Vie Agreement Template

Agreements. The concept behind a VIE structure is that control is acquired through legal agreements and not through the holding of shares. Together, the agreements aim to provide Dangdang Information, for the most part, with all the economic benefits of Dangdang Kewen and the obligation to bear all its losses. Dangdang uses five chords to achieve this. These chords are typical of most life structures: call option agreement. The founders undertake to sell Dangdang Kewen to Dangdang Information at any time for the initial capital contribution. The payment price can be deducted from the credit. From a practical point of view, the option cannot be exercised unless China at some point allows foreign investment in companies such as Dangdang Kewen. Loan agreement. The founders borrowed funds from Dangdang Information to capitalize on Dangdang Kewen.

By using information from Dangdang instead of Cayman Island`s parent company for the loan, there is an agreement between two Chinese companies, which avoids the need to deal with the public administration of foreign exchange. Technical Assistance Agreement. Dangdang Kewen agrees to use the Dangdang Information as an exclusive technical service provider, including platform and technical support, maintenance and other services. Through this agreement, Dangdang extracts the profits of Dangdang Kewen. Transfer pricing, which determines the amount of the fee for technical services, creates a tax risk that I will discuss in more detail in a later contribution. Power of attorney. The founders give Dangdang Information power giving it all normal shareholder rights, including voting, participation in shareholder meetings, and execution of the call option agreement. Transactions. Dangdang`s registration statement does not contain details on how it will work, but there are a few clues.

The goal of each life structure will be to minimize the benefits in LIFE. The remaining gains in VIE create problems, because the definitive transfer of these profits to public shareholders is difficult and costly….

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