Bai Wei looked at Mei Xiang snuggled beside Chen Cheng, as if she saw the very beginning of love.
She smiled and said, "You need to quickly organize Xingye Products’ financial reports and related legal documents, ensuring that all the data is complete, true and reliable. This is crucial for the subsequent equity swap."
Upon hearing this, Mei Xiang’s confidence grew, "These past few days, Xingye Products and Sanyo Group have almost completed this part of the work; it can be directly utilized."
Bai Wei continued, "That can also be considered a blessing in disguise."
She turned to look at Chen Cheng, who shared his thoughts before she could speak.
"Ms. Bai, I personally believe that setting up a company in the short term to acquire Xingye Products is too big of a target and may easily alert Sanyo Group."
Bai Wei didn’t answer but simply gestured for Chen Cheng to continue speaking.
"How about this, we select a suitable company from among the chamber of commerce members to carry out the acquisition in that company’s name."
Chen Cheng continued, "And through investing in this company, I acquire management and decision-making authority."
Chen Cheng was originally into quant trading, and this was relatively new to him.
Bai Wei pondered for a moment, "This could indeed reduce some risks. Using a chamber member’s company as a shell for the acquisition can divert attention. Your idea of gaining management and decision-making authority through investment is also very good, but it needs to be handled with even greater caution."
She thought for a while longer and then said a word, "VIE."
Bai Wei looked at Chen Cheng, "I’ll find you a company within the chamber of commerce. You don’t need a controlling share, nor even a majority stake, but through signing a special agreement, you could obtain the management and decision-making authority of that company, and thus acquire Xingye Products in the name of that company."
Mei Xiang blinked, "Can business really be done ?"
Bai Wei nodded, "Mr. Chen can sign an agreement with the original shareholders of this company, stipulating that you will be fully responsible for the acquisition and subsequent operations of Xingye Products, and the original shareholders will only have dividend rights without involving in the actual corporate management."
"This way, it not only avoids the risks of you directly making the acquisition but also ensures your actual control over Xingye Products."
Mei Xiang’s eyes lit up, she turned to look at Chen Cheng, "Brother Cheng, isn’t this what you call... wielding the emperor to command the princes?"
Chen Cheng smiled faintly, "Ms. Bai, that’s exactly what I mean."
Mei Xiang eagerly asked, "So how do we operate this VIE?"
To help Mei Xiang understand what a VIE is, Bai Wei signaled for a waiter and asked for paper and pen.
She took the pen and began, "Miss Mei Xiang, your analogy of wielding the emperor to command the princes is quite vivid, but the actual operation is much more complex."
"We’re constructing a VIE structure, also known as a ’Variable Interest Entity.’ It is essentially a form of control through agreements, rather than equity control."
She picked up the pen and paper and started to draw diagrams to explain:
"Let’s assume we find a suitable chamber member company, referred to as Company A. Company A is registered in Japan and has the required licenses and qualifications to conduct business."
"Mr. Chen will set up an offshore company, referred to as Company B, to invest in Company A. At the same time, you will need to establish a domestic company, referred to as Company C, which will be the main entity you actually operate."
Bai Wei drew three boxes on the paper representing Companies A, B, and C, then began to connect them.
"First, Company B will sign a series of agreements with Company A, including exclusive business operation agreements, equity pledge agreements, option agreements, etc."
"Through these agreements, even though Company B does not directly hold a majority of Company A’s shares, it obtains actual control of Company A, including authority over financial, operational, and personnel matters."
She drew a dashed line between A and B, labeling it "Agreement Control."
"Next, Company A engages in an equity transaction with Xingye Products to complete the acquisition. As Company A is a legally registered entity in Japan, this transaction is completely lawful and does not attract too much attention."
She drew a solid line between A and Xingye Products to represent the acquisition.
"Lastly, and this is the core of the VIE structure,"
Bai Wei pointed at Company C, "Between Company C and Company A, through a series of technical service agreements, consulting agreements, etc., the profits generated by Company A are transferred to Company C. This way, Company C, which you actually control, will enjoy the profits from Xingye Products."
She drew a dashed line between A and C, labeling it "Profit Transfer."
"The key to the entire structure lies in agreement control,"
Bai Wei paused her pen on the paper, "If operated properly, it would allow Mr. Chen to obtain actual control of Xingye Products without direct shareholding, and safely transfer profits domestically."
Chen Cheng carefully looked at the diagrams Bai Wei drew, thoughtfully considering each link.
He realized that this was a very ingenious plan, yet one filled with challenges.
Although Mei Xiang didn’t quite understand the details, she had full trust in Bai Wei. She believed Bai Wei would definitely be able to help her through the difficulties.
"Ms. Bai," Chen Cheng asked, "what should we pay attention to when choosing Company A?"
Bai Wei thought for a moment and said, "Firstly, it’s best if Company A’s business is somewhat related to Xingye Products, or at least doesn’t conflict."
"Secondly, Company A should have a healthy financial status without any potential legal risks."
"Lastly, and most importantly, the original shareholders of Company A must be trustworthy and willing to cooperate with us throughout the operation."