WOS UNION

Red Chip and VIE Architecture

Red chip structure refers to a structure in which a company whose main operating assets and business are in China restructures to have its equity controlled by an overseas company, in order to achieve the overseas listing and financing of the overseas holding company. VIE is a structure used to indirectly achieve overseas control of a Chinese company through an agreement when foreign investment is restricted in a specific industry. From initial planning and program design for cross-border investment and financing- related policies and equity incentive plans, to the implementation of the overall structure and opening of bank accounts, as well as the equity arrangement for overseas investors, WOS UNION can provide you with comprehensive services.

Our advantages

Overall Planning

Overall architecture design, tax planning, employee stock ownership plan (ESOP) platform settings

Institutional Investor

Equity valuation of domestic institutional investors (ODI mode, Warrant mode)

Individual Investor

Foreign exchange registration of domestic individual investors and founders (Circular 37)

Employee Stock Ownership Plan

Foreign exchange registration of equity incentive plans for domestic employees on overseas shareholding platforms (Circular 7)

Related services

Offshore Trust >

Overseas Direct Investment‍ >

Foreign Direct Investment‍ >

International Tax Planning‍ >

What is the process of setting up a VIE structure?

As each company's business, industry and equity structure of the domestic Operational Company (OPCO) are unique, the specific process needs to be determined case-by-case. Generally, the setting up of a VIE structure involves the following steps:

The establishment and bank account opening of offshore SPVs, before which the overall structure needs to be planned in details, including the top parent shareholding platform, the establishment of ESOP and the reservation of stock option, the establishment of financing entities, the choice of banks, etc. Different places have different requirements and policies, which require professional coordination and tax planning skills.
Circular 37 registration for founders and individual investors. In addition, if the OPCO has already institutional investors, it is necessary to consider ODI or other ways to remove the equity they own to overseas SPV.
Registration of WFOE: it involves the notarization of the overseas holding entity and the choice of WFOE registration place, which needs to be combined with the business situation, local policies and other factors.
VIE agreements: this involves agency agreements, loan agreements, exclusive subscription of share option agreements, equity pledge agreements, spouse confirmations, exclusive technical service agreements, etc. The parties to be contracted involve the founders, their spouses, offshore SPVs, WFOE, OPCO, investors, etc.
Issuing shares to investors: it involves Shares Purchase Agreements (SPA), filing by registered agent, certification of documents, etc.

The establishment of VIE structure, whether in the preliminary planning, or the subsequent establishment process, account opening, foreign exchange registration, equity delivery, etc., requires rigorous planning and coordination. Having a professional agent can greatly enhance the smoothness and efficiency of the whole process and assist you to successfully complete the overseas financing and prepare for future public listing.

The Masterplan of Your Global Business.

WOS UNION is a professional service provider that integrates business structuring, finance, taxation, and legal matters. We are committed to offering you peace of mind in your international business expansion.