With the heightened focus by overseas regulators on PRC entities who are accessing overseas capital markets, investors into China are examining how Chinese groups have been structuring their commercial arrangements and holding structures, particularly where tax benefits appear overly favourable. In addition to any tax penalties that may arise from aggressive structures, punitive actions may arise as a result of bribery and corruption enforcement actions around the world. As a result, bribery and corruption due diligence has become an essential component of M&A due diligence scope and a key consideration to deal pricing.
Being cognisant of the transactions and contractual relationships between onshore and offshore entities will enable investors to assess tax and integrity risks and how to structure around these.