M&A
Buying a Chinese company: a legal due-diligence checklist
By Zhixi Guo (郭之晞), PRC-licensed attorney
Acquiring or taking a stake in a Chinese company involves the same core legal due diligence you would expect anywhere — plus a cross-border regulatory layer that domestic-only checks routinely miss. Here is the checklist I work through.
The company side
- Legal standing & history — incorporation, changes, and whether the entity is validly existing.
- Equity & paid-in capital — who owns it, and whether subscribed capital is actually paid in (a common defect).
- Actual controller & related parties — penetration to the real controller, nominee/holding arrangements, and related-company dealings.
- Assets & title — land use rights (granted vs allocated), property, equipment, IP, and any mortgages or pledges.
- Material contracts — key customer/supplier, financing and licence agreements.
- Debts & guarantees — borrowings and, crucially, external guarantees given for related parties.
- Litigation, arbitration & enforcement — pending and historical.
- Tax, subsidies, labour, social insurance, environment & qualifications — compliance and contingent exposure.
The cross-border layer (the part foreign buyers miss)
- Foreign-investment access — does the target's business fall on the negative list for foreign investment?
- National security review — does a foreign acquisition of control over this target (technology, data, key sectors) require review?
- Merger control — do the parties' turnovers meet China's anti-monopoly notification thresholds?
- Data compliance — does the target hold important or sensitive personal data, and is cross-border data transfer (including during diligence) compliant under PIPL?
- Export control & licences — dual-use exposure, and the approvals needed to change the target's shareholders or qualification holders.
The value of legal due diligence is not the list of problems — it is turning each one into a deal term: conditions precedent, seller representations & warranties, indemnities, price adjustments and escrow. A discovered risk should become an enforceable remedy.
Two formats
A red-flag report gives you a fast, fixed-fee first pass on deal-breakers; a full legal due-diligence report covers every area above, with the cross-border chapter and a reliance letter for white-label use by foreign counsel.
General information, not legal advice; PRC law only.