Chinese companies looking to expand in the UK may wish to set up their own UK limited company however may prefer to acquire an existing business through an acquisition. This allows the Chinese company to take advantage of the UK target company’s market share and reputation.
Chinese companies should be aware that how the UK common law system impacts on corporate transactions. Here we have an overview of the main issues the Chinese companies expanding to acquire the UK companies.
Private Acquisitions under the UK legal system
Chinese law provides stronger statutory protection for buyers, and a seller’s misrepresentation can more readily lead to rescission of the contract or a claim for damages. By contrast, the UK legal system which is rooted in common law operates on the principle of caveat emptor (“let the buyer beware”). This principle is central to UK commercial contracts, property transactions, and private acquisitions.
Under this approach, a seller is generally not liable for failing to disclose an issue unless specifically asked about it by the buyer. However, a seller must not deliberately conceal liabilities or misrepresent the overall condition of the company.
In light of these differences, Chinese buyers should ensure they are adequately protected through a carefully drafted share purchase agreement and by undertaking thorough financial and legal due diligence. In particular, in private acquisitions—even of small private limited companies—buyers must fully understand that a share purchase transfers all existing and potential liabilities, which may be effectively unlimited. These include obligations relating to employees, third-party contracts, corporate tax liabilities, key intellectual property (IP) rights and risks, as well as real estate ownership or existing lease arrangements.
Asset or Share Purchase
The next step for Chinese buyers is to determine whether an asset purchase or a share purchase is more suitable for acquiring the UK private company. In a share purchase, the buyer acquires the company in its entirety, including all assets and liabilities. This means that employees, third-party contracts, suppliers, and other obligations will remain with the target company under its new ownership. Such a structure allows the business to continue operating as a “going concern,” but also transfers all existing risks and responsibilities to the buyer.
Whether the transaction is structured as an asset purchase or a share purchase will depend on the business plan and the broader commercial considerations of the Chinese companies as they pursue expansion in the UK. In addition, whether the transaction is structured as an asset purchase or a share purchase will depend on factors such as risk allocation, tax considerations, regulatory requirements, and the strategic objectives of the acquiring party.
An asset purchase involves acquiring selected assets and, where agreed, certain liabilities of a target business, rather than purchasing the company itself. This approach allows the buyer to select specific assets, such as equipment, intellectual property, real estate, and customer contracts, while generally excluding unwanted liabilities. However, asset purchases can be more complex to execute, as individual assets and contracts may require separate transfer arrangements or
third-party consents, and the transfer of employees may be subject to the UK’s TUPE regulations. In practice, share purchases are often the more popular choice for Chinese companies.
Due Diligence toward the UK Target Companies
Due diligence is inevitably the most important set of exercises for a Chinese company to undertake. The two key areas of focus are typically financial due diligence and legal due diligence.
It is also worth noting commercial due diligence on the UK target company, although this is often carried out internally by employees of the Chinese company. At an early stage, the UK target company will usually share general information on market position, business operations, and any potential issues; such as director’s loans, pension obligations, or third-party disputes. This initial disclosure helps shape the scope and priorities of the subsequent legal and financial due diligence exercises.
Financial due diligence is typically conducted by qualified accountants, with a scope that generally focuses on tax compliance, the UK target company’s overall financial affairs, and any irregular withdrawals or distributions to individual shareholders.
Legal due diligence is a comprehensive, in-depth exercise that builds on the findings of commercial and financial due diligence. Its primary purpose is to identify any ongoing employment liabilities, pending or potential third-party litigation, as well as to verify real estate ownership and intellectual property rights. This process ensures that the buyer fully understands the legal risks associated with the target company and can take appropriate measures to mitigate them before completing the acquisition.
Conclusion
For Chinese companies looking to expand into the UK, acquisitions offer an effective way to gain market presence, established customer relationships, and operational infrastructure. However, navigating the UK’s common law system requires careful planning, particularly when deciding between an asset purchase and a share purchase. In the case of a share purchase, it is essential to combine a carefully drafted share purchase agreement with thorough financial, legal, and commercial due diligence.
Contact Lewis Nedas Law via our enquires page on our website or by telephone on 020 7387 2032.
中国企业在英国寻求市场拓展时，可能会选择在英国建立自己的有限公司。然而中国企业也更可能倾向通过收购英国现有商业机构来实现扩展。此举有助中国企业利用英国现有公司的市场份额和声誉的优势。
因此，中国企业需要留意公司收购交易时英国普通法对此的影响。以下将概述中国企业在英国扩张并收购英国公司时需要关注的重要事项。
英国法律体系下的私人收购
中国法律为买方提供較强的法定保护，卖方虚假陈述更容易导致合同撤销或引发损害赔偿请求。相较之下，英国法律体系以普通法为基础，遵循 “买家自慎” 原则，英国的商业合同、房产交易及私人收购均循此核心原则。
在此原则下，除非买方向卖方明确提出问题，否则卖方通常没有义务主动向买方披露问题。然而，卖方不得故意隐瞒负债或对公司整体状况作虚假陈述。
鉴于这些差异，中国买方应慎重起草股权购买协议，并进行全面财务和法律尽职调查以确保自身获得充分保护。特别在私人收购中——即便是收购小型私人有限公司——买方必须充分理解在股权收购过程中，所有现有及潜在负债将转移到买方身上，而这些负债有可能为无限责任。这包括与员工相关的义务、第三方合同、公司税务责任、关键知识产权（IP）权利和风险，以及房地产所有权或现存租赁安排等。
资产收购或股权收购
在收购英国私人公司时，中国买方下一步需要确定的是选择资产收购或股权收购更为合适。
在股权收购中，买方将整体收购公司，包括所有资产和负债。这意味着随着目标公司所有权的变更，公司新持有者将接手原公司员工、第三方合同、供应商及其他义务。这种结构有助企业作为 “持续经营体” 继续运作，但同时也将所有现有风险和责任转移给买方。
无论买方采用资产收购还是股权收购，最终决定取决于中国企业在英国扩张时的商业计划及整体商业考量。此外，两种收购的选择还需考虑风险分配、税务考量、监管要求以及收购方的战略目标等因素。
资产收购是指收购目标企业的特定资产，以及在双方协议情况下承担目标业务的部分负债而非收购整个公司。这种方式允许买方选择特定资产，例如设备、知识产权、房地产及客户合同，同时通常可以排除不想要的债务。然而，执行资产收购可能更为复杂，因为单项资产和合同可能需要分开办理转让或取得第三方同意，而且员工转移也可能受到英国《企业转移（雇佣保护）条例》（TUPE）的约束。实际情况是，股权收购一般更受中国企业青睐。
对英国目标公司的尽职调查
尽职调查无疑是中国企业必须开展的最重要工作之一。通常重点包括财务尽职调查和法律尽职调查两个方面。
值得关注的是，对英国目标企业的商业尽职调查通常由中国企业内部人员完成。在早期阶段，英国目标企业通常会提供一般有关市场地位、业务运营及企业潜在问题，如董事借款、养老金义务或第三方纠纷资料。这些初步资料披露有助于明确后续法律和财务尽职调查的范围和重点。
财务尽职调查通常由专业会计师执行，其范围主要集中在税务合规、英国目标企业的整体财务状况，以及个别股东是否存在异常提款或分红。
法律尽职调查是在商业和财务尽职调查基础上进行的全面且深入的审查，其主要目的是识别任何目标企业正在承担的雇佣责任、待决或潜在的第三方诉讼，以及核实房地产所有权和知识产权权利。这一过程确保买方充分了解目标企业的法律风险，并在完成收购前采取适当措施控制风险。
总结
对于希望进入英国市场的中国企业而言，收购是一种有效获取市场份额、客户资源及运营基础设施的方式。然而，在英国普通法体系下，特别是在资产收购与股权收购之
间进行选择时，中国企业需要谨慎规划。在进行股权收购时，中国企业必须谨慎起草股权收购协议，同时进行深入且全面的财务、法律和商业尽职调查。
** 如中、英文两个版本有任何抵触或不相符之处，应以英文版本为准。
The English version shall prevail in case of any discrepancy or inconsistency between the English version and its Chinese translation.