In China, the liquor market shows a trend of steady and sound development along with the development and maturity of food industry. The Catalogue for Guiding Industrial Restructuring, which became operative on 1 January 2020, excludes liquor making from restricted industries, releasing active policy guidelines for the liquor making industry.
In order to maintain growth in a highly competitive market, liquor makers mostly expand their production capacity and market shares by mergers and acquisitions (M&A) out of the consideration for raw material supply, sales channels, brand influence, etc. This article summarizes the legal risks common in M&A of liquor makers.
Transaction modes
It is provided in the Provisional Regulations on Consumption Tax that the tax payable by liquor makers shall be 20% × liquor price + RMB0.5 / 500g (500 ml) × weight (volume) of the liquor. In the case of asset acquisition, investors shall pay the consumption tax incurred at the time of transfer of liquor assets. Therefore, out of the consideration for saving tax costs, investors mostly acquire core assets of the target company by share acquisition.
