vie structure chinese companies

First Foreign Company With VIE Structure Goes Public in China ... U.S. funds seeking to dispose of assets in the U.S. would typically have received bids from one or more Chinese companies. China is less likely to regulate the variable interest entity VIE structures of internet companies a relief for those that list overseas. h�bbd```b``f�5 �� ,�D2�I�&�,˴�6��@��L&� �LVv qvɝ $��b`bd`d��) �30�}0 w7 Since around 1999, an increasing number of VIEs have conducted initial public offerings on U.S. Stock Exchanges. ��Q�A���a���k��34���*}�y�@b������ �.��P���a`?�H}#����u��b`w�e`x �d�qk>#A� ������D 笔�o*���_� x ,�zr__ImSV���A��~�н�2Q�)c��2�G�~�� Typical VIE Structure . Impact on the VIE Structure. Chinese e-commerce companies turned to the VIE structure as a means to circumnavigate China’s restrictions against foreign ownership. This business structure, called a variable-interest entity, became common among Chinese companies because Beijing restricts foreign investment in certain sectors, such as the internet. The VIE structure operates through a network of contracts between China and an offshore entity based in a low-tax jurisdiction. The note explains the history and origins of the structure, the elements of the structure, the key contracts that make up the structure and the key clauses required in each contract to give effect to the structure. 0 Initially, such dismantling was aimed at facilitating the privatization of overseas-listed Chinese companies seeking domestic listing in the PRC. As discussed above, VIE structures have been a gray area in the Chinese legal system. HKEx Listing Decision 43-3. 0 h�b```�!a��1�C��� endstream endobj 372 0 obj <>/Metadata 24 0 R/Pages 369 0 R/StructTreeRoot 47 0 R/Type/Catalog>> endobj 373 0 obj <>/MediaBox[0 0 595.44 841.68]/Parent 369 0 R/Resources<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 374 0 obj <>stream July 22, 2019. The VIE structure consists of at least three core entities: a Chinese company with legitimate operations (referred to as the VIE or OpCo); a wholly foreign-owned enterprise (WFOE) established as an intermediary in China; and an offshore shell endstream endobj startxref Council of Institutional Investors . � ��c~7` �O��d Y����WP8��x�{Thx�u�)�a�g. A��f� �>Қ.�xH���" ����������:�(U�U�wt U0��� NEq��2����$��b>��M�Xv]>8��E6�N��s'00X\iH +e`X � 0 ��0�`? 402 0 obj <>stream The VIE structure is best understood by looking at a specific company case in which ownership is deliberately obscured by a series of shell companies. %%EOF In order to circumvent the Chinese government’s restrictions on foreign investment in the value-added telecommunications industry, Sina adopted the VIE structure. On October 29, 2020, Ninebot, a leading supplier of electric scooters incorporated in the Cayman Islands, went public on China's Science and Technology Innovation Board (the “ STAR Board ”). The bar is high for venture companies that have not been established for long and have yet to … A large number of very large companies operate in China’s Internet and telecom sector as VIEs. Risk of China authorities declaring structure illegal – thought harm to Chinese economy makes this unlikely. Buyer Beware: Chinese Companies and the VIE Structure. All of China’s major Internet companies that list on U.S. exchanges use the VIE structure as a means of circumventing Chinese restrictions on their access to foreign capital. h�b```��@��9�I�sV�ζ:memi�S�� �a�qMox$��HX��k�� ; retail … There has also been no n�v�i|����ͩ��sپ/f��M��bG� d�J|O��!d�����>��=��� Listing Decision 43-3 on VIE structures first issued in 2005 – updated several times, most recently in April 2014. hޤ�mk�0ǿʽߊ�{�d(��kؠۋm���^kRC���۷�Ir�4MӴ�8z:�.���2U,P� -i����R�!Z�R�Yd�xp.�pl�V"�@ɶ� [�l���Z��f��j�TV�������n�ٙ���}�No:ͻ���|3�����bލNj?�G�K�`խ���?տ3Z��,7/�C]�|��Y{5�Og Xs����| This makes the company the first foreign-incorporated company using a VIE structure to issue Chinese Depositary Receipts (“ CDRs ”) in China. A VIE Structure typically involves contractual arrangements pursuant to which an offshore holding company (the “Offshore SPV”) (usually through a wholly foreign-owned enterprise (“WFOE”) established in China) controls and receives the economic benefits of a Chinese onshore operating entity (the “VIE”) whose shareholders would normally be PRC nationals (the “Nominees”). VIE structure is only used on overseas-listed Chinese private companies. In Dangdang’s case, it appears that they intend to conduct procurement, fulfillment and warehousing activities in the WFOE (except for audio and video products that the WFOE is prohibited by law from handling). h�bbd``b`��kAD�`M�@��(���$��A�*@B�HHO�@"�9#� ��������_ f$ On October 29, 2020, Ninebot, a leading supplier of electric scooters incorporated in the Cayman Islands, went public on China’s Science and Technology Innovation Board (the “STAR Board”).This makes the company the first foreign-incorporated company using a VIE structure to issue Chinese Depositary Receipts (“CDRs”) in China. endstream endobj 2358 0 obj <. endstream endobj startxref Companies with VIE operations in China typically try to conduct as much of the business as they can justify in the WFOE. 371 0 obj <> endobj SP Global Ratings revisited the VIE risk of Chinese companies last week, saying that the likelihood of … ; media companies such as Focus Media, Vision China Meida and Bona, etc. to successfully list in the United States, and also became a magic weapon of Chinese … • The VIE structure in effect (1) enables foreign investors, through a … D�c�����|�_�4���m�}�H��m�X��}�(���C��)#�W�?z�v���x �|���Y�z��0G��Z���K)7�"M_�=?4[�zդ]�7�l~�Hg.��h�j�ۓv��No��:Mö)��gs^�&��35q����.m���]���~�MN�*#��ONx���� � ��nx�c����(�L�Y�@ Take “variable interest entities” (VIEs), a kind of corporate architecture used mainly by China’s tech firms, including two superstars, Alibaba and … However, most Chinese companies still consider a VIE stake to be equivalent to a direct stake. In China, companies are required to pass rigorous screening in terms of profit size in order to be listed on the domestic stock market . A note on the variable interest entity (VIE) structure that is commonly used for Chinese companies. T %%EOF Even though the Chinese government holds a negative attitude towards VIE structures, there is no clear prohibition against the use of a VIE structure in most industries in China, except for a few industries such as online gaming. 2370 0 obj <>/Filter/FlateDecode/ID[]/Index[2357 27]/Info 2356 0 R/Length 77/Prev 251275/Root 2358 0 R/Size 2384/Type/XRef/W[1 2 1]>>stream Once the VIE is established, the Chinese company and the VIE establish a contractual relationship in which the VIE received the profits from the Chinese company and … A variable interest entity (VIE) refers to a legal business structure in which an investor has a controlling interest, despite not having a majority of voting rights. 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