Can the VIE architecture still be engaged? Two days ago, the relevant departments just issued a document: these enterprises that meet the requirements of the VIE structure can still be listed overseas. As soon as this remark came out, many Internet companies were reassured, that is, the VIE architecture can still continue to engage.
So what is VIE architecture, I believe that everyone may have heard of this word, but it may not be so detailed, today I will give you a detailed disassembly. VIE Chinese called variable interest entities, is essentially a structure that converts business interests between different entities.
You may ask, isn't it okay to go public normally? Why variable benefits? The core of this matter is because Chinese Internet companies want to go public overseas. Why go public overseas? This is because the domestic securities market previously did not allow loss-making enterprises to go public. However, the characteristics of Internet companies are that they come up to lose money first, and use huge losses to build infrastructure to occupy users and markets.
But the capital behind it is in a hurry to exit, so they have to force these companies to hurry up to go public even when they lose money, so they can quickly cash out, then they can only go overseas to list. But going overseas to list faces another problem, that is, if you list overseas, your shareholders must have foreign capital. However, there are some sensitive industries in our country that foreign capital is not allowed to enter.
For example, various Internet services belong to this category, which must be 100% Chinese capital and shareholders, and penetrate upwards to natural persons. That is to say, no matter how many layers of the shareholding structure you have been finding the final shareholder, this person must be Chinese.
Then this problem comes out, on the one hand, these Internet companies can only go overseas to list, on the other hand, once they go overseas to list, they are not a purebred domestic enterprise, and there is no way to do Internet business.
How to solve this thing? There is such a group of smart people who have thought of such a method: I first register an enterprise overseas and use this enterprise as the main body to go overseas for listing, but this is just a shell company, there is no specific business in it, there is another company in China, all the Internet business is installed in this company, it cannot be directly used as the main body of overseas listing. Although the two companies have no equity connection, they sign an agreement between each other, and the domestic business company earns all the profits.
After paying the tax, they are transferred to the overseas shell company, and the overseas shell company is essentially loaded into all the business of the domestic business company, and the shell company can go overseas to list. Where is an overseas company registered? There are three places:
The first, the British Virgin Islands, abbreviated as BVI;
the second, the Cayman Islands;
The third, Hong Kong. All three places can be used at the same time.
→ first register a shareholding platform with the BVI, and the BVI company is only used for shareholding.
Why are → here? It is because the BVI's business registration information is confidential, unlike it can be found on a certain inspection, the BVI cannot be found, and can be used to conceal some sensitive information of shareholders. The BVI company then establishes a company in Cayman, and this Cayman company is the main body of the future listing.
Why should → regard Cayman as a listed entity? Doesn't the BVI work? It is because the shareholder information of the BVI is not public, but disclosure itself is the basic requirement of the stock exchange, so it is not possible to list your shareholder information on the stock exchange without disclosing it. But Cayman's company information is public, and it can be listed on overseas exchanges.
→However, when signing an agreement with a domestic business company, it is generally not necessary to use the Cayman company, but the Cayman company to register a Hong Kong company, and the Hong Kong company will register a wholly-owned foreign-owned company in the mainland, and use the wholly foreign-owned company to sign an agreement on the conversion of interests with the domestic business company, that is, the domestic business company, load the profits into the wholly foreign-owned company, and then you can pay dividends layer by layer.
Domestic business companies transfer profits to wholly foreign-owned companies in the form of agreements. WFOEs distribute profits to Hong Kong companies in the form of dividends. Why is it necessary to have a Hong Kong company? Because if you pay dividends directly to the Cayman company, you have to pay a 10% withholding tax. However, the mainland has preferential policies for Hong Kong, and paying 5% is half of it. Therefore, the role of Hong Kong companies is to save this half of the withholding tax.
Then dividends are paid to the Cayman company through the Hong Kong company, so every point is useful. The top BV1 company is used to hold shares and hide shareholder information. Then the Cayman company is the main body of overseas listing, and the Hong Kong company is used to save withholding tax. A WFOE is used to sign agreements with business companies. The last business company is the one that actually operates the business with various licenses for Internet operation. This is the architecture of a complete VIE.
Everyone understands, right? Pay attention to Cha Ge, start a business without stepping on the pit!
