What impact will the overseas investment regulations have on VIE enterprises?

If the new foreign investment law is really put into practice, it will have a great impact on four types of enterprises based on VIE.

1. VIE-based enterprises founded by foreign investors will face the situation that they cannot obtain legal business licenses, such as Youku, which will limit the immigrant tendency of entrepreneurs to some extent;

2. Most VIE structures controlled by foreign companies are enterprises founded by China people and later sold to foreign venture capital institutions. According to the new regulations, they will no longer be able to operate relevant licenses;

3. Enterprises founded by China people and listed overseas, but whose management rights are controlled by foreigners, can be recognized as foreign investors and lose relevant business qualifications; Tencent creates space, a platform for entrepreneurship.

4. For domestic individual-controlled start-up companies based on VIE, although they can be directly identified as China investment enterprises, eliminating the influence of the original VIE structure on the business license, in the long run, they will also lose the opportunity to obtain capital injection from foreign venture capital institutions.

Generally speaking, if this law is put into practice, it actually reflects the will of the state to a certain extent, that is, the state encourages and hopes that innovative enterprises originally planned to list overseas can raise funds from domestic RMB funds instead of US dollar funds and list on the domestic capital market instead of Nasdaq.

On the one hand, it is convenient for the state to supervise these enterprises, on the other hand, it can also allow domestic investors to participate in and share the dividends of innovative enterprises, which is highly consistent with the recent reform of the registration system promoted by the domestic capital market and the argument that VIE-structured enterprises return to A-shares.