(I) Registered capital

In case of asset M&A, the determination of the registered capital is relatively simple, and like all the newly established foreign-invested enterprises, the total capital contribution by Chinese and foreign investors to the newly established foreign-invested enterprises upon the M&A is the registered capital of the enterprise. In terms of equity M&A, since the legal person qualification of the enterprises still exist, the determination of the registered capital is relatively complex, where three situations shall be differentiated. Firstly, foreign investors only purchase the equity of the original investors of the target company but not the added capital of the enterprise. In such case, the target company changes its shareholders and nature of enterprise, without any change in the registered capital. Therefore, the registered capital of the newly established foreign-invested enterprises upon the M&A is the registered capital prior to the alteration of its registration (for change from domestic companies to foreign-invested enterprises). Secondly, foreign investors purchase not only the equity of the original investors of the target company but also purchase the added equity capital of the target company separately or jointly with other investors. In such case, though the alteration of the shareholders does not influence on the registered capital of the company, with the added capital of the target company, its owners' equity (net assets) may increase with such increase of the equity capital, and hence the registered capital of the newly established foreign-invested enterprise upon the M&A shall be "the sum of the original domestic company's registered capital and the increased amount". Thirdly, foreign investors do not purchase the equity of the original shareholders of the target company but purchase the added equity of the target company. In such case, the target company may increase its registered capital synchronously with the added capital. Hence, the registered capital of the newly established foreign-invested enterprises upon M&A shall also be "the sum of the original domestic company's registered capital and the increased amount".

What deserves explanation is that if the domestic company (the target companies0, as a joint-stock company, additionally issues stocks at a premium over the par value of its stocks, its registered capital, i.e. the total equity capital, shall be the sum of the registered capital of the original company and the total par value of the additional stocks issued, and in such case, the "added equity capital" mentioned in the M&A Provisions shall be the par value of the additional stocks issued of the joint-stock company but no the "premium".

(II) Total investment

The term "total investment" is a legal concept used for the requirements for the management of the foreign-invested enterprises. The total investment of the newly established foreign-invested enterprise upon the M&A shall be determined by the investors according to the actual business scope, which, however, must be kept at certain proportion with the registered capital. According to the provisions of Articles 11 and 14 of the M&A Provisions, the newly established foreign-invested enterprise upon the equity M&A shall determine its upper limits of total investment according to the following percentage: (a) if the registered capital is less than USD2,100,000, the total investment amount shall not exceed 7/10 of the registered capital; (b) if the registered capital is more than USD2,100,000 but less than USD5,000,000, the total investment amount shall not exceed two times of the registered capital; (c) if the registered capital is more than USD5,000,000 but less than USD12,000,000, the total investment amount shall not exceed 2.5 times of the registered capital; and (d) if the registered capital is more than USD12,000,000, the total investment amount shall not exceed 3 times of the registered capital. The newly established foreign-invested enterprise upon the asset M&A shall determine its upper limits of total investment according to practices for the originally new establishment of foreign-invested enterprises.