Rights defects in equity M&A

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Equity merger and acquisition (M&A) refers to the way that the acquirer becomes a shareholder of the target company by purchasing the equity of the target company, or subscribing its newly increased capital by agreements to participate in or control the target company. The principal purpose of M&A is to become the controlling shareholder of the target company by acquiring equity.

In accordance with article 216 of the Company Law, “controlling shareholder refers to a shareholder whose capital contribution accounts for 50% or more of the total capital of a limited liability company, a shareholder whose shares account for 50% or more of the total share of a company limited by shares, or a shareholder whose voting rights corresponding to the capital contribution or shares are sufficient to exert a material influence on the resolutions of the shareholders’ meeting or the general meeting, despite the fact that such shareholder’s capital contribution or shares account for less than 50% of the total capital or total share capital”…

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