News; "Control Agreement" under the regulatory regime have caused mass
Published: Thursday 01 September, 2011
Boat uploaded a very public, Baidu, Sina, Jingdong Mall, Bona Pictures and other Chinese listed most of the United States have been or will be asset-light companies, have adopted V IE structure (protocol control structure). According to several fund managers to estimate, at least here, the first involving trillions of dollars of assets.
Microblogging public opinion surging up to say that, "Ma (microblogging) to the whole structure of Chinese companies VIE kidnapped." This scene in the end? August 26, the Ministry of Commerce official website officially announced "the implementation of a foreign investor acquires a domestic enterprise security review system requirements', specifically pointed out that foreign investors shall not in any real way to avoid security review of mergers and acquisitions, including but not limited to, on behalf of the holders, Trust, a multi-level re-investment, leasing, loans, protocol control, foreign trade, etc.. The requirement is formally implemented on September 1.
Caused by the introduction of the New Deal a VC, PE who panic, "Once the chain completely stuck, the entire PE industry simply could not handle that many investment issues will be followed." ID G Investment Managers Huang Bo told reporters the South, we all very anxious, looking forward to the implementation guide rules as soon as possible.
Ma force "control agreement" to be regulated?
On May 11, 2011, before Ma in a "national hero", "Chinese entrepreneurs' attitude by others. But in this day, Alipay battle for control began to emerge, not on the table had the "whether to insist on agreement control" has also been made public.
In micro-Bo, a typical sound is "the original protocol control is a 'officials do not chase people do not study' things, but Ma has to pick this thing opened, forcing the government to make a statement." Bo Na Pictures Group CFO Xu Liang said.
Jingdong Liu Qiang East Mall CEO (microblogging), said, "To my knowledge, all domestic Internet companies to get financing, including listed and unlisted, all V IE structure! Including Jingdong Mall! Minority acts of bad faith, need to pay for the whole industry! "
Results, Ma won the bet.
Ministry of Commerce recently released the "implementation of the foreign investor acquires a domestic enterprise security review system requirements" for the first time that "the substance from the transaction and the actual impact" to determine whether the M & M's range of security review, and specifically pointed out "Foreign investors are not in any real way to avoid security review of mergers and acquisitions, including but not limited to, on behalf of the holders of the trust, multi-level re-investment, leasing, loans, protocol control, foreign trade, etc.."
An anonymous official said, "The government does not explicitly require companies to clean up protocol control but to the enterprise initiative inquiries to the competent authorities, the agreement holding okay.".
In fact, the "rule" is also mentioned that the foreign investor acquires a domestic enterprise, relevant State Council departments, national trade associations, industry enterprises and downstream enterprises mergers and acquisitions that require security clearances, and can be made to the Ministry of Commerce M & A security review recommendations. Meanwhile, mergers and acquisitions in the Ministry of Commerce official safety review prior to the application, the applicant may make the acquisition of domestic enterprises of procedural issues to the Ministry of Commerce to discuss the application in advance to communicate the situation.
VC, PE who panic
Estimate, according to several fund managers on the market a "protocol control" mode to invest in the IPO project at least one trillion U.S. dollars.
Boat by a very public for a reason. "China's" Foreign Investment Industrial Guidance Catalogue ", for restricted and prohibited foreign investment in the industry have limited provisions in the Enron incident, the U.S. FASB requires the SPV (special purpose company) merged with the financial statements, therefore, If foreign-invested enterprises are not holding domestic enterprises, it can not consolidated, it is not listed on the fundamental order and form, it is necessary to take 'control protocol'. "ID G Investment Managers Huang Bo told reporters the South, Sina is The earliest implementation of the "protocol control" mode and successfully listed on the template, so the model also known as "Sina model."
"Now the chain is stuck, it could not handle the entire industry." Huang Bo told reporters the South, previously a joint venture approval to three months, the investment cycle is now extended to at least a month or two. And as long as the "rule" is not the introduction of rules to guide the functional departments of the staff would not be able "by the book", all items will be "stranded."
A lot of investment will be followed, "the entire investment industry are worried that if the fight against 'protocol control' case, many IPO project may be over, the United States listed on the hopeless. Transfer to the domestic A shares, then China's capital market and can not digest so many projects. "omai Capital Partners Sun Yun told reporters the South, the industry has been the focus of discussion from the" protocol control "to" hot money flows "on the folklore of a statement," has now entered the 'national back into the 'era of foreign investment into the gate closure is possible. "
Apparently, foreign investors back into the domestic, in fact, "many of IPO projects are funded and co-investment of foreign funds, the Fund is behind the LP (limited partnership, that of PE investors), and China most of the funds the company's managers are not 'pocket', and once China stocks face extinction, and ultimately lose is China's new rich class --- LP's money. "unnamed fund manager Mr. Zhu is a reporter for the South further explained.
Stick to just playing, "third-party payment"?
What end? Look forward to the implementation of rules to guide the industry as soon as possible.
Prior to that, "control agreement" has been avoided regulatory authorities, one of the default. "In other countries, the default can mean legal, but in China, there is no existing regulations are not always 'legitimate', it is 'policy risk' of the essence."
Information Consulting Co., Ltd. Shenzhen Furong, chief analyst Yang Yuanyi that alone "require" the introduction, the Government should be targeted "Alipay dispute" to "custom" rules, should not expand the impact surface. You know, any country may be experienced in any industry "legal blind spots", and all of the legal system is perfect, simply follow "from scratch, from the special case solution, derived for the general" legal framework. "
Put bluntly, the foreign review of the "big stick" may just hit the "third-party payment," "government should regulate the market, improve the investment barriers to entry in this field." Yangyuan Yi said.
This judge is not without reason, the State Council Information Office had issued a "status of China's Internet" white paper wrote, "China will unswervingly implement the opening-up policy, China's Internet market is always open according to the law, welcomes foreign enterprises based on" Foreign Investment Telecommunications Enterprises "to enter the Chinese Internet market share of China's Internet development opportunities."
The industry estimates, "protocol control" regulation may be introduced next more flexible mechanism, may be listed "mandatory review of the industry and the industry can choose to self-censorship", detailed scope of the review.
VIE structural model (see top left icon)
1. Founder or management team in the Virgin or Cayman Islands set up an offshore company.
(2) The company then usually in the Cayman and VC, PE to set up a company, as the main market.
3 The body set up in Hong Kong 100% owned by a shell company.
4 Hong Kong companies to set up one or more wholly owned subsidiary of territory (W FO E).
5 The WFO E and domestic operations of entities signed an agreement to have V IEs interest purposes and in accordance with SEC regulations.
Agreement is an offshore company controlled by foreign-owned enterprises, and domestic companies have signed a series of agreements, transformed into a domestic business income and assets, control the actual person in order to avoid the "Foreign Investment Industrial Guidance Catalogue" for restricted and prohibited trade restrictions on foreign entry requirements, accurately speaking, a "red-chip mode" variant form.