China: Most Popular Articles (30 days performance)/最受欢迎文章(月点击表现)

Last Updated: 4 April 2012
Article by Xiaomin Zhang

All the articles selected by the editors of Chinalawinsight are based on a monthly statistics of the readership of the blog articles. We hope our selection can make your browse of Chinalawinsight more enjoyable and effective.

Overview of Doing Business in China

Since the reform and opening-up policy was introduced in 1978, especially in the past ten (10) years, the People's Republic of China (the "PRC" or "China") has undergone significant changes. China is a growth engine for the worldwide economy, fueling global expansion via higher output and trading relationships with other nations as well as greater contributions from domestic consumption. Over last nine (9) months of 2011, China has already attracted contractual inbound foreign direct investment of USD177.8 billion. Notwithstanding China's status as one of the world's largest economies, and the massive amounts of foreign money invested in China, the basic laws and rules in China governing foreign investment seems mysterious for those who want to invest in China or are accustomed to laws of their countries.


自1978年改革开放以来,特别是最近十(10)年,中华人民共和国("中国")发生了巨大变化。中国成为世界经济的增长引擎,通过其日益 强劲的出口、与其他国家日益密切的贸易合作关系以及国内消费的增长,为世界经济发展加油。在2011年的前(九)9个月,中国已经吸引了1778亿美元的 合同外资金额。尽管中国是全球最大经济体之一,并且吸引了规模巨大的外资到中国进行投资,然而,中国有关外商投资的基本法律法规,对于那些想到中国投资的 或者熟悉其本国法规的外国投资者而言,却似乎仍显得神秘。为使您对中国的政治体制、法律制度和投资环境有更好的了解,我们在本文中对中国的商业法律环境进 行了简要概述,以供参考。

Variable Interest Entity Structure in China

To achieve the initial public offering ("IPO"), there are two options for Chinese companies, onshore listing (also known as A-share listing) and offshore listing (also known as red-chip listing). Since the conditions and qualifications for A-share listing are usually a little higher and the procedure is more time-consuming than for the offshore listing, Chinese companies which cannot meet the A-share listing's requirements or which need to complete IPO rapidly, usually would prefer the red-chip listing. For the red-chip listing, there are two commonly-used structures for Chinese companies: the straight-forward offshore listing structure and the VIE structure. In addition, for the purpose of attracting foreign investors and for circumventing restrictions on foreign direct investment, during the Pre-IPO restructuring, the VIE structure is also widely used by Chinese companies and foreign companies alike.


长期以来,可变利益实体结构(即Variable Interest Entity,"VIE"结构)一直是外国投资者进入中国外商投资限制领域的常用模式。与此同时,VIE结构一直以来也是中国境内企业在境外资本市场实现上市的常用做法。


Variable Interest Entity (VIE) Structure for Foreign Investment in the PRC May Face Challenge

The variable interest entity ("VIE") has long been a popular structure for foreign parties to invest in sectors which are restricted by China's industrial policy to foreign investment. In addition the VIE structure has also been used as a means by which Chinese domestic entities could list offshore on international capital markets.

The first well known VIE structure was that of in its 2000 listing on NASDAQ. Indeed the VIE structure is also commonly known as a "Sina Structure". Sina used the VIE as a workaround structure to avoid restrictions on foreign direct investment (FDI) in the value-added telecom services sector. Since then, both foreign and Chinese investors alike have replicated the VIE structure in many other sectors of China's economy where FDI is either restricted or prohibited to foreign investors.

Minimizing the Risks that Legal Representatives Face

Under PRC laws, the legal representative of a company is the person who acts in the name of the company and represents the company in the exercise of its rights and obligations. The legal representative is a fundamental part of a company's corporate governance structure. To an extent, the person who is appointed to the position of the legal representative is authorized to conduct many of the company's affairs. However, the legal representative must fulfill certain duties while exercising his/her rights. This article will briefly introduce the potential legal risks that a legal representative may face under civil, criminal and administrative laws and how such risks are often prevented or minimized based on China's legal practices.



CSRC's Guidance on Merger Control of Listed Chinese Companies

China Securities Regulation Commission ("CSRC") is the authority in charge of supervising Chinese listed companies. In August 2010 and November 2011, CSRC published on its website two FAQs addressing application of the merger control regime under the Anti-Monopoly Law ("AML") to listed companies.

MOFCOM Issued the Second Conditional Clearance on Joint Venture

On February 9, 2012, the Ministry of Commerce ("MOFCOM") published its first conditional clearance decision in 2012, approving the proposed joint venture ("JV") established by Henkel Hong Kong Holdings Co., Ltd. ("Henkel HK") and Tiande Chemical Industry Co., Ltd. ("Tiande") ("Transaction"). This is the second conditional clearance decision in relation to a joint venture and reaffirms MOFCOM's approach that formation of a joint venture does constitute a notifiable transaction under the Anti-monopoly Law ("AML").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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