Selling Assets in China: Plan the Exit and the Proceeds Together

The sale price is not the whole exit

An international investor planning to leave a China business may focus on finding a buyer and agreeing a price. The legal work must also address what is being transferred, where liabilities remain and how the proceeds will reach the intended recipient.

A transaction should be planned from both ends: the asset or shareholding being sold and the overseas account expected to receive the funds. The connection between them is a documented ownership, transaction and payment history.

1. Compare the transaction routes

A share sale changes the ownership of a company; an asset sale concerns specified property or business assets. The two routes require different investigations. For a share sale, review the company’s liabilities, contribution history, corporate records and key contracts. For an asset sale, identify the asset owner, the transferable rights and the arrangements needed for the business that remains.

The comparison should include employment, financing, security, permits and existing contracts, as relevant. It should also distinguish money received by the company from money received by the overseas investor. A company receiving asset-sale proceeds does not, by that fact alone, complete the investor’s withdrawal of funds.

2. Read the property record, not just the commercial description

A description such as “factory and land” is not a sufficient transaction specification. Review the title records, the nature and remaining term of the land-use interest, the permitted use, the buildings and any security or transfer conditions. Historical land arrangements deserve particular attention.

Ask whether the available records describe the same property that the parties intend to sell. Identify discrepancies in the owner’s name, boundaries, building approvals or use before they become a completion problem. Where an approval, consent or supplementary step may be needed, allocate responsibility and timing in the transaction plan.

3. Compare net proceeds using current tax analysis

The better-looking headline price may not produce the better net outcome. Request a transaction-specific tax calculation for each realistic route, identifying the taxpayer, tax base, available deductions, withholding responsibilities and supporting records.

Do not apply a standard tax percentage to every foreign seller. Individual and corporate owners, their tax residence, transaction form and any relevant treaty analysis can produce different questions. For property disposals, the review may need to cover several taxes rather than only income tax.

As one illustration of why precision matters, the statutory stamp duty rate for the relevant land-use and building ownership transfer instruments is five ten-thousandths of the price (0.05%), before considering any applicable relief. It is not five per thousand. [1]

Historical training materials are useful for identifying issues, but a tax model should use the rules and facts applicable to the proposed transaction.

4. Discuss the payment route before signing

Identify the payer, recipient, currency, account and source of funds. Then work with the handling bank and relevant advisers to establish the supporting documents and any registration or tax steps applicable to that route. The SAFE 2024 capital-account guidelines replaced the 2020 edition; a checklist copied from an older transaction is not enough. [2]

Give particular attention to deferred consideration, retention amounts and price adjustments. Ask how the final amount will be evidenced and what the bank will need if the payment differs from the original estimate. Do not assume a later contractual adjustment automatically fits the earlier payment documentation.

The contract should align the payment schedule with the steps each party can actually perform. Consider what happens if a required record is missing or a review is delayed, and avoid promising an overseas payment date without assessing the route.

5. Build a completion record

Prepare a closing list that connects the ownership evidence, signed documents, agreed adjustments, corporate or property changes, tax records and bank documents. Keep the final signed versions and evidence of actual payment together.

The goal is a transaction that can be explained consistently to the buyer, the advisers and the bank. Early coordination helps identify obstacles, but it cannot guarantee regulatory clearance or remittance. Start with the transaction structure and let the documents support the intended commercial result.