Document Type
Perspective
Publication Title
Emory Corp. Governance & Accountability Rev. Perspectives
Publication Date
1-1-2016
Abstract
Zhiyuan Liu examines how the structure of Variable Interest Entities ('VIE') under Chinese legal environment operates as a corporate governance mechanism in lieu of the traditional governance structure. Since an off-shore listed company cannot hold equity interests in the operating company in mainland China due to restrictive regulations in foreign investment, the VIE structure utilizes various types of contractual arrangements to gap the loophole where the listed company should play the role of shareholder in the lucrative mainland business. In spite of the complex covenants, this study by analyzing different VIE agreements' function and actual effects finds that listed companies in VIE structures can merely have limited control over profit-transferring process without any decision-making power. The article concludes that the recent legal reform in China might bring changes to VIE structures and substantiate the nominal rights under the typical VIE contracts or rights that investors should have had as shareholders.
First Page
2063
Volume
3
Recommended Citation
Zhiyuan Liu,
Basic Corporate Governance Pattern in Variable Interest Entities,
3
Emory Corp. Governance & Accountability Rev. Perspectives
2063
(2016).
Available at:
https://scholarlycommons.law.emory.edu/ecgar-perspectives/28