What Are Equity Partners?

Equity swap means that the purpose is usually to introduce strategic investors or partners, and does not involve the change of controlling rights, to achieve cross-shareholdings between the company's controlling shareholders and strategic partners to establish interest relationships.

Equity swap

Equity swaps are those whose purpose is usually to introduce

Regarding the method of equity replacement, there are three methods in practice, namely, equity replacement, equity replacement + assets, and equity replacement + cash.

(1) Legal risks of equity swap

This means that the replacement can be done without paying any cash, which effectively reduces financial risks. It usually takes place between companies with complementary needs.

For example, on July 28, 2004, a half-year-long share swap case was finally concluded

Cross-shareholdings are usually held between parent and subsidiary companies

During the equity replacement process, parties should pay attention to the following:

1. Both parties to the equity swap must perform the board approval procedures of their respective companies, the necessary industrial and commercial change registration procedures, and the evaluation and approval procedures for state-owned assets.

2. You should try to understand the relevant information of the replaced equity to determine whether there are defects.

(1) Both parties should make a detailed understanding of the shareholding structure of the company to be replaced. Such as reviewing the company's business license, tax registration certificate, contract, articles of association, board of directors, shareholders' meeting resolutions and other necessary documents. After careful investigation, the clarification of the equity structure is to ensure that all parties to the contract are qualified as principals when signing the equity transfer contract. Avoid the phenomenon that when the contract is signed, the object of the contract does not actually own the equity.

(2) It should be investigated whether there is any defect in the equity replaced

Attention should be paid to whether there is a flaw in the capital contribution of the replaced equity, that is, the actual value of the non-monetary property is significantly lower than the amount of the capital contribution subscribed.

Attention should be paid to whether there is a flaw in the replacement of the equity investment (default), that is, the shareholders' capital contribution is not paid on time and in full.

Pay attention to whether there is any pledge of equity in the replaced equity.

(3) Attention should be paid to investigating whether there is any false investment or withdrawal of capital from the counterparty.

3. The purpose of equity replacement is usually to introduce strategic investors or partners, and generally does not involve the change of controlling rights.

4. Asset evaluation. After confirming the share of equity replacement, a professional asset appraisal agency should be invited to evaluate the assets and rights of the acquired company and issue an evaluation report. The equity value of both parties in the equity replacement is based on the fair value determined in the asset evaluation report or capital verification report.

5. The exchanged fixed assets must be cleared before replacement.

6. In the process of equity replacement, fixed assets used for production can be deducted from input tax. In order to be deducted in the exchange of non-monetary assets, a VAT invoice must be provided. Input assets cannot be deducted from non-production fixed assets.

7. Turnover tax and income tax: If there is a difference in the equity transfer, personal income tax is required, and the assets exchanged at this time involve the payment of income tax.