14. April 2021 · Comments Off on Vie Agreements · Categories: Uncategorized

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: legally, the LIFE model essentially consists of controlling a company through agreements and not through capital control. Given that the origin of the application of the LIFE model in China is indeed the desire to circumvent restrictions on foreign investment in certain industrial sectors, this is in itself a mistake. On the one hand, a LIFE agreement carries the legal risk of being considered a null and void agreement, with the potential to be considered a legal form for an illicit purpose, to harm the public interest or to violate mandatory laws or administrative provisions. This also greatly increases the controller`s actual exposure to the moral star. On the other hand, public authorities can strengthen the supervision of operators` operating licences (cancellation of administrative authorizations or increased conditions for verification of these administrative authorizations) and, therefore, materially deny the LIFE model directly from the company`s point of view. (v) the capital agreement between WFOE, prC and the national company, whereby the PR persons pledged their interests in the national company in the WFOE as a guarantee of the performance of their obligations and the obligations of the national company arising from other agreements between the three (3) parties to the LIFE structure; and examples of agreements granting effective control over LIFE: appeal option agreements, voting rights or agents, loan contracts. 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. It is clear that more and more Chinese companies have adopted the LIFE structure since the issuance of the rules of the L-A. In the initial phase, the life structure was used almost exclusively for asset-light companies. However, after 2006, these heritage companies also opted for the use of the life structure. It is thought that one of the reasons for the increasing use of the LIFE structure is that the LIFE structure can avoid MOFCOM`s accreditation.

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