The VIE (Variable Interest Entity) structure is a type of offshore company structure, also known as the protocol control model. It is mainly applied to foreign-owned companies in China, so that foreign-owned companies can legally conduct business in China.
The core of the VIE structure is that an offshore company registered overseas controls the domestic entity through a blanket agreement, so as to achieve the purpose of foreign investment in sensitive industries. Specifically, the foreign parent company transfers the actual operation rights, income rights and control rights of the domestic entity company to the offshore company by signing a series of agreements, such as equity pledge agreements, equity disposal agreements, exclusive service agreements, asset equity transfer agreements, etc. In this way, the foreign parent company can achieve control over the domestic entity, but does not need to hold direct shares.
The emergence of the VIE structure is mainly due to the fact that China** has certain restrictions and regulations on foreign investment in certain sensitive industries. Through the VIE structure, foreign companies can circumvent these restrictions and regulations and enter the Chinese market in a legal manner.
However, there are also some controversies and risks associated with the VIE architecture. Some believe that the VIE structure can lead to *** problems, as foreign companies may gain access to confidential information in sensitive industries by controlling onshore entities. In addition, the VIE structure also has certain legal risks and stability issues.
Overall, the VIE architecture is a complex business structure, and its legitimacy, security, and stability need to be further refined and regulated. ** and relevant departments should strengthen the supervision and regulation of the VIE structure to ensure its legal, safe and stable operation.