offshore merger or acquisition within China exceeding
3 billion RMB;
• business turnover in the Chinese market of a party to the offshore merger or acquisition in the
current year exceeding 1.5 billion RMB;
• the share of the Chinese market of a party to the offshore merger or acquisition and its affiliates
reaching 20 per cent;
• the Chinese market share of a party to the offshore merger and acquisition and its affiliates
reaching 25 per cent as a result of the offshore merger or acquisition; or

• a party to the offshore merger or acquisition directly or indirectly holding equity in more than 15
FIEs in the relevant industry in China as a result of the offshore merger or acquisition.
It is still early days for the Provisional Rules on the Mergers with and Acquisitions of Domestic
Enterprises by Foreign Investors, and their interpretation and implementation by MOFCOM
is evolving.
China has been in the process of drafting an Anti-Monopoly Law for the past several years, and it
appears that the urgency of this process has been stepped up very recently. The Anti-Monopoly
Law will be significant for foreign investors in that it is likely to raise the profile of antitrust regulation
in the PRC and may coincide with enhanced scrutiny of M&A activity that results in increased
market concentration.
PRC stamp duty is payable on the sale and purchase of A-shares, B-shares, state-owned shares
and “legal person” shares at the rate of 0.2 per cent. PRC stamp duty is not payable on the transfer
of shares listed on an overseas stock exchange, provided that the transfer is not executed or
received in the PRC.
Income tax of 33 per cent is payable on the gains realised by a corporate seller of shares, while
individual Chinese and foreign sellers of shares in PRC companies are currently exempt from PRC
income tax on capital gains.
Recent Relevant Legislation
Mergers and Acquisitions of domestic companies
Investors was recently issued by MOFCOM, the State Administration of Taxation, the SAIC and the
SAFE and went into effect on 12 April 2003. This regulation sets out a framework for foreign
investors to acquire domestic companies via either shares or purchases of assets.
Antitrust rules
Investors also sets out — for the first time — antitrust rules that apply to both onshore and offshore
deals with different triggering thresholds. Approval from MOFCOM and the SAIC is required for
deals that raise antitrust concerns. However, the rules are very vague and broad and it still remains
unclear how they will be applied in practice.

FIEs with investment by foreign investors of less than 25 per cent
On 30 December 2002, MOFTEC (now MOFCOM), the State Administration of Taxation, the SAIC and
the SAFE issued a notice that allows companies in which a foreign investor holds an interest of less than
25 per cent to be granted FIE status with “foreign investment less than 25 per cent” noted on the FIE’s
approval certificate and business licence. However, such FIEs will not qualify for the preferential tax
policies granted to FIEs, where a foreign party holds an interest of 25 per cent or more.
Opening of A-share market to QFII
On 5 November 2002, the CSRC and the People’s Bank of China issued the Interim Measures on
the Administration of Domestic Securities Investments by QFIIs. Based on this new regulation, it is
possible that a QFII approved by the CSRC may invest in A-shares publicly traded on the Shanghai
or Shenzhen stock exchanges by engaging a qualified domestic commercial bank as trustee.
Transfer of state-owned shares and “legal person” shares of a listed company to foreign investors
On 1 November 2002, the CSRC, the Ministry of Finance and the State Economic and Trade
Commission (SETC) (its function in this respect now transferred to the National Development and
Reform Commission (NDRC)) issued a Notice on Relevant Issues Regarding Transferring State-
owned Shares and Legal Person Shares to Foreign Investors setting out principles and requirements
for the transfer of state-owned or “legal person” shares in a listed company to foreign investors.
First comprehensive listed company takeovers code
The Administrative Measures for the Acquisition of Listed Companies went into effect on 1 December
2002. The measures include detailed provisions on takeovers of listed companies, including takeovers
by agreement, takeovers by offer and conditions for waivers of mandatory offer obligations.
Converting unlisted foreign invested shares into B-shares
On 16 August 2002, MOFTEC (now MOFCOM) issued a notice setting out detailed requirements,
procedures and documents for converting unlisted foreign invested shares into listed B-shares.
Suspension of listing and delisting of companies
On 30 November 2002, the CSRC issued a revised version of the Implementing Measures for the
Suspension of Listing and Delisting of Listed Companies Suffering Losses, setting out detailed
procedures for suspension of listing and the re-listing and delisting of listed companies that have three
consecutive years of losses. Stock exchanges are now authorised to decide on the suspension of listing,
as well as the re-listing and delisting of companies, although the final decision rests with the CSRC.

Significant purchase, sale, or exchange of assets of listed companies
The CSRC issued a Notice on Issues Concerning Listed Companies’ Significant Purchases, Sales,
or Exchanges of Assets on 10 December 2001 providing criteria for and detailed requirements and
procedures relating to significant purchases, sales or exchanges of assets of listed companies.
Contact: Douglas Markel, Carl Cheng
3705 China World Tower Two 34th floor

1 Jianguomenwai Avenue Jinmao Tower
Beijing 100004 88 Century Boulevard
People’s Republic of China Shanghai 200121
Tel: + 8610 6505 3448 People’s Republic of China
Fax: + 8610 6505 7783 Tel: + 8621 5049 1118
Email: douglas.markel@freshfields.com Fax: + 8621 3878 0099
Email: carl.cheng@freshfields.com

Philippines SyCip, Salazar,
Hernandez & Gatmaitan
As a general rule, there are no restrictions on the extent of foreign ownership of shares. However,
certain industries are nationalised, ie corporations involved in these industries are permitted only
limited foreign equity, or none at all. Some examples of these industries are mass media, public
utilities, retail trade, advertising and the exploration of natural resources. The Fifth Regular Foreign
Investment Negative List sets out these nationalised activities. It should be noted that investments
by non-Filipino nationals are permitted only if the applicant’s country or state allows Filipino citizens
and corporations to invest and engage in business within its jurisdiction.
The principal law that regulates foreign equity participation is the Foreign Investments Act of 1991,
as amended. This law sets out the areas of investment that have restrictions on foreign ownership
under the Philippine Constitution and other laws, and imposes certain additional restrictions. The
Negative List, mentioned in section 1, is issued pursuant to this statute. The Anti-Dummy Law
penalises the use of trusts and other devices intended to circumvent nationality restrictions.
Compliance with foreign equity requirements is enforced by the Securities and Exchange
Commission and by the Bureau of Trade Regulation and Consumer Protection. The Department of
Justice supervises the enforcement of the Anti-Dummy Law.
Investments by non-Filipino nationals are required to be registered with the Securities and Exchange
Commission in the case of corporations, or with the Bureau of Trade Regulation and Consumer
Protection in the case of single proprietorships. After a favourable evaluation, the Commission or
the Bureau, as the case may be, issues a Certificate of Registration. All applications for registration

SyCip, Salazar, Hernandez & Gatmaitan • Philippines
are acted upon within 15 working days from the time they are officially accepted. Otherwise, the
application is considered automatically approved. While there is no express rule or regulation to that
effect, in practice, the Commission does not require the registration of foreign investments that will
not increase the foreign equity of the target domestic corporation to more than 40 per cent.
In addition to registration with the Commission or Bureau, foreign investments may also have to be
registered with the Bangko Sentral ng Pilipinas (the Central Bank), but only if the foreign exchange
needed for repatriation of profits is to be obtained from the Philippine banking system.
Exchange control restrictions are imposed through regulations issued by the Central Bank, which
is authorised by its charter to restrict or suspend the sale of foreign exchange and subject all
transactions in foreign exchange to licensing by it, in order to combat an exchange crisis or a
national emergency. However, foreign exchange restrictions have, in large measure, been removed
as part of the government’s foreign exchange liberalisation programme and, in general, foreign
exchange transactions may take place without restriction.
If the foreign exchange needed for repatriating profits is to be sourced from the Philippine banking
system, the foreign investment from which these profits accrue must be registered with the Central
Bank. Upon registration, the investment is eligible for the full and immediate remittance of dividends,
profits and earnings, as well as repatriation of capital. In such a case, commercial banks are
authorised to sell and remit the equivalent foreign exchange representing profits and other earnings
without prior Central Bank approval. On the other hand, if the foreign investment is not registered,
the foreign exchange needed for the repatriation of profits or capital must be sourced from outside
the Philippine banking system.
The Corporation Code governs mergers and consolidations, and the Securities and Exchange
Commission is the government agency charged with the enforcement of the law. Except for rules
that apply to listed shares, there are presently no laws or regulations that govern takeovers.
Under the law, a merger or consolidation must be approved by:
(a) the respective boards of directors of the corporations involved, by a majority vote;
(b) the corporations’ stockholders or members, by a vote of at least two-thirds of the outstanding
capital stock, or the number of members, as the case may be; and
(c) the Securities and Exchange Commission.

Philippines • SyCip, Salazar, Hernandez & Gatmaitan
The latter must be the last approval sought. Upon such approval, a certificate of merger, or a
certificate of consolidation, is issued. It is only then that the corporate combination becomes
effective. Under the law, neither creditors nor dissenting stockholders can prevent the
implementation of a merger or consolidation, although a dissenting stockholder has an appraisal
right, ie if he votes against the proposed merger or consolidation, he is entitled to sell his shares in
the corporation by demanding payment of the fair value of his shares by the corporation.
Generally, shareholdings are disclosed only in connection with the annual reporting requirement
imposed by the Securities and Exchange Commission on all corporations. The General Information
Sheet, which a corporation must prepare and submit every year, discloses the names of its top 14
stockholders and the amount of their shareholdings. The following corporations are required to file
an annual report setting out the names of the beneficial owners of more than 5 per cent of
outstanding securities and the amount of their holdings:
(a) corporations whose securities are registered with the Commission under the Securities
Regulation Code or listed with the Philippine Stock Exchange; and
(b) corporations with assets of at least PHP50 million (Philippine peso) and having 200 or more
stockholders, at least 200 of which are each holding at least 100 shares.
In turn, every such owner is himself obliged to file a statement of beneficial ownership. Should such
ownership change, he is to file a statement of change in beneficial ownership.
Listed companies are required to inform the Commission and the Exchange promptly of any
material information, corporate act, development or event that is likely to impact on the operation
of the business of the company. In this context, material information, acts, developments or events
are those which induce, tend to induce, or otherwise affect the sale or purchase of securities. A
memorandum of understanding relating to the acquisition of a listed company’s shares does not
itself need to be disclosed. However, in these circumstances, a statement should be submitted to
the Exchange and the Commission announcing the proposed acquisition and setting out the basic
features of the transaction (eg identity of the purchaser, number of shares). Unlisted companies
whose securities are registered under the Code, or who have assets of at least PHP50 million and
have 200 or more stockholders, at least 200 of which are each holding at least 100 shares, are
subject to a similar requirement.

Except for the foreign equity restrictions mentioned in section 1 above, there are no restrictions
imposed by law on the acquisition of shares. However, it must be noted that general corporation
law grants the existing stockholders of a corporation pre-emptive rights to subscribe to all issues
or disposition of shares of any class, in proportion to their respective shareholdings, unless such
right is denied by the articles of incorporation.
Takeover offers involving the equity securities of a public company are governed by the tender offer
rules of the Securities Regulation Code. Either of the following is considered a public company:
(a) a corporation with a class of equity securities listed on any exchange; and
(b) a corporation with assets in excess of PHP50 million and having 200 or more holders, at least
200 of which are holding at least 100 shares of any class of the corporation’s equity securities.
A tender offer is any publicly announced intention by a person acting alone or in concert with others
to acquire the equity securities of a public company. It is subject to the following principal conditions:
(a) No bidder shall make a tender offer unless, as soon as practicable on the date of the
commencement of the tender offer, he:
(i) files a tender offer statement in the prescribed form with the Commission; and
(ii) hand delivers copies of such statement to the target corporation at its principal office and
to each exchange where the securities subject to the tender offer are listed for trading.
Any additional tender offer material, or material change in the information contained in the tender
offer statement, shall be similarly disclosed to the Commission, the target corporation and the
relevant exchange(s).
(b) The bidder shall publish, send, or give to the security holders a report containing the following
information:
(i) the identity of the bidder;
(ii) the identity of the target corporation;
(iii) the amount and class of securities being sought and the type and amount of
consideration being offered for the securities;
(iv) the scheduled expiration date of the tender offer, whether or not said tender offer may
be extended, and the procedure for any such extension;

(v) the exact dates on which security holders may withdraw the securities they deposited
pursuant to the tender offer and the manner in which withdrawal may be effected;
(vi) the exact period during which securities will be accepted for payment, the manner of
acceptance and the plan of the bidder in the event of an oversubscription by security holders;
(vii) confirmation from the bidder’s financial advisor or other appropriate third party that the
bidder has sufficient resources to satisfy full acceptance of the tender offer; and
(viii) the information required to be included in the tender offer statement submitted to the
Commission.
If a material change occurs in any of the above information, the bidder is required to disclose such
change promptly to the security holders.
(c) The bidder may disseminate his tender offer to security holders by long form publication or
summary publication. The long form method entails the publication of all the information listed
in point (b) above, while the summary method is satisfied with the publication of the
information mentioned in items (i) to (vii), provided that the bidder:
(i) includes in the publication appropriate instructions for security holders who wish to obtain,
at the bidder’s expense, the information included in the tender offer statement; and
(ii) undertakes to promptly furnish any security holder requesting one, with a copy of the
tender offer statement submitted to the Commission.
(d) Shares tendered pursuant to the tender offer may be withdrawn:
(i) at any time during the period that the tender offer remains open; and
(ii) if they have not yet been accepted for payment, after the expiration of 60 business days
from the commencement of the tender offer.
(e) If a greater number of securities is tendered than the bidder is bound or willing to accept and
pay for, the securities shall be accepted and paid for pro rata, disregarding fractions.
(f) The consideration paid to any security holder pursuant to the tender offer shall be the highest
consideration paid to any other security holder during such tender offer. If the bidder increases
the consideration after the tender offer has commenced, he shall pay such increased
consideration to all security holders whose securities are accepted for payment, whether or
not said securities were tendered prior to the date he increased the consideration.
During the course of a tender offer (or even before the commencement thereof if the board of
directors of the target corporation has reason to believe that such an offer might be imminent), the

target corporation shall not engage in any of the following transactions, except (i) in pursuance of a
prior contract; (ii) with the approval of its stockholders in a general meeting; or (iii) with the approval
of the Commission under special circumstances:
(a) issue any authorised but unissued shares;
(b) issue or grant options in respect of any unissued shares;
(c) create or issue any securities carrying rights of conversion into, or subscription for, shares;
(d) sell, dispose of, acquire or agree to acquire any assets, the value of which amounts to
at least 5 per cent of the total value of assets prior to acquisition; and
(e) enter into contracts otherwise than in the ordinary course of business.
Under the Securities Regulation Code, a tender offer is mandatory where any person or group of
persons intends to acquire at least 15 per cent of the equity securities of a public company, or at
least 30 per cent of such securities over a 12-month period. In addition, the implementing rules of
the Code provide that where any person or group of persons intends to acquire equity securities that
would result in its ownership of more than 50 per cent of the equity securities of a public company,
a tender offer must likewise be made. In September 2001, the Securities and Exchange Commission
exempted acquisitions of less than 35 per cent of the equity securities of public companies from the
mandatory tender offer requirement. As of this writing, the exemption is still in place.
In any of the following instances, exemption from the mandatory tender offer requirement may be
sought from the Commission:
(a) the purchase of newly issued shares from the unissued capital stock of a public company;
(b) the purchase of shares in connection with a foreclosure proceeding involving a duly constituted
pledge or security arrangement where the acquisition is made by the debtor or creditor;
(c) the purchase of shares in connection with a privatisation undertaken by the government of the
Republic of the Philippines; and
(d) the purchase of shares in connection with a corporate rehabilitation under court supervision.
The acquisition of a public company’s shares through open market purchases at the prevailing
market price shall be automatically exempted from the mandatory tender offer requirement.

In a mandatory tender offer, the consideration must be the highest price paid by the bidder for the
securities during the past six months. Where the offer involves payment by transfer or allotment of
securities, such securities must be valued on an equitable basis.
A 75 per cent shareholder achieves effective control of a corporation as his shareholdings assure
him of more than a majority of the seats on the board of directors and the board elects the
corporation’s president and other principal officers. With regard to those corporate actions requiring
shareholder approval, the law only requires approval by either a majority of the outstanding capital
stock, or two-thirds of it, depending on the particular corporate action involved.
It should be noted, however, that the law permits corporations to stipulate a higher voting
requirement in their by-laws for actions by the board of directors as well as by shareholders. Thus,
a 75 per cent shareholding may not be enough to ensure complete corporate control in a
corporation that has a very high voting requirement.
No.
Step Timeframe
Tender offer/Purchase of shares A tender offer shall remain open until the expiration of (i) at least
20 business days from its commencement, provided that the
tender offer should generally be completed within 60 days from
the date that it is publicly announced; and (ii) at least 10 business
days from the date that the notice regarding a change in the
percentage of the shares sought or in the consideration offered is
first published, sent, or given to security holders.
Payment of tax If the shares are traded on the stock exchange, the capital gains tax
(technically, stock transaction tax) due on their transfer must be paid
by the seller within 25 days after the end of each taxable quarter.
If the shares are not traded on the stock exchange, the seller has
30 days from the date of the sale within which to pay. Documentary
stamp tax must be paid within five days after the end of the month
when the sale and purchase agreement was executed.
Entry in stock and transfer book These are done only after a tax clearance is procured, which
and issue of stock certificate(s) clearance will attest to the payment of all taxes due on
the transfer.

Two alternatives that may be resorted to are the proxy device and the voting trust.
Proxy device
Philippine law allows shareholders to vote by proxy. Thus, if shareholders representing a majority, or
a greater proportion, of the corporation’s outstanding capital stock execute a proxy in favour of a
particular person, the latter will be able to vote all their shares. Technically, a proxy may direct that
the shares be voted a certain way, ie in favour of or against the proposed corporate action, but,
where no directions are given, the designated proxy decides how to vote the share.
Proxies must be in writing, signed by the shareholder and filed with the corporate secretary before
the meeting. If the proxy does not fix a period during which it shall remain effective, it expires at the
end of the particular shareholders’ meeting concerned. On the other hand, if it does fix a period,
such period cannot be greater than five years, although it may be renewed for not more than five
years for each renewal.
Voting trust
Under a voting trust arrangement, a shareholder transfers his shares to a trustee who will exercise
his voting rights. The certificates of stock in the name of the shareholder are actually cancelled and
new ones are issued in favour of the trustee. To safeguard the shareholder’s rights, voting trust
certificates are issued by the corporation in his favour. Under the prevailing view, a voting trust must
have a legitimate business purpose to promote the best interests of the corporation. If it exists only
for the benefit of the trustee without any obligation on the latter’s part to perform any useful service
for stockholders or creditors, the voting trust is considered invalid.
Voting trusts must be in writing and notarised and certified copies must be filed with the corporation
and the Securities and Exchange Commission. A voting trust cannot be effective for a period longer
than five years, although it may be renewed for not more than five years for each renewal.
Upon the application of a listed company, the Philippine Stock Exchange will permit the delisting of
its securities if the following conditions are complied with:
(a) the delisting must have been approved by a majority of the company’s incumbent directors;
(b) all the security holders of the company must have been previously notified of the proposed delisting;
(c) a petition for delisting (including proposed tender offer terms and conditions) shall be filed with
the Exchange at least 60 days prior to the date that the delisting becomes effective;

(d) a tender offer shall be made to all security holders for all of their outstanding securities. The
Exchange shall appoint an independent financial advisor who must confirm, in a fairness
opinion or valuation report, that the terms and conditions of the tender offer are fair. The fees
of the independent financial advisor shall be paid by the company;
(e) the person(s) proposing the delisting must demonstrate to the Exchange that, after the
acquisition of the tendered securities, he (they) shall have obtained at least 95 per cent of the
company’s outstanding securities;
(f) the company should not have any unpaid fees or penalties; and
(g) the delisting should not prejudice the interests of the investors.
Upon the approval of its application for delisting, the company shall pay a delisting fee equivalent
to its annual listing maintenance fee for the year when the application for delisting was filed.
Unfair competition, combinations in restraint of trade and monopolies are prohibited only by general
provisions contained in the Constitution and the Revised Penal Code. There are no statutes that
deal specifically with these issues.
The Philippine Constitution expressly prohibits unfair competition and combinations in restraint of trade.
Monopolies are regulated, or even prohibited, in the public interest. Under the Revised Penal Code, any
person who takes part in any conspiracy in restraint of trade or commerce in order to prevent free
competition in the market, or who monopolises any object of trade or commerce, is guilty of a criminal
offence and may be punished by imprisonment, the imposition of a fine, or both.
Capital gains and documentary stamp taxes are applicable to the transfer of shares of stock:
(a) Capital gains tax (technically, stock transaction tax on shares traded on the stock exchange)
is imposed on the net capital gains realised by the seller from the disposition of his shares of
stock at the following rates:
• for shares traded on the stock exchange: 0.5 per cent of the gross selling price or gross
value in money of the shares of stock sold; and
• for shares not traded on the stock exchange: 5 per cent of the net capital gains realised
during the taxable year from the sale of shares of stock, if such gains do not exceed
PHP100,000. For gains in excess of PHP100,000 the rate is 10 per cent.

(b) A documentary stamp tax is also imposed on the sale of shares of stock at the rate of
PHP1.50 for every PHP200, or fractional part thereof, of the par value of the stock.
Recent developments
The exemption from the mandatory tender offer requirement of acquisitions of less than
35 per cent of the equity securities of a public company (which exemption is discussed in
section 9 above) is a development that may be relevant to any intended acquisition of shares in
public companies in the Philippines.
SyCip, Salazar, Hernandez & Gatmaitan
Contacts: Andres B Sta Maria, Annalisa J Carlota
105 Paseo de Roxas Tel: + 63 2 817 9811-20 / + 63 2 817 2001-09
Makati City Fax: + 63 2 817 3896 / + 63 2 818 7562
1226 Metro Manila Email: abstamaria@syciplaw.com
Philippines ajcarlota@syciplaw.com

Singapore Freshfields Drew & Napier
There are generally no restrictions on the foreign ownership of shares of companies incorporated
in Singapore. However, there are certain businesses (referred to below) in which there are
ownership restrictions.
(a) Shares of a company owning residential property
Whilst there are no restrictions on foreigners owning commercial or industrial property, foreigners
(both individuals and corporations) are prohibited from owning most residential property. The
Residential Property Act restricts the ownership of most residential property to citizens of
Singapore, Singapore companies (with all shareholders and directors being citizens of Singapore)
and companies exempted from the provisions of the Residential Property Act.
(b) Banks
There is a restriction on the percentage of voting shares which any one person can acquire in a
bank incorporated in Singapore.
The Banking Act provides that the approval of the Monetary Authority of Singapore (MAS) is
required before any person either becomes (i) a holder of 5 per cent or more of the voting rights;
(ii) a holder or controller of 12 per cent or more of the voting rights; (iii) a holder or controller of 20
per cent or more of the voting rights; or (iv) acquires ‘control’ of a Singapore incorporated bank.
‘Control’ refers to situations where a person is able to determine the policy of the bank and where
the directors are accustomed or under an obligation to act in accordance with a person’s
directions.
In 1999, MAS lifted the 40 per cent ceiling on foreign ownership of local banks, but the government
has recently indicated that foreign majority control of a Singapore bank is unlikely to be approved.

Freshfields Drew & Napier • Singapore
(c) Insurance companies
There is no foreign shareholding limit in relation to Singapore insurance companies. However, under
the Insurance Act, the approval of MAS is required before any person enters into any arrangement
or agreement in relation to any Singapore incorporated insurance company, by virtue of which such
person would, if the arrangement or agreement is carried out or completed, either acquire 5 per cent
or more of the voting rights or obtain ‘control’ of the insurer. A person would be regarded as obtaining
‘control’ of a registered insurer if such person has either actual control (ie where such person alone
or acting together with any associates would be in a position to determine the policy of the insurer,
for example through the creation of a trust whether express or implied), controls not less than 20 per
cent of the voting rights, or holds interests in not less than 20 per cent of the insurer’s issued capital.
(d) Securities dealers and advisors
There is no foreign shareholding limit in relation to licensed securities dealers and advisors in Singapore,
but the conditions of their licences may require MAS approval for changes in shareholding control.
(e) Finance companies
There is no foreign shareholding limit in relation to finance companies incorporated in Singapore.

However, under the Finance Companies Act, MAS approval is required prior to any person entering
into any arrangement or agreement in relation to any Singapore incorporated finance company, by
virtue of which such person would, if the arrangement or agreement is carried out or completed,
either acquire 5 per cent or more of the voting rights or obtain ‘control’ of such finance company.
The definition of ‘control’ under the Finance Companies Act is similar to the definition of ‘control’
under the Insurance Act described above.
(f) Others
Singapore companies involved in industries where Singaporean control of such companies is regarded
as being in the national interest (such as newspaper publishing, telecommunications, broadcasting
and public utilities) may have ownership or foreign ownership restrictions imposed on them pursuant
to specific legislation or contained in their respective memorandum and articles of association.
Other than the categories listed above, there are generally no restrictions that require shares in a
Singapore company to be held by Singapore nationals.
No approvals are required for foreign investments in Singapore. Where the business to be conducted
in Singapore is regulated (eg banking, insurance and securities), regulatory approval will be required.
The time period for obtaining approval will vary, but usually at least two months should be allowed.

Singapore • Freshfields Drew & Napier
There are no exchange control restrictions in operation in Singapore. Foreign currency brought into
Singapore can be transferred out freely. In addition, currency is freely convertible. Any profits made
can be repatriated without any restriction, as long as taxes have been paid. There is, however, a
policy against the internationalisation of the Singapore dollar which is reflected in restrictions on the
ability of Singapore financial institutions to extend Singapore dollar facilities to non-residents.
In Singapore, takeovers and mergers are regulated by a combination of statutory and non-statutory
rules. The principles, procedures and rules that govern the conduct of takeovers are set out in the
Singapore Code on Takeovers and Mergers (Code) which is non-statutory in nature. The body that
administers and polices the provisions of the Code is the Securities Industry Council (SIC). The Code
is issued by the MAS pursuant to the power conferred upon it by the Securities and Futures Act (SFA).
The rules concerning compulsory acquisitions (or minority squeeze-outs) are set out in the
Companies Act (see section 12 below).
All persons, whether natural or artificial, including foreign corporations, are obliged to comply with
the Companies Act, the SFA and the Code.
In addition, where the target company’s shares are quoted on the Singapore Exchange Securities
Trading Limited (SGX), the provisions of the SGX Listing Manual regarding takeovers and mergers
must be complied with. The provisions of the SGX Listing Manual are regulated by the SGX.
A person who has an interest in 5 per cent or more of the voting shares of a company listed on the
SGX (a Substantial Shareholder) is required to give notice in writing to the company and the SGX
stating, inter alia, his name and address within two business days of becoming a Substantial
Shareholder. The Substantial Shareholder is also required to give notice of any subsequent 1 per
cent change in shareholding interest within two business days after becoming aware of such a
change. Such notice must specify the name and address of the Substantial Shareholder, the date
of the change and the circumstances leading to that change. The company is in turn required to
make an immediate announcement to the SGX of a person becoming a Substantial Shareholder, or
of any change in shareholding interest so notified.
Whether a memorandum of understanding relating to the acquisition of shares needs to be disclosed

largely depends on the parties involved, the nature of the acquisition and the nature and terms of the
memorandum of understanding. The general rule regarding corporate disclosure policies as set out

in the SGX Listing Manual is that a listed company must disclose information (i) necessary to avoid
the establishment of a false market in its securities; or (ii) that would be likely to have a material effect
on the price or value of securities of that company. The SGX Listing Manual permits exceptions from
the requirement to make immediate disclosure in certain limited circumstances (such as when a
reasonable person would not expect the information to be disclosed, the information is confidential,
or the information concerns an incomplete proposal or negotiation). Depending on the
circumstances a memorandum of understanding may fall within these exceptions.
(a) A memorandum of understanding between individuals/companies not listed on the SGX
A memorandum of understanding entered into between individuals/companies not listed on the

SGX for the sale and acquisition of shares generally does not require disclosure, as it is effectively
a private arrangement between the parties. However, where the proposed acquisition relates to
shares listed on the SGX, the signing of a memorandum of understanding may give rise to
announcement or notification obligations in certain circumstances including:
• where it indicates a firm intention to make a takeover offer; and
• where it gives rise to a notifiable substantial shareholding interest or change in such an interest.
(b) A memorandum of understanding entered into with a company listed on the SGX for the issue of new
shares in the company
A company listed on the SGX is required to keep its shareholders and the SGX informed, as soon
as reasonably practicable, of any information which might reasonably be expected to materially
affect the price of its securities. A memorandum of understanding that relates to the subscription
of shares of a listed company and constitutes an agreement in principle between the parties should
be disclosed, unless one of the exemptions referred to above applies.
(c) A memorandum of understanding entered into by a company listed on the SGX for the sale or
purchase of existing shares in another company
The SGX Listing Manual requires a listed company to make an announcement if it acquires or
disposes of any shares (including shares of another listed company) in certain circumstances, such
as if the acquisition would result in the listed company holding 10 per cent or more of a listed
company or would result in a company becoming a subsidiary or associated company of the listed
company. Announcement obligations will also arise if the aggregate consideration given or received
compared with the capitalisation of the listed company exceeds 5 per cent of the net assets (after
deducting loan capital and amounts set aside for future taxation) represented by such shares
exceed 5 per cent of the audited consolidated net tangible assets of the listed company. Whether
or not a memorandum of understanding relating to a potential acquisition or disposal of shares that
meets the above criteria needs to be disclosed depends on whether any of the exceptions
mentioned above apply.

Other than the ownership restrictions and the foreign shareholding restrictions of certain listed
companies stated in section 1 above, and the requirement to make a takeover offer stated in
section 9 below, there are no rules restricting the acquisition of shares in a listed company.
8 What are the key conditions attached to a takeover offer?
If the offeror and persons acting in concert with it hold less than 50 per cent of the voting rights
before making the offer, the takeover offer is conditional upon the offeror having received
acceptances which, together with shares acquired or agreed to be acquired before or during the
offer, would result in the offeror and persons acting in concert with it holding more than 50 per
cent of the voting rights. Voluntary general offers may be subject to other conditions provided
that fulfilment of the conditions is not dependent on the subjective interpretation or discretion
of the offeror.
A mandatory general offer is always subject to the 50 per cent condition mentioned above, but
should not be subject to any other conditions. However, an offeror is allowed to attach conditions
to an agreement, the satisfaction of which would trigger a mandatory general offer obligation (for
example, by including conditions in a share acquisition agreement) if the conditions are clearly
stated, are objective and reasonable and the time for their fulfilment is specified in the agreement.
For example, the making of a takeover offer may be subject to the shareholders’ approval for the
issue of new shares.
A mandatory general offer obligation is triggered when a person or corporation:
• acquires shares which (taken together with shares held or acquired by persons acting in
concert with him or it) carry 30 per cent or more of the voting rights of a public company; or
• together with persons acting in concert with him or it, holds between 30 and 50 per cent of
the voting rights, and such person, or any persons acting in concert with him or it, acquires
in any six-month period additional shares carrying more than 1 per cent of the voting rights.
Persons acting in concert comprise individuals or companies who cooperate to obtain or

consolidate control of a company pursuant to an agreement or understanding.
The minimum price for a mandatory general offer is the highest price (excluding stamp duty and
commission) paid by the offeror and persons acting in concert with it for shares of the target
company during the offer period and within six months prior to its commencement. The minimum

price for a voluntary general offer is the highest price (excluding stamp duty and commission) paid
by the offeror and persons acting in concert with it for shares of the target company during the offer
period and within three months prior to its commencement.
Subject to any provisions to the contrary in a company’s articles of association, a 75 per cent
shareholder achieves effective control of a company, as such shareholder is able to have all
shareholders’ resolutions passed at a meeting of the company, whether ordinary resolutions (which
require a simple majority of members attending and entitled to vote) or special resolutions (which
require a 75 per cent majority).
Special resolutions (which require a 75 per cent majority) include resolutions to amend the articles
of association, to reduce the capital of the company (subject to the court’s approval) and to approve
the company’s giving of financial assistance in connection with the acquisition of its shares.
The power of compulsory acquisition is only available to a company, not to an individual. If a

company acquires 90 per cent of the shares of another company pursuant to a takeover (excluding
any shares held, or deemed to be held, by the purchaser or its related corporations at the time of
the offer), it may by notice, which must be sent within two months of the purchaser achieving the
90 per cent threshold, require that the dissenting shareholders sell out to it. However, the
shareholders whose shares are thus to be acquired may apply to the court within one month of
receipt of the notice from the purchaser, to have the acquisition stopped. If no application is made,
the purchaser is bound to acquire the minority interest.
Depending on various factors (for example, the duration of the offer period and the date of dispatch
of the offer document) and excluding the time taken to effect a compulsory acquisition, a takeover
in Singapore could take between one and a half months and three months. An indicative timetable
for a voluntary general offer under the Code is set out on page 72.
14 What alternatives are there for achieving control?
An alternative to making a takeover offer would be to achieve control through a scheme of

arrangement under section 210 of the Companies Act.
Typically, such a scheme of arrangement would involve the listed company, its shareholders and the
acquirer. It is an approach that can only be used if the target listed company is inclined to cooperate.
The scheme of arrangement may provide that all the issued shares in the listed entity will be cancelled

and new shares issued to the acquirer, or it may provide for the transfer of the existing shares to the
acquirer. In consideration for the cancellation or transfer of their shares in the listed entity, the
shareholders will either receive a cash payment from the acquirer, or receive shares in another company.
Stamp duty may be payable (unless the shares are listed and traded on the SGX).
The scheme of arrangement has to be approved by the members of the company convened at the
direction of the court. The scheme of arrangement will have to be approved by a majority in number
representing not less than 75 per cent in value of the relevant class of shares present and voting at
the meeting. Shares held by the acquirer or persons having a common interest with the acquirer
are generally excluded from constituting the relevant class of members whose approval is to be
sought. If the scheme involves cancellation of shares it will have to satisfy additional requirements
applicable to the reduction of capital.
After the scheme of arrangement has been approved by the members, it must be sanctioned by
the Singapore Court and a copy of the court order must be filed with the Singapore Registry of
Companies before it is effective and binding on all members of the relevant class.
The SGX may agree to an application by a listed company to delist if the following criteria are fulfilled:
(a) the listed company convenes a general meeting to obtain shareholders’ approval for the delisting;
(b) the resolution to delist the company has been approved by a majority of at least 75 per cent
in nominal value of the shares held by the shareholders present and voting, on a poll, either
in person or by proxy at the meeting (the listed company’s directors and controlling
shareholder need not abstain from voting on the resolution);
(c) the resolution has not been voted against by 10 per cent or more in nominal value of the
shares held by the shareholders present and voting, on a poll, either in person or by proxy at
the meeting;
(d) a reasonable exit alternative, which should normally be in cash, should be offered to
(i) the listed company’s shareholders and (ii) holders of any other classes of listed securities to
be delisted. This provision will not apply to the holders of securities which are unlisted at the
time; and
(e) the listed company should normally appoint an independent financial advisor to advise on the
exit offer.
The requirements listed in paragraphs (a), (b) and (c) do not apply to a delisting pursuant to a
voluntary liquidation or scheme of arrangement.

There are no antitrust laws in Singapore. However, certain industries (including the
telecommunications sector, public utilities, media and postal services industries) are subject to
regulations which restrict anti-competitive behaviour.
The United States-Singapore Free Trade Agreement (FTA) was signed on 6 May 2003. The FTA commits
Singapore to enacting legislation regulating anti-competitive business conduct by January 2005.
(a) Shares listed on the SGX and traded through the Central Depository (Pte) Limited (CDP)
Shares listed and traded on the SGX are settled through the CDP. Stamp duty is not payable in
respect of the trading of such shares.
(b) Shares listed on the SGX but not traded through the CDP
Persons holding shares in securities accounts with the CDP may withdraw the shares from the CDP
and hold them in the form of physical share certificates, which may be transferred in accordance
with the articles of association of the company. Stamp duty is payable at S$0.20 (Singapore dollars)
for every S$100, or any part thereof, on the amount of consideration for or market value of the
shares, whichever is higher. Unless determined otherwise by the parties to the transfer, the stamp
duty will be borne by the transferee.
(c) Shares not listed on the SGX
A transfer of shares in Singapore of a Singapore-incorporated company not listed on the SGX will
attract stamp duty at the rate of S$0.20 for every S$100 or any part thereof, on the purchase
consideration for the shares or the value of the shares, whichever is higher. The stamp duty is borne
by the purchaser, unless there is an agreement to the contrary.
(d) Taxes
Under current Singapore tax law, there is no tax on capital gains. Any profits from the disposal of shares
are generally not taxable unless the seller is regarded as carrying on a business of trading in shares.
(e) Carrying forward of unabsorbed losses and unutilised capital allowances
For any unabsorbed losses or capital allowances to be carried forward, the shareholders of a
company must remain substantially the same (ie generally, at least 50 per cent of the shares must
remain in the same hands).

Indicative timetable for a voluntary general offer
Date Particulars
Announcement Offeror notifies offeree of firm intention to bid
Day 0 Posting date of offer document: — not earlier than 14 days but not later than 21 days
from date of announcement
Day 14 Last day for offeree s board to issue a circular containing its recommendation to its
shareholders and the advice of the independent advisors
Day 28 First permitted closing date:

if successful: press announcement that the offer is unconditional
if unsuccessful: board meeting of bidder to consider extending and/or improving the offer
Day 39 Last day for offeree to release new information
Day 42 Assuming closing date is Day 28, right of withdrawal of acceptances arises if the offer is
not unconditional
Day 46 Last day for voluntary revision of the offer
Day 60 Last day for the offer to become or to be declared unconditional
Day 81 Last day for settlement of consideration if offer is declared or becomes unconditional
on Day 60
Contact: Elaine Williams, David Simpson, Gary Pryke
20 Raffles Place #18-00 Email: elaine.williams@freshfields.com
Ocean Towers david.simpson@freshfields.com
Singapore 048620 gary.pryke@drewnapier.com
Tel: + 65 6535 6211
Fax: + 65 6533 5007 / 8007 / 9007

South Korea Kim & Chang
Since 1 January 1994, the Korean government has been gradually liberalising its foreign investment
laws so that most areas are now open to foreign investment. Currently, except for a certain limited
number of industries (eg telecommunications and commercial banks) and certain listed companies
of national importance, foreign ownership of shares is freely allowed, although certain procedural
and administrative requirements still exist.
The principal law governing foreign investment in Korea is the Foreign Investment Promotion Law
(FIPL). The Securities and Exchange Law (SEL) contains restrictions on the foreign ownership of
shares of certain listed companies of national importance. Finally, although it does not restrict
foreign ownership of shares directly, the Alien Land Acquisition Law places certain restrictions on
foreign ownership of land which may have indirect implications on the foreign ownership of shares.
Foreign investment is generally administered by the Ministry of Commerce, Industry and Energy
(MOCIE), although other ministries and organisations may be involved in certain areas. Matters
related to restrictions under the SEL are administered by the Financial Supervisory Commission
(FSC) and its enforcement organisations.
Under the FIPL, a report must be submitted to a foreign exchange bank before any acquisition of
existing or newly issued shares. The acquisition can take place after the foreign exchange bank has
issued its receipt, which in practice takes one or two days. The acquisition of shares of a company
involved in the national defence industry will require approval from the MOCIE, which generally takes
no more than 15 days.

South Korea • Kim & Chang
The FIPL and Foreign Exchange Transactions Law regulate the repatriation of profits. Broadly, profits
originating from a foreign investment which was made in compliance with the relevant laws and regulations
can be freely repatriated as long as certain, fairly routine, procedural requirements are satisfied.
In general, if an acquisition of shares is made under the FIPL, there are no limitations on the number
of shares that can be acquired. However, in addition to restrictions under the FIPL, acquisitions of
shares of a listed company are regulated by the SEL, which applies to both foreign and domestic
acquirers (see below). The SEL is enforced by the FSC and the Financial Supervisory Service.
The SEL requires any person (together with those having special relations with such person and those
acting in concert with such person) holding 5 per cent or more of equity securities of a company listed
on the KSE or KOSDAQ to report details of such holdings to the FSC and the KSE (or KOSDAQ, as
the case may be) within five days of attaining that shareholding position. Thereafter, an additional
report is to be filed within five business days of any change in such holdings of 1 per cent or more of
the total issued voting shares of the listed company. ‘Shareholding’ includes legal and beneficial
ownership and certain other categories of deemed shareholdings, such as a right to purchase shares.
In addition to the above 5 per cent reporting requirement, if the holdings reach 10 per cent or more,
a report should be filed within 10 days and any subsequent change in shareholding of any amount
reported on a monthly basis by the tenth day of the following month.
Whether a memorandum of understanding relating to the acquisition of shares needs to be

disclosed is not entirely clear and depends on the legal nature of the document. Even if a
memorandum of understanding is in the form of a simple expression of intent without any details of
terms and conditions of the transaction and does not purport to have any binding effect, the
company may be required to disclose its existence or contents if requested by the KSE.
Various rules as discussed above and below apply to the acquisition of shares in a listed company.
Where an investor intends to acquire more than 5 per cent of the shares of a listed company outside
of the KSE or KOSDAQ from 10 or more shareholders within a six-month period, a tender offer is
mandatorily required. In these circumstances, a tender offer statement must be filed with the FSC

Kim & Chang • South Korea
and various procedural requirements apply. The offeror may not proceed with the proposed
purchase of shares until three days have elapsed following completion of the reporting steps. The
tender offer period must extend for a minimum of 20 days and a maximum of 60 days from the
expiry of the three-day waiting period. The offeror is prohibited from purchasing shares in the
company in question otherwise than through the tender offer until the tender offer period expires,
and from making another tender offer within one year, except in certain limited circumstances.
Generally, the offeror may not withdraw a tender offer once it has commenced. Withdrawals of
tenders by offerees are freely permitted at all times during the offer period and the offeror may not
assert any claims for damages resulting from withdrawals of tendered shares.
The offeror should purchase, in accordance with the terms and conditions and method of purchase
as set out in the tender offer report, all shares tendered for sale on the date immediately following
the expiry of the tender offer period. Certain exceptions to this purchase requirement may apply
when one of the following has been specified in the tender offer report and public notice:
(i) that if the total number of tendered shares is less than the total intended to be purchased
pursuant to the tender offer, the offeror will not purchase any of the shares tendered; or
(ii) that if the total number of tendered shares exceeds the number intended to be purchased
pursuant to the tender offer, the offeror will purchase pro rata from tendering holders the
number of shares the offeror intended to purchase.
As mentioned above, when an acquirer wishes, during a period of six months, to purchase 5 per
cent or more of the shares in a listed company outside the KSE or KOSDAQ from 10 or more
shareholders, a public tender offer is mandatorily required, subject to certain exceptions.
Acquisitions of shares in breach of this requirement may lead to criminal liabilities and various
sanctions, such as a disposal order and loss of voting rights.
There are no restrictions on the minimum price for a tender offer. However, the offeror cannot offer
different prices in the same tender offer.
Typically, special resolutions for important corporate acts (eg mergers, transfers of important assets or
businesses, the dismissal of directors and amendments to the articles of incorporation) require the
affirmative vote of two-thirds of the shareholders present at the meeting and representing one-third of the
outstanding shares. Thus, unless the articles of incorporation of a company provide for a higher threshold,
it is generally understood that a 75 per cent shareholder will achieve effective control of a company.

South Korea • Kim & Chang
No.
Once an investor acquires a majority of the shares of a listed company, it will still typically take about
six to eight weeks to achieve actual control of the company by passing the necessary
resolutions through a shareholders’ meeting. If the management of the target company is not
cooperative, the investor may need to seek a court order, in which case it will take much longer
to achieve full control.
It may be possible for an investor not holding the majority of the shares to have effective control of
the management of a company through an arrangement with other shareholders. However,
because such an arrangement (eg a voting trust) would be a mere contractual arrangement without
the benefit of specific performance as a viable remedy, it might not be reliable in extreme situations.
In order to delist a company voluntarily, the minority shareholding ratio of the company must
generally have fallen below 10 per cent of the outstanding shares.
An application for delisting may then be filed with the KSE after obtaining the shareholders’ approval
for delisting. In addition, the company must give the existing shareholders, who do not want to
remain shareholders after the company is delisted, an opportunity to sell their shares. The KSE has
the discretion to accept or reject applications for voluntary delisting, except in cases when
mandatory delisting requirements, such as the liquidation of a company or a failure to meet the
minimum share diversification ratio for two consecutive years, apply.
16 Are there any anti-competition laws?
Under the Monopoly Regulation and Fair Trade Law (FTL), a corporation whose assets or sales
equal or exceed KRW100 billion (South Korean won) must file a report of the establishment of a
business combination to the Korean Fair Trade Commission (FTC) within 30 days from such
establishment. There are various types of business combinations triggering such reporting
requirement. With regard to the acquisition of existing or new shares in a company that is already
established, such reporting requirement is triggered in the case of an acquisition of 20 per cent (or
15 per cent in the case of a listed company) or more of the total issued and outstanding
voting shares of a company. The report should be filed within 30 days from the date of
delivery of the share certificates, or (where share certificates are not issued) the date of payment of

Kim & Chang • South Korea
the purchase price. The KRW100 billion requirement is an amount that is applicable to the
consolidated total assets, or the consolidated annual sales, of the acquirer and all affiliated
companies thereof, whether domestic or foreign.
The FTC has 30 days to determine whether or not to accept the report and, if necessary, may extend
the review period by 60 days. If the FTC views the transaction as having anti-competitive effects, it
may take action as necessary (eg the issuance of a suspension order or a share disposal order).
A person who transfers shares on the KSE or KOSDAQ is subject to a securities transaction tax
(0.3 per cent of transaction price). In the case of a transaction outside of the KSE or KOSDAQ, the
rate is 0.5 per cent of the transaction price. The transferor may also be required to pay a tax of 27.5
per cent on any capital gains or 11.5 per cent of the transfer price, whichever is smaller, unless the
tax is exempted under an applicable tax treaty.
Kim & Chang
Contacts: KS Jeon, Douglas Lee, CS Hwang
Seyang Building Tel: + 822 3703 1100 / + 822 3703 1114
223 Naeja-Dong Fax: + 822 737 9091/3
Chongro-Ku Email: ksjeon@kimchang.com
Seoul dlee@kimchang.com
Korea cshwang@kimchang.com

Taiwan Lee and Li
Foreign investments are regulated by the Statute for Investment by Foreign Nationals (SIFN).
Pursuant to the SIFN, a ‘Negative List’ is promulgated by the Executive Yuan, which sets out
business categories that are either closed to foreign investments, or are subject to restrictions on
foreign ownership. The scope of the ‘Negative List’ has been reduced over the years and it currently
applies to only a limited number of businesses, such as telecommunications, broadcasting and
television, inland transportation, mining, banking and insurance. In relation to listed companies, see
also section 7 below.
In addition to the various laws governing regulated industries subject to foreign ownership, the SIFN
provides that any foreign investor whose investment project does not fall under the ‘Negative List’
should file a foreign investment application (FIA) with the Investment Commission (IC) of the Ministry
of Economic Affairs (MOEA) in order to be entitled to the various benefits available under the SIFN.
When reviewing the FIA, the IC will ensure that that the FIA application is made in compliance with
the restrictions on foreign ownership. Share transfers involving foreign nationals are also subject to
the review and approval of the IC. An approval from the IC would also be required if a company
having a foreign shareholding exceeding one-third of the outstanding shares or capital contribution,
reinvests in other companies.
Note that the restriction on foreigners holding, individually or jointly, more than 50 per cent of the
capital of a limited company, or constituting a majority of the number of shareholders of a company
limited by shares, has been abolished by the amendment to the Company Law in November 2001.
In relation to listed companies, see section 7 below.

Lee & Li • Taiwan
Foreign investors who wish to secure the privileges provided for in the SIFN must file an FIA with
the IC. If the company in question is located in a science-based industrial park (in Hsin Chu City or
Tai-Nan County) or in an export processing zone (in Kaohsiung City or Taichung City), the FIA is filed
with the Science-based Industrial Park Administration (SIPA) or the Export Processing Zone
Administration (EPZA) of the MOEA, instead of with the IC. Normally, the IC or the EPZA grants
approval within one or two weeks of filing. It takes much longer to obtain the SIPA approval,
because companies located in a science-based industrial park are eligible for more tax incentives
and the spaces available in the park are limited. When considering an application, the SIPA reviews
a business plan submitted by the investors and, if necessary, interviews the investors.
The SIFN provides a statutory guarantee to foreign investors with respect to the repatriation of their
capital investments and profits generated from these investments.
Takeovers and mergers of listed companies are governed by the Company Law in general, the Law
Governing the Merger of Financial Institutions (promulgated in 2000 to regulate mergers of financial
institutions), the Merger and Acquisition Law (as newly promulgated in 2002), the Securities and
Exchange Law (SEL) and securities related rules and regulations. In particular, the merger and
acquisition of listed companies is governed by the Guidelines Governing the Acquisition and
Disposal of Assets by Listed Companies promulgated by the Securities and Futures Commission
(SFC) in 2002. According to these guidelines, a listed company should implement an internal
procedure rule for the acquisition and disposal of assets, such as during a merger, spin-off,
acquisition or share transfer. Under the guidelines, the procedure rule must be implemented in
accordance with specific requirements and should cover such matters as asset evaluation,
transactional decision, public disclosure and internal control. If the amount of the investment
exceeds 20 per cent of the listed company’s paid-in capital or NT$300,000,000 (Taiwan dollars),
the listed company must report to the SFC and make a public announcement of the relevant
information within two days from the date of the investment’s occurrence.
Unless otherwise specifically exempted or a special approval obtained from the SFC, all the shares
of listed companies must be traded through the Taiwan Stock Exchange (TSE) according to the
Securities and Exchange Law. The SFC, under the jurisdiction of the Ministry of Finance, is the
agency responsible for administering and enforcing securities laws.

Taiwan • Lee & Li
The acquisition of listed shares can be made through a tender offer pursuant to the Regulations
Governing Tender Offers of Securities of Listed Companies (the Tender Offer Regulations) last
amended by the SFC in 2002.
A ‘tender offer’ means an offer launched by a person (the bidder) to purchase the securities of a
listed company (the target), and is made directly to the target’s shareholders. The offer can be for
cash, listed securities (the SFC is yet to approve any case involving foreign securities) or a
combination thereof and on an actual delivery basis.
Mergers of listed companies can take place in accordance with the relevant provisions of the Company
Law and the Merger and Acquisition Law, provided that a report is submitted to the SFC on the same
day the merger proposal has been adopted by the respective boards of the merging companies.
A director, supervisor, manager or shareholder holding more than 10 per cent of the total
outstanding shares of a listed company can only sell or transfer his shares in the company three
days after he has reported the intended sale or transfer to the SFC, except where the number of
shares to be transferred on each trading day is less than 10,000. Under the SEL a listed company
must report to the SFC and make a public announcement regarding the class, number and par
value of the shares held by its directors, supervisors, managers and shareholders that hold more
than 10 per cent of the total outstanding shares. A person is also required to report to the SFC any
acquisition, whether individual or joint with others, of more than 10 per cent of the total outstanding
shares of a listed company, within 10 days following such an acquisition.
A memorandum of understanding (MOU) relating to the acquisition of shares may need to be

disclosed. According to the Procedure Rules for the Verification and Disclosure of the Material
Information of TSE Companies, any material MOU should be disclosed prior to the opening of trading
hours on the next business day after the execution of the MOU. However, the Procedure Rules for
the Verification and Disclosure of the Material Information of Over-the-Counter Companies
(promulgated by Gre-Tai Securities Market) specifically excludes the disclosure requirement for the
MOUs relating to mergers and spin-offs. In the case of a merger of listed companies, some important
information regarding the merger, eg the purpose and benefits of the merger, the stock exchange
plan and calculating basis, the timetable and the portfolios of the parties to be merged, shall be
disclosed after the merger proposal has been adopted by the respective boards of the companies.
Under the Regulations Governing Securities Investment by Overseas Chinese and Foreign
Nationals, qualified foreign institutional investors (QFIIs) and general foreign investors (GFIs) are

Lee & Li • Taiwan
allowed to make direct portfolio investments in listed companies, subject to certain restrictions,
such as not being able to invest in the businesses, or being able to only make limited investment in
businesses listed on the ‘Negative List’. Investments made by GFIs is subject to a ceiling of US$50
million per year (for corporate investors), or US$5 million (for individual investors), in listed
companies, while the previous ceiling imposed on QFIIs (ie US$3 billion) has been lifted pursuant to
SFC rulings issued in July 2003.
General restrictions on shareholding by QFIIs or GFIs have been abolished. Under these restrictions,
investments by a single QFII or GFI could not exceed 50 per cent of the total outstanding shares of
a listed company and aggregate investments in a company by all QFIIs and GFIs could not exceed
50 per cent of the total outstanding shares of the company.
After the amendment of the Tender Offer Regulations in 2002, the requirement imposed on the
bidder to obtain SFC approval has been abolished. However, a bidder still needs to make a filing of
the information prescribed by the SFC prior to launching the tender offer, unless otherwise
specifically exempted. The target must also submit the prescribed information to the SFC within
seven days after the notification of such tender offer by the bidder. The tender offer period should
be between 10 and 50 days and cannot be terminated or amended except for very limited reasons.
When the volume of shares tendered exceeds the offered number, the bidder is to purchase the
shares from all the sellers on a pro rata basis. A bidder is prohibited from purchasing shares of the
target during the period from the date of filing the application for a tender offer with the SFC until
the end of the tender offer period.
Yes, there is a level at which a mandatory general offer is required. Any person, individually or jointly
with others, who intends to acquire more than 20 per cent of the shares of a listed company within
a 50-day period, is obligated to launch a mandatory tender offer.
No.
Yes. Under Company Law, material corporate matters, such as dissolutions and mergers, require a
quorum of two-thirds of the outstanding shares at a shareholders’ meeting with a simple majority
vote. In addition, for listed companies, the quorum of two-thirds can be replaced by a quorum of
50 per cent with affirmative votes equalling at least two-thirds of the voting shares carried by the
shareholders attending the meeting.

Taiwan • Lee & Li
No. However, if a purchaser has acquired 90 per cent or more of the total issued shares in a
target, the purchaser may merge the target into the purchaser by conducting a short-form
merger and effectively squeeze out the minority by making a cash payment to the minority as
the merger consideration.
According to the Tender Offer Regulations, the period for a tender offer cannot be shorter than
10 days or longer than 50 days. The bidder may apply to the SFC for an extension of up to 30 days,
if sufficient reasons exist or if another person wishes to compete with the bidder during the tender
offer period. The competing bid must be submitted to the SFC at least five days prior to the expiry
date of the tender offer period.
It is possible for two or more shareholders of a listed company to reach an agreement with respect
to exercising their voting rights at a shareholders’ meeting. A common practice for enhancing voting
rights at a shareholders’ meeting is to solicit proxies from other shareholders. Pursuant to Company
Law, all meetings of shareholders and boards of directors must actually take place. Any shareholder
who is not able to attend a shareholders’ meeting may issue a proxy to another person (who may
or may not be a shareholder) to attend the meeting on his behalf. The proxy solicitation procedures
for a listed company are regulated by the SFC. It should be noted, however, that under Company
Law, voting rights represented by a proxy or proxies that exceed 3 per cent of the total outstanding
shares of the company will be ineffective if two or more proxies are issued to the same person.
Another alternative is to reach a voting agreement or to set up a voting trust pursuant to the Merger
and Acquisition Law.
According to the delisting rules promulgated by the TSE and Gre-Tai Securities Market, approval from
the board of directors’ or shareholders’ meeting is required to delist a company. The directors or
shareholders who affirm the delisting proposal should represent the shareholding of at least two-thirds
of the outstanding shares. In the board of directors’ or shareholders’ meeting, the directors and/or
supervisors of the company should undertake to purchase the company’s shares (ie by presenting a
written undertaking) for a period not less than three months with the purchase price not lower than
the shares’ weighted market price during the one month before the respective board of directors’ or
shareholders’ meeting. A TSE company should file a delisting application with the TSE for approval by
the SFC and TSE, and an Over-the-Counter company should file a delisting application with the Gre-
Tai Securities Market to be approved by the SFC and the Gre-Tai Securities Market.

Lee & Li • Taiwan
In addition to the regulations under the SEL for securities trading in the Republic of China, the Fair
Trade Law (FTL) contains certain requirements for a transaction that involves the taking over or
consolidation of a business if the transaction meets any of the specified conditions. A transaction
is deemed a ‘combination’, if one company holds or acquires shares or capital contributions
representing more than one-third of the total voting shares or the total capital stock of the target
company. If any of the following thresholds is met, a notification is required to be filed with the Fair
Trade Commission:
(a) as a result of a combination, the market share of the combined entity reaches one-third;
(b) one of the companies involved in the combination has a market share of one-quarter; or
(c) the sales volume of one of the companies participating in the combination exceeded
NT$10 billion in its most recent fiscal year and the other participating company’s sales
volume exceeded NT$1 billion; or for a combination of financial institutions, the sales volume
of one exceeded NT$20 billion in its most recent fiscal year and that of the other exceeded
NT$1 billion.
The transfer of shares results in the payment of a securities transaction tax at 0.3 per cent of the
transfer price, which is borne by the transferor and withheld by the transferee from the purchase
price and paid to the tax authorities on the date of transfer or the following day. Capital gains tax is
presently suspended. No stamp duty is payable.

Taiwan • Lee & Li
Recent developments
The Republic of China’s government continues to liberalise its foreign investment policies and
regulations. For instance, cable and satellite television businesses and automobile route freight
transport businesses have been opened to foreign investment. The Ministry of Transportation and
Communications amended the Telecommunication Law in 2002 to loosen the percentage cap on
foreign nationals’ shareholding in telecommunications companies. The maximum limit of direct
foreign ownership allowed in a Type I telecom enterprise has been increased from 20 per cent to
49 per cent. In addition, among the SFC rulings promulgated during July 2003, the liberalisation of
restrictions on investments by QFIIs includes the lifting of (i) the US$100 million (or US$50 million for
securities firms) minimum requirement for the investor’s asset value; and (ii) the two-year period for
inward remittance of the approved investment capital. The SFC also indicated that further
liberalisation would include (i) classifying foreign investors simply into two categories, individual
investors and institutional investors; and (ii) further streamlining the application process.
In addition, the intention of the Merger and Acquisition Law, promulgated in 2002, was to remove
obstacles and provide additional incentives for and privileges to companies proceeding with a merger
or acquisition, such as simplified procedures, allowance of more complicated transaction structures,
like share exchange and spin-offs, flexible employment transfer mechanisms and tax benefits.
Lee and Li
Contacts: Sophia H.H. Yeh, CV Chen, Kwan-Tao Li
7th Floor Tel: + 886 2 2715 3300 (Ext. 2245)
201 Tun Hua N Road Fax: + 886 2 2713 3966
Taipei 105 Email: sophiayeh@leeandli.com
Taiwan, ROC cvchen@leeandli.com
ktli@leeandli.com

Thailand Freshfields Bruckhaus Deringer
Restrictions on foreign ownership of shares depend on the activities of the relevant company and
whether it owns land. In addition, there are some industry specific restrictions as described in
section 2 below.
Foreign Business Act
The principal statutory restriction on foreign investment in Thailand is the Foreign Business Act B.E.
2542 (1999) (FBA).
The FBA restricts or prohibits a non-Thai national (including a company of which at least half of the
share capital is owned by non-Thai nationals) from engaging in certain businesses unless:
(a) the business has obtained US Treaty status (see discussion under ‘US Treaty’ section below),
or permission to operate its business under the Industrial Estate Authority of Thailand Act, or
the benefit of promotion by the Board of Investment under Thailand’s Investment Promotion
Act; or
(b) approval is obtained from the Cabinet or the Director-General of the Department of Business
Development.
In determining whether a company is considered to be a non-Thai national, the number of shares

held by non-Thai nationals is considered, rather than the rights attached to such shares.
US treaty
Currently, the FBA does not apply to United States nationals and juristic persons (being companies
of which more than half of the issued shares are owned by United States nationals) registered as
such under the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the
United States of America, 1966 (the Treaty). United States nationals and juristic persons are

Thailand • Freshfields Bruckhaus Deringer
permitted to establish or invest in companies engaged in most businesses in Thailand on the same
basis as Thai nationals, provided the Treaty’s tests for United States nationality (essentially, more
than half of the issued shares of the relevant company must belong to Americans) are satisfied.
There are no similar agreements between Thailand and any other country.
A number of businesses such as accounting, legal services, telecommunications, transportation,

fiduciary functions, banking (deposits only) and domestic trading of local agricultural products are
expressly excluded from the Treaty.
The future of the Treaty is not certain. The Thai government is reviewing the status of the US Treaty
and has not yet reached a final decision as to whether the Treaty should be extended or ended.
Land
Subject to a limited number of exceptions, the Land Code prohibits a non-Thai national (including
a company of which more than 49 per cent of its share capital is owned by non-Thai nationals) from
owning land. In determining whether a company is considered to be a non-Thai national for the
purpose of the Land Code, the number of shares held by non-Thai nationals is considered, rather
than the rights attaching to such shares. The circumstances in which non-Thai nationals may own
land include:
• if permitted by the terms of a promotion granted by the Board of Investment; and
• if the land is located in an industrial estate under the control of the Industrial Estate Authority
of Thailand.
In addition to the FBA and the Land Code, there are ownership and foreign ownership restrictions
contained in other industry specific legislation.
Banking
Under the Commercial Banking Act:
• at least 75 per cent of the issued shares of a Thai commercial bank must be held by Thai
nationals; and
• no investor, other than certain organisations such as government agencies and state enterprises,
can hold more than 5 per cent of the issued shares of a commercial bank. Shares acquired in
excess of such 5 per cent threshold cannot be voted and do not carry a right to dividends.
These restrictions may be, and have in the past been, relaxed by the Minister of Finance on a case-
by-case basis.

Freshfields Bruckhaus Deringer • Thailand
Insurance
Under the Life Insurance Act and Non-Life Insurance Act:
• at least 75 per cent of the issued shares of an insurance company must be held by Thai
nationals; and
• shares acquired by non-Thai nationals in excess of such 25 per cent threshold cannot be
voted and do not carry a right to dividends.
This restriction does not apply to branches of foreign insurance companies.
Draft legislation has been proposed, but not yet enacted, to allow foreign participation in life and
non-life insurance companies up to 49 per cent of the issued shares of the relevant company.
Finance companies
The Act on Undertaking of Finance Business, Securities Business and Credit Foncier Business provides
that at least 75 per cent of the issued shares of a finance company must be held by Thai nationals.
These restrictions may be, and have in the past been, relaxed by the Minister of Finance on a case-
by-case basis.
Telecommunications
For all but one category of telecommunications business licence, the Telecommunications Business
Act (TBA) requires that at least 75 per cent of the issued shares of a company to which a
telecommunications licence is granted must be held by Thai nationals. Draft legislation has been
proposed to reduce this requirement such that foreign ownership of not more than 50 per cent of
the issued shares of a telecommunications company would be permitted. As the National
Telecommunications Commission, the regulatory body contemplated by the TBA, has not yet been
established, no telecommunications licences have yet been issued. Presently, telecommunications
companies operate their businesses pursuant to government granted concessions, which enable
them to operate notwithstanding that less than 75 per cent of their issued shares may be held by
Thai nationals. Furthermore, Thailand has announced to the World Trade Organisation that its
telecommunications market will be open for full competition by local and foreign operators by 2006.
Others
It is quite common for Thai companies (including listed companies) to have foreign shareholding
restrictions in their articles of association.
The time required for approval of foreign participation in a non-regulated business, to the extent that
approval is available, varies. An approval period of approximately three months from the date the
required documents are complete and submitted is, however, typical.

Foreign participation in excess of the ceiling on foreign ownership in commercial banking or in

finance businesses requires approval from the Ministry of Finance. Since this approval is granted on
a case-by-case basis, the timing may vary.
As a general rule, all matters involving foreign currency are regulated by, and require the permission
of, the Bank of Thailand. Since 1990, however, the Bank of Thailand has considerably relaxed its
foreign exchange control. At present, many transactions in foreign currency can be performed
virtually without restriction, and only a few require approval from the Bank of Thailand.
Outward remittance
The Bank of Thailand has authorised commercial banks (including supra-finance companies, Thai
banks and full branches of foreign banks in Thailand) to approve certain transactions on its behalf
in accordance with its rules and regulations. In practice, commercial banks will, as a matter of
course, approve the purchase and remittance of foreign currencies for most types of transactions,
provided that a request for approval is accompanied by the requisite supporting documents.
Inward remittance
The inward remittance of money for investment in Thailand does not need to be registered or
authorised, although it is desirable to keep the evidence of any inward remittance to facilitate any
subsequent outward remittance. However, foreign currency brought into Thailand must be sold to
a commercial bank within seven days. It cannot be maintained in a foreign currency account of a
Thai resident, unless the Thai resident has an obligation to remit the foreign currency in the amount
so deposited to a non-resident person or a commercial bank within six months from the date of the
deposit.
Repatriation of profits
The repatriation of profits derived in or from Thailand in foreign currencies, whether in the form of interest,
dividends or capital gains, will be approved by a commercial bank as a matter of course upon
presentation of the relevant supporting documents (such as evidence of the relevant holding of shares
or disposal of assets).
The Securities and Exchange Act (SEC Act) and the takeover rules issued thereunder govern
takeovers or mergers in Thailand. The Securities and Exchange Commission (SEC) supervises and
regulates the takeover of listed public companies. Takeovers of unlisted public companies and
private companies are not regulated under the takeover rules, but are subject to the general
provisions of the Thai Civil and Commercial Code or the Public Limited Company Act.

When a person acquires shares of a public company (whether or not listed) and thereby increases
the number of shares held by him in aggregate to a number which reaches or exceeds any multiple
of 5 per cent of the total number of issued shares of the company, a report must be submitted to
the SEC prior to the end of the next business day.
In relation to the requirement to disclose a memorandum of understanding, the Stock Exchange of

Thailand (SET) requires that, during the negotiation of an acquisition of shares, the offeror and major
shareholders of the target company must ensure that the persons involved in the negotiations keep
all information regarding the negotiations confidential. If information is leaked, the target company
(as well as the acquiror if it is also a listed company) must immediately disclose certain required
information to the SET.
The main restrictions on the acquisition of shares in a listed public company are the foreign
ownership restrictions discussed in sections 1 and 2 above. However, as noted in section 2 above,
the articles of association of some listed companies may restrict foreign ownership. Prior to an
acquisition of shares, the articles of association may therefore need to be amended to permit
foreign ownership up to the levels permissible under the relevant law.
In addition, if an offeror is a listed company and the acquisition is of a size which exceeds thresholds
as specified under the SET rules, or constitutes an acquisition of the business of another person,
the offeror may be required to obtain approval from its shareholders (passed by a vote of not less
than three-quarters of the votes of shareholders who attend the meeting and have the right to vote)
in order to acquire shares of another company (whether listed or unlisted).
Key conditions attaching to a takeover offer include:
(a) the offeror must specify an offer period of not less than 25 consecutive business days, and
not more than 45 consecutive business days;
(b) the offeror must allow the holders of securities who have declared their acceptance pursuant
to the takeover offer to cancel their acceptance during a period of not less than 20 business
days during the offer period and must clearly specify the option in the takeover offer;
(c) if the offeror intends to delist the shares of the target company, that intention must be clearly
stated in the takeover offer; and

(d) the offeror cannot during the six-month period after the tender offer purchase additional
shares of the target company at a higher price or on terms which are more favourable than
those specified in the offer document.
A mandatory general offer must be for an offer for all the securities of the target company and must
be unconditional. The offer price must be satisfied in cash (or a cash alternative offered). A
mandatory takeover offer may be cancelled under certain circumstances (subject to approval of the
SEC) if, after receipt of the takeover offer by the SEC and before the offer period has expired, there
is significant damage to the target’s position, assets or the value of its shares.
A voluntary offer must be an offer for all the securities of the target company unless the conditions
for a partial offer (see below) have been met. No conditions are permitted to be attached to a
voluntary offer other than an acceptance condition which allows the offer to be withdrawn if the
number of shares acquired is less than the minimum number specified in the offer. Also, as with
mandatory general offers, voluntary general offers may be cancelled in circumstances as described
above where there is significant damage to the target’s position, assets or the value of its shares.
Partial offers are permitted only if:
• approved by shareholders at a meeting of shareholders of the target company representing

not less than 50 per cent of the total voting rights of the shareholders attending the meeting
and having the right to vote;
• the offeror (following the partial offer) will not hold more than 50 per cent of the total voting
rights attaching to shares of the company; and
• during the six-month period prior to the offer, the offeror has not acquired (i) shares of the
target company representing in aggregate more than 20 per cent of the total voting rights
attaching to the shares of the target company for which the offer is made or (ii) shares from
an individual shareholder in excess of 5 per cent of the total number of shares for which the
offer is made.
Under the takeover rules an obligation to make a mandatory general offer will be triggered if a
person acquires shares of a listed public company giving rise to such person having:
• 25 per cent or more; or
• 50 per cent or more; or
• 75 per cent or more
of the total voting rights attaching to shares of that listed public company.

The same offer price must be offered to all shareholders of the target company. If the offeror has
acquired shares of the target company during the 90 days prior to the date of receipt of the
takeover offer by the SEC, the offer price must be no lower than the highest price paid for such
shares by the offeror during such period. If the offer price includes consideration other than cash,
the portion of the offer price which is cash must not be less than the highest cash amount paid for
such shares during the 90 days prior to the date of receipt of the takeover offer by the SEC.
The SEC has imposed new rules for determining the offer price if the offer is made for the purposes
of delisting the target company.
Subject to any provisions to the contrary in a company’s articles of association, a 75 per cent
shareholder achieves effective control of a company as such shareholder is generally able to pass all
resolutions at a meeting of the shareholders of the company, whether ordinary resolutions (which require
a simple majority of members attending and entitled to vote) or special resolutions (which require a
three-quarters majority).
However, the 75 per cent shareholder would not be able to vote its shares if it has an ‘interest’ or
a ‘special interest’ in the matter to be voted on. It is therefore possible that shareholders holding
less than 25 per cent may block a resolution to be passed by shareholders if the 75 per cent
shareholder has an ‘interest’ or a ‘special interest’ in the matter to be voted on.
There is no concept of a compulsory acquisition, or squeezing out, of a minority. The offeror cannot
compulsorily acquire shares from minority shareholders, even where the delisting of the target
company from the SET is proposed.
The time required depends on various factors. Leaving aside the requirement for approval from any
regulatory body, it takes approximately 80 calendar days (assuming an offer period of 25 business
days, which is the minimum offer period permitted) from the date of announcement of the transaction
to achieve full control in the form of the acquisition of shares of a listed public company, where
approval of the shareholders of the target company or of the offeror is required.
There is no concept under Thai law of a scheme of arrangement. Apart from obtaining control
through the acquisition of existing shares, or the subscription of new shares, control of another

company can be achieved through an amalgamation. Under the amalgamation procedure, the two
existing companies disappear, their assets and liabilities are transferred to a new company and their
shareholders become shareholders in the new company. It is a cumbersome procedure.
A listed company is entitled to apply to delist its shares from the SET when a resolution to delist the
company has been passed at a shareholders’ meeting by a vote of not less than three-quarters of the
total issued shares of the company and there is no objection from any shareholder or shareholders
holding 10 per cent or more of the shares of the company. The company must apply for approval from
the SET, appoint a financial advisor and arrange a tender offer for its shares held by the shareholders
(other than the offeror). In this regard, the SEC rules regarding tender offers applies.
Thailand has anti-competition legislation in the form of the Trade Competition Act (the Competition
Act) and provisions concerning anti-competition in the Constitution of the Kingdom of Thailand (the
Constitution).
Competition Act
Generally, the Competition Act applies to all types of businesses, including finance, insurance, and
other businesses as may be prescribed. The Trade Competition Committee chaired by the Minister
of Commerce is the regulatory body under the Competition Act.
The Competition Act prohibits certain forms of abuse of dominant position, certain anti-competitive
agreements and restrictive arrangements and unfair trade practices. It also empowers the Trade
Competition Committee to control certain forms of prohibited activities of a market dominant
business operator and anti-competitive mergers and acquisitions.
Constitution
The Constitution which was amended and promulgated in 1997 contains certain provisions which
deal with anti-competitive behaviour and monopolies.
Corporate income tax and withholding tax
The withholding tax liability on the transfer of shares depends on the identity of the transferor.
If the transferor is an individual shareholder (whether Thai or non-Thai) and the transfer is effected
on the SET, capital gains arising from a transfer are exempt from withholding tax liability. Sales in a
tender offer would be considered to be sales through the SET.

If a transfer by an individual is not effected on the SET, capital gains are subject to a withholding tax
at progressive rates ranging from 5 to 37 per cent. If the transferor is a non-Thai individual
shareholder, capital gains are subject to Thai withholding tax at the rate of 15 per cent, but are
exempt if the transferor resides in a country, which has a double tax treaty with Thailand that
exempts capital gains from withholding tax.
If the transferor is a company established under Thai law, or a company established under foreign
law, which carries on business in Thailand, capital gains are not subject to withholding tax, but the
transferor is required to include the capital gains as part of its income for the purpose of computing
its net profits.
If the transferor is a company established under foreign law, which does not carry on business in
Thailand, capital gains are subject to withholding tax at the rate of 15 per cent unless the transferor
is located, or incorporated, in a country which has a double tax treaty with Thailand that exempts
capital gains from withholding tax.
Stamp duty
If the Thailand Security Depository Co., Ltd. (TSD) is the registrar of the relevant shares, a transfer
of shares is exempt from stamp duty. Currently, the TSD is appointed as the registrar of shares for
all companies listed on the SET.
If the TSD is not the registrar, a share transfer agreement is subject to stamp duty at the rate of 0.1
per cent on the transfer price or the par value of the shares, whichever is higher.
Value-added tax (VAT) and specific business tax
Currently, no VAT or specific business tax is levied on the transfer of shares.
Contact: Elaine Williams, Veeranuch Thammavaranucupt
10th Floor Tel: + 66 (2) 344 9200
Sathorn City Tower Fax: + 66 (2) 344 9300
175 South Sathorn Road Email: elaine.williams@freshfields.com
Khet Sathorn veeranuch.thammavaranucupt@freshfields.com
Bangkok 10120
Thailand

Profiles Freshfields Bruckhaus Deringer
HONG KONG
Robert Ashworth Email: robert.ashworth@freshfields.com
Robert Ashworth is head of the firm’s corporate practice in Asia. He joined the firm in London in
1985 and from 1989 to 1992 worked in the firm’s New York office before moving to Hong Kong in
1994. He was made partner in 1997. Robert specialises in public and private M&A and securities
work and advises on initial public offerings (IPOs) and capital-raising exercises generally. He
writes and speaks regularly on legal aspects of mergers and acquisitions and is the consulting
editor of Freshfields Bruckhaus Deringer’s Guide to mergers and acquisitions in Asia.
HONG KONG
Email: teresa.ko@freshfields.com Teresa Ko
Teresa Ko is a partner in the Hong Kong office. She joined the firm in 1988 and was made a
partner in 1993. She has wide experience in public and private acquisitions and disposals,
particularly in the banking sector. She also specialises in initial public offerings (including many of
the largest international equity offerings to come out of the PRC) and capital-raising exercises.
She has advised on corporate reorganisations, direct investment and joint ventures in Hong Kong
and the PRC. She is a member of the Hong Kong Takeovers and Mergers Panel of the Securities
and Futures Commission and she has also been appointed to the successor body of the
Securities and Futures Appeals Tribunal under the new legislation.
BEIJING
Douglas Markel Email: douglas.markel@freshfields.com
Douglas is the managing partner of the Beijing office and has been partner since 1997. He has
been based in Beijing for over 12 years and is fluent in Mandarin, Cantonese and French. Douglas
specialises in all aspects of foreign direct investment, public and private M&A, private equity,
technology licensing, corporate restructuring, information technology and media, and solving
complex problems in established ventures in China. He writes and speaks regularly on
developments in PRC law affecting foreign companies doing business in China. Douglas has
been published in The Financial Times, The International Financial Law Review, The China
Business Review, China Law & Practice and Doing Business in China.

Profiles
SHANGHAI
Carl Cheng Email: carl.cheng@freshfields.com
Carl Cheng is a corporate partner in the Shanghai office. He joined the firm in China in 1993, and
was made a partner in 1998. He specialises in advising on public and private acquisitions and
disposals, restructurings, international equity offerings and other equity transactions, and direct
investment and infrastructure transactions. Before coming to China, Carl practised law in the
United States. He is fluent in written and spoken Mandarin, Japanese and English.
TOKYO
Email: naoki.kinami@freshfields.com Naoki Kinami
Naoki Kinami is a partner in the Tokyo office. He became a partner of Freshfields Law Office
in May 1998 when Freshfields and Kinami & Associates merged and became the current
registered associated offices of Freshfields Law Office and Freshfields Foreign Law Office.
Naoki has practised law in Japan for more than 25 years and has extensive experience in
international finance, public and private acquisitions and disposals, banking and regulatory
work. He is a native Japanese speaker.
TOKYO
Tim Wilkins Email: tim.wilkins@freshfields.com
Tim is a partner in Freshfields Foreign Law Office. He has worked in Japan for over eight years.
His practice focuses primarily on corporate mergers, private equity investments, joint ventures
and software licensing. His clients include US and European multinationals, e-commerce ventures
and major Japanese corporations.
Tim is a graduate of Harvard College, Harvard Law School and Harvard Business School.
He was awarded a Ford Foundation Fellowship in Public International Law. He is a member of
the Dai-ichi Tokyo Bar Association and the New York Bar and speaks English and Japanese.
TOKYO
Email: nobuo.nakata@freshfields.com Nobuo Nakata
Nobuo Nakata is a partner in Freshfields Law Office. His practice focuses primarily on M&A,
structured finance and other corporate and financial transactions. His clients include
Japanese and international banks, securities houses, insurance companies and other
business corporations.
Mr Nakata was educated at the University of Tokyo, the Legal Research and Training Institute
of the Supreme Court of Japan and graduate law school of the University of Pennsylvania. He was
admitted as a Japanese bengoshi in 1985 and to New York bar in 1991 and is a member of the
Tokyo Bar Association. He speaks Japanese and English.

Profiles
SINGAPORE/BANGKOK
Elaine Williams Email: elaine.williams@freshfields.com
Elaine is a partner based in our Singapore office. She has been in Asia for over 10 years. Elaine
has extensive experience of cross-border mergers and acquisitions in Asia and has handled a
wide range of corporate finance and general corporate transactions in Asia, including joint
ventures and international equity and equity-related issues. She divides her time between the
Bangkok and Singapore offices.
SINGAPORE
Email: gary.pryke@drew.napier.com Gary Pryke
Gary is a director of Drew & Napier LLC, our joint law venture partner in Singapore. He joined the
firm in 1986, became a partner in 1991 and subsequently a director on the firm’s corporatisation
in 2001. Gary’s main area of practice is corporate finance, including mergers and acquisitions,
securities and stock exchange-related work.
BANGKOK
Veeranuch Thammavaranucupt Email: veeranuch.thammavaranucupt@freshfields.com
Veeranuch Thammavaranucupt is an associate in the Bangkok office. She joined the firm in 1994.
Veeranuch advises on commercial, banking, securities transactions and corporate work including
joint ventures and investment-related transactions in Thailand. She co-authored the Thai chapter
in Global Securitisation and Structured Finance 2003.

A leader in Asian and
international M&A work
We are a leading international law firm with over 2,400 lawyers in
18 countries across Asia, Europe and the US. Our international
experience, combined with our local knowledge, means that we always
add value, particularly on cross-border transactions.
B A N G KO K SHANGHAI
Elaine Williams Carl Cheng
T + 66 2344 9200 T + 8621 5049 1118
E elaine.williams@freshfields.com E carl.cheng@freshfields.com
BEIJING SINGAPORE
Douglas Markel Freshfields Drew & Napier
T + 8610 6505 3448 David Simpson
E douglas.markel@freshfields.com T + 65 6535 6211
E david.simpson@freshfields.com
HANOI
Tony Foster TO K YO
T + 84 4 8247 422 Freshfields Law Office
E tony.foster@freshfields.com Freshfields Foreign Law Office
Naoki Kinami
HO CHI MINH CITY T + 81 3 3584 8500
Milton Lawson E naoki.kinami@freshfields.com
T + 84 8 8226 680 Timothy Wilkins
E milton.lawson@freshfields.com T + 81 3 3584 8500
E tim.wilkins@freshfields.com
H O N G KO N G
Robert Ashworth
T + 852 2846 3400
E robert.ashworth@freshfields.com
www.freshfields.com

M &amp; A in Asia

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Guide to mergers and acquisitions

Published by White Page

We are delighted to be publishing this third edition of the Guide to

As advisors on many of the region’s most groundbreaking deals,

Nigel Page, Director

First published 1999 Philippines 54

Guide to mergers and acquisitions in Asia Singapore 64

Guide to mergers and acquisitions in Asia 1

The seeds of recovery

Geographical shifts – and a new groundswell of deals

Finance sector mergers under way

Guide to mergers and acquisitions in Asia 3

Supporting the recovery

4 Guide to mergers and acquisitions in Asia

Towards the uplands

Guide to mergers and acquisitions in Asia 5

6 Guide to mergers and acquisitions in Asia

1 Are there any restrictions on foreign ownership of shares?

No person may become a majority shareholder controller or minority shareholder controller of an

Guide to mergers and acquisitions in Asia 7

(d) Sound broadcasting

(d) Sound broadcasting

8 Guide to mergers and acquisitions in Asia

Before becoming a majority shareholder controller or minority shareholder controller of an authorised

(a) Securities and Futures Ordinance

Guide to mergers and acquisitions in Asia 9

(b) The Code

10 Guide to mergers and acquisitions in Asia

(c) Disclosure of memorandum of understanding (MOU)

8 What are the key conditions attaching to a takeover offer?

Guide to mergers and acquisitions in Asia 11

Initial percentage stake Trigger point

Between 30 per cent Acquisition of additional shares which results in a percentage

12 Guide to mergers and acquisitions in Asia

12 Can a purchaser compulsorily acquire or squeeze out a minority?

Guide to mergers and acquisitions in Asia 13

13 What is the takeover timetable for achieving full control?

Announcement Offeror notifies offeree of firm intention to bid

Day 0 Posting date of offer document:

Day 21 First permitted closing date:

Day 46 Last day for voluntary revision of offer

Day 60 Last day for offer to become or to be declared unconditional

Day 70 Last day for settlement of consideration if offer unconditional on Day 60

14 Guide to mergers and acquisitions in Asia

In addition to shareholders’ approval, the scheme must be approved by the court.

15 What is needed in order to delist a company?

16 Are there any anti-competition or monopoly laws?

There are no generally applicable anti-competition or monopoly laws, although restrictions do

17 What stamp duties or other taxes apply to a transfer of shares?

Contact: Robert Ashworth, Teresa Ko

11th Floor Tel: + 852 2846 3400

Two Exchange Square Fax: + 852 2810 6192

Central Email: robert.ashworth@freshfields.com

Hong Kong teresa.ko@freshfields.com

Guide to mergers and acquisitions in Asia 15

1 Are there any restrictions on foreign ownership of shares?

16 Guide to mergers and acquisitions in Asia

(ii) oil and gas; and

Guide to mergers and acquisitions in Asia 17

Acquisitions of shares in a securities company require the consent of BAPEPAM. In addition, a

18 Guide to mergers and acquisitions in Asia

Guide to mergers and acquisitions in Asia 19

20 Guide to mergers and acquisitions in Asia

Guide to mergers and acquisitions in Asia 21

M & A in Asia

M & A in Asia