Vie Agreement Template
Agreements. The concept behind a life structure is that control is achieved through legal agreements and not through the holding of shares. Together, Dangdang`s information agreements are essentially aimed at providing all the economic benefits of Dangdang Kewen and the obligation to absorb all losses. Dangdang uses five agreements to achieve this. These agreements are typical of most life structures: the appeal option agreement. The founders agree to sell Dangdang Kewen to Dangdang Information at any time for the initial capital allocation. The payment price can be deducted from the loan. From a practical point of view, this option can only be exercised if, at one time or another, China authorizes foreign investment in companies such as Dangdang Kewen. Power of attorney. The founders give Dangdang Information a power of attorney that gives it all normal shareholder rights, including voting, participation in shareholder meetings and the execution of the appeal option agreement. Operations. Dangdang`s registration statement does not contain details on how this will work, but there are some clues.
The objective of each LIFE structure will be to minimize gains in LIFE. The remaining gains in the LIFE are problematic because the final transfer of these profits to public shareholders is difficult and costly. While life agreements generally require VIE shareholders to pay dividends to the limited company, all distributions to LIFE shareholders in China would be subject to an individual income tax, which is superimposed on corporate taxes already paid. Technical assistance agreement. Dangdang Kewen is committed to using Dangdang Information as an exclusive technical service provider, including platform and technical support, maintenance and other services. Through this agreement, Dangdang derives the profits from Dangdang Kewen. The transfer price, which determines the amount of the levy for technical services, creates a tax risk, which I will discuss further in a later contribution. Loan contract. The founders borrowed money from Dangdang Information to capitalize Dangdang Kewen. Using Dangdang information instead of the cayman island parent company to make the loan, the agreement between two Chinese companies, is the need to do with the state management of currencies. Capital agreement. The founders entered into a share concession agreement with Dangdang Information, which mortgaged its shares in Dangdang Kewen as collateral under the loan agreement and other agreements.
This publication traced the basic structure of IE using a typical example. There are some variations of this structure that I will detail in future bookings. In these interventions, I intend to present some of my studies on how EVs are actually used in China and outline some of the most important risks. The entities of the WFOE. Cayman Islands Corporation founded a Chinese subsidiary, Beijing Dangdang Information Co. Ltd. (Dangdang Information). As this unit is 100% owned by a foreign company, it is known in China as an all-foreign company (WFOE). Dangdang Information must not hold the necessary licenses for the operation of the company and cannot sell audio and video products in China. However, it carries out a significant portion of Dangdang`s activities in China, including the liquidation of product acquisition and production plants and the operation of warehouses.