Mr. Liu Hongru, who has worked in securities for 10 years, said, why should private enterprises go public? The thing to be solved is to "pass" by going up one flight of stairs. He does not advocate that all enterprises should be restructured and listed. He believes that the purpose of listing enterprises is to become bigger, enter the big market and enter the international market. If you make up your mind, you must pass the exam.
Liu Hongru also said, don't take listing as simple, but once listed, there are many benefits. He believes that once an enterprise goes public, its management transparency will be high and its reputation will be good. People in the industry will naturally like to deal with you and do business. He said that the listing of private enterprises will also be investigated.
It is understood that Jinjiang City has Hengan Group and Huayi Company listed in Hong Kong. In the future, the idea of Jinjiang City is to further guide enterprises to improve their core competitiveness, expand their industries, strengthen their enterprises and start their brands. At the same time, guide enterprises to jump out of product management and move towards capital management. It is reported that Jinjiang City is vigorously promoting enterprises to carry out capital management, and strive to have 3-5 enterprises listed in five years.
How do domestic enterprises reorganize overseas listing?
American securities market is the largest and most influential capital market in the world. In recent years, with the listing of,, LTON and LONG, the enthusiasm of domestic private enterprises to go public in the United States is growing. Since 2005, Dexin Wireless (CNTF), Baidu (BIDU), Focus Media (FMCN) and Zhongxing Micro (VIMC) have successively landed on Nasdaq, while "Suntech Holdings" (STP), with Wuxi Suntech Solar Power Co., Ltd. as its main business, has successively completed international private placement and IPO in a short period of one year, reaching 65,438+in 2005.
However, according to the author's experience as a China legal consultant for many non-state-owned enterprises including Suntech Holdings to go public in the United States, due to the specific living conditions and legal environment, private enterprises in China are facing a series of practical problems in the process of going public in the United States, which are mainly reflected in the process of overseas restructuring. If these problems can't be solved well, enterprises will face many difficulties or even failures in listing in the United States.
Why choose red-chip listing and overseas restructuring?
Non-state-owned enterprises (hereinafter referred to as "enterprises") are generally listed overseas in the form of overseas red chips, that is, investors (or actual controllers) of enterprises register an overseas holding company (usually a tax-free company or a Hong Kong company established in the British Virgin Islands, Cayman Islands and Bermuda) for the purpose of overseas listing, and inject all or substantial parts of enterprise rights (including equity or assets) into the company through overseas restructuring.
Red-chip listing is different from domestic joint-stock companies issuing shares in overseas securities markets and listing overseas ("overseas listing"). From a practical point of view, red-chip listing has more advantages than overseas listing.
Applicable law is more acceptable to all parties.
Because the main body of red chip listing is an overseas holding company, the company itself should apply the law of the place where the offshore company is registered, that is, the personal law with offshore law as the main body of listing. The offshore places usually chosen in the operation are all former British colonies (such as the above four famous offshore places), and their laws originally belong to the Anglo-American legal system and are of the same origin as the American company law. Compared with the laws of China, they are more easily understood and accepted by international investors, American regulators and exchanges. Among the above-mentioned offshore locations, Cayman Islands is considered as the best overseas holding company domain because of its perfect judicial system, stable legal environment, good corporate governance standards and convenient company operation procedures, and is generally accepted by American listed regulators and exchanges. At present, most of China's non-state-owned enterprises listed in the United States through red chips are overseas holding companies incorporated in the Cayman Islands as the main body of listing. Therefore, Cayman Islands is the first choice for China enterprises to issue shares in the US stock market through red chips.
For international investors, if the listed entities can apply the offshore laws belonging to the Anglo-American legal system and be under the jurisdiction of the relevant courts under the Anglo-American legal system, their concerns about investment security will be eliminated, which will be conducive to the overseas financing and listing of enterprises. For companies listed overseas, after listing overseas, they are still legal persons in China, and the laws of China, especially those of foreign-invested enterprises, must be unconditionally applied. Because there is still a gap between China's foreign investment law and Anglo-American company law, the consideration of investment security in company law and even China's legal system often affects the judgment of international investors on enterprise investment. This is particularly prominent in the process of international private placement.
The approval process is simpler.
Since China Securities Regulatory Commission cancelled the supervision of no objection letter on red-chip listing in early 2003, China enterprises have been listed overseas through red-chip listing, and there is no problem of approval in China. According to the State Council's Special Provisions on Overseas Issuance and Listing of Limited by Share Ltd and China Securities Regulatory Commission's Notice on Relevant Issues Concerning Enterprises' Application for Overseas Listing, overseas issuance and listing must be approved by China Securities Regulatory Commission before listing. Because it generally takes a long time for China Securities Regulatory Commission to approve overseas issuance and listing, it is not easy to predict and grasp. Therefore, through the listing of red chips, the procedure is simpler and the time is controllable.
The range of tradable shares is very wide.
In the process of red-chip listing, all the shares of overseas holding companies can be circulated in the exchange through legal registration procedures stipulated in the US 1933 Securities Law and 1934 Securities Exchange Law, or they can be sold in limited quantities according to the rules of the US Securities and Exchange Commission 144. In the process of overseas issuance and listing, except for the shares listed and circulated on the stock exchange, the rest of the shares generally cannot be directly listed and circulated on the stock exchange.
The equity operation is convenient.
According to the author's practical experience, the most prominent advantage of red chip listing in practice is the convenience of equity operation. Since the equity operation is completed at the level of overseas holding companies, the equity operation of overseas holding companies implements the authorized capital system. A large number of equity operations, including the issuance of common shares and all kinds of preferred shares whose rights and obligations are determined by the company itself, capitalization, equity transfer, stock exchange, etc. , can be handled by the company itself, can also authorize the directors or board of directors of overseas holding companies to decide, so it has great flexibility. At the same time, the registered capital of an overseas holding company only needs to be subscribed at the time of establishment, which greatly reduces the operating cost of the company's capital, and is especially suitable for China enterprises whose foreign exchange receipts and payments have not been fully liberalized under the capital account.
At the level of overseas holding companies, the capital contributions of shareholders and private investors, as well as the corresponding rights and obligations of shareholders, can be freely determined by all parties through consultation, which is very flexible in attracting and introducing overseas capital and is of great significance to flexibly meet the requirements of all parties including shareholders and private investors in the process of enterprise financing.
exempt from taxation
Overseas holding companies are the most widely known and controversial. Apart from the fees related to registration and annual inspection, the offshore government does not levy any tax on overseas holding companies, thus greatly reducing the cost of various flexible capital operations of listed entities in the future. Tax exemption is also one of the important reasons for the operation of red chip listing.
Overseas reorganization is the basic step of red chip listing. The purpose of overseas reorganization is to reorganize the rights and interests of enterprises through legal channels, and inject the rights and interests of enterprises into overseas companies, that is, the entities that will be listed soon. In the case of Suntech's listing, Power Solar System Co., Ltd, a British Virgin Islands company controlled by Mr. Shi, was established, and all the shares of the original shareholders of Wuxi Suntech Solar Power Generation Co., Ltd., a Sino-foreign joint venture, were directly or indirectly acquired through this BVI company, making this BVI company actually hold 0/00% equity of Wuxi Suntech/Kloc. Later, in the process of listing, Suntech Holdings was established in Cayman Islands. Suntech Holdings indirectly holds 65,438+000% interest in Wuxi Suntech by exchanging the shares of Suntech Holdings with the shares of the shareholders of this BVI company, so as to achieve the purpose of domestic enterprises' rights and interests entering overseas listed entities.
Overseas restructuring plans depend on industrial policies.
Overseas reorganization is not a simple shareholder change. As overseas holding companies belong to the category of "foreign investors", the result of overseas restructuring will lead to foreign investors holding all or substantial rights and interests of domestic enterprises. Therefore, overseas restructuring must conform to China's industrial policy on foreign investment, and overseas holding companies should conduct overseas restructuring in accordance with the Interim Provisions on Guiding Foreign Investment and the Catalogue for Guiding Foreign Investment Industries (revised in 2004), enter the industries where domestic enterprises are located, and make foreign investment according to the industries where enterprises are located.
The access of foreign investors directly affects the company's overseas restructuring plan. The restructuring plan is relatively simple when the enterprise's industry allows wholly foreign-owned holding. Generally speaking, overseas holding companies make a return investment to acquire all the shares of domestic enterprises, and the enterprises will be changed into wholly foreign-owned enterprises, so as to realize the effective merger of the financial statements of enterprises by overseas holding companies. Wuxi Suntech, whose main business is the production of photovoltaic cells, belongs to this type.
In the case that domestic enterprises are not allowed to be wholly foreign-owned, different schemes are needed for restructuring. The general practice is to set up a wholly foreign-owned enterprise in China through an overseas holding company according to the requirements of the American accounting standard "Variable Interest Entity (VIE)", acquire part of the assets of domestic enterprises, and obtain all or most of the income of domestic enterprises by providing monopolistic consulting, management and services and/or monopolizing trade for domestic enterprises. At the same time, wholly foreign-owned enterprises should also obtain the preemptive right, mortgage right and voting right of all shares of domestic enterprises through contracts. Through the above arrangement, the enterprise will become the variable interest subject of the overseas holding company and realize the effective merger of the financial statements of the overseas holding company. According to this plan, the reorganization should be carried out under the guidance of financial advisers with practical experience in American GAAP. At present, many China Internet companies listed in the United States, including Baidu, Shanda and Sohu, have reorganized overseas through the above similar schemes because the telecom value-added services involved are not open to foreign investment.
It is feasible for state-owned shares to withdraw through transfer.
There may be state-owned shares in the ownership structure of domestic companies. Can state-owned shares enter overseas holding companies through overseas restructuring? We often encounter this problem in practice. When domestic enterprises are preparing for overseas red-chip listing, state-owned shareholders often want to participate in overseas restructuring with other non-state-owned shareholders and inject their equity into overseas holding companies to hold the equity of overseas holding companies.
The State Council's "Notice on Further Strengthening the Management of Overseas Stock Issuance and Listing" stipulates that the transfer of state-owned shares to overseas companies for overseas listing, domestic enterprises or domestic equity holders shall obtain the consent of the provincial people's government or the relevant competent authorities in the State Council in advance according to their affiliation, and report to the China Securities Regulatory Commission for approval, and the State Council shall examine and approve according to the national industrial policy, relevant regulations and annual total scale. Therefore, from the rules, it is possible to inject state-owned shares into overseas holding companies, but from the practical point of view, the biggest problem of this scheme is that the examination and approval procedures are complicated, time-consuming and the results are uncontrollable. The above problems directly affect the process and opportunity of red chip listing of enterprises. Therefore, in practice, the above scheme is generally not feasible. A more feasible scheme is that in the process of overseas restructuring, state-owned shares will be withdrawn by means of transfer.
If the state-owned shares of domestic enterprises are transferred to overseas holding companies and withdrawn, they must entrust an asset appraisal institution with corresponding qualifications to conduct asset appraisal according to the Measures for the Administration of State-owned Assets Appraisal and the Provisions on Several Issues in the Administration of State-owned Assets Appraisal. After approval or filing, it will be used as the basis for determining state-owned property rights and asset prices. Therefore, in the process of overseas reorganization, the acquisition of state-owned shares of domestic enterprises by overseas holding companies should follow the principles of evaluation and filing, and the transfer price should not be lower than the evaluation value.
The purchase price of foreign-invested enterprises is more flexible.
The process of overseas reorganization involves the acquisition of the rights and interests of domestic enterprises by overseas holding companies, which involves the determination and payment of prices. In this regard, due to the different nature of domestic enterprises, the determination and payment of their prices are also different.
The Interim Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors (hereinafter referred to as the Provisions on Merger and Acquisition) shall apply to the merger and acquisition of domestic enterprises by overseas holding companies for overseas restructuring. These Provisions shall apply to the merger and acquisition of domestic non-foreign-invested enterprises (including equity merger and asset merger) by foreign investors.
In terms of pricing, according to the Regulations on Mergers, Acquisitions and Reorganizations, overseas holding companies and domestic enterprises applying for asset appraisal institutions adopt internationally accepted appraisal methods to evaluate the value of the equity to be transferred or the assets to be sold, and take the appraisal results as the basis for determining the transaction price. Neither party may transfer equity or sell assets at a price significantly lower than the evaluation result, and transfer capital abroad in disguise. There is no exception to the evaluation pricing principle in the Regulations on Mergers and Acquisitions. With regard to the time limit for payment of the price, according to the regulations on mergers and acquisitions, the overseas holding company shall pay the transferor in one lump sum within three months from the date of issuing the business license of the foreign-invested enterprise after the merger. If the time limit needs to be extended due to special circumstances, the transferor shall be paid more than 60% of the total consideration within 6 months from the date of issuance of the business license of the foreign-invested enterprise, and the total consideration shall be paid within 65,438+0 years ("deferred payment"). Therefore, the merger and acquisition of the above-mentioned overseas holding companies should actually pay the price as stipulated in the contract. In terms of the validity period of the transfer of rights and interests, according to the provisions of the Regulations on Mergers and Acquisitions, in the case of deferred payment, foreign investors should distribute their rights and interests to the acquired enterprises according to their actual contribution ratio.
If a domestic enterprise belongs to a foreign-invested enterprise, the equity reorganization of the foreign-invested enterprise by an overseas holding company belongs to the change of the investor's equity of the foreign-invested enterprise, and the relevant laws, regulations and provisions of the foreign-invested enterprise are applicable, especially the Provisions on the Change of the Investor's Equity of the Foreign-invested Enterprise (hereinafter referred to as the Provisions on the Change of Foreign Equity).
The laws and regulations of foreign-invested enterprises have no special provisions on the pricing and payment of equity transfer of foreign-invested enterprises reorganized overseas. Although the "Regulations on Mergers and Acquisitions" stipulates that the existing laws, administrative regulations and provisions on the change of foreign-invested enterprises' equity are applicable to the equity acquisition of foreign investors in China, if there are no provisions, it shall be handled with reference to the "Regulations on Mergers and Acquisitions". However, the pricing and payment terms for foreign investors to acquire the equity of domestic foreign-invested enterprises should be determined according to the agreement of the parties concerned and the provisions of the company's articles of association, and the provisions on pricing and payment terms in the aforementioned merger and acquisition regulations naturally cannot be applied.
This is because: first, foreign-funded enterprises have strong human nature. The capital contribution of investors in foreign-invested enterprises can be in the form of currency, buildings, factories, machinery and equipment or other materials, industrial property rights, proprietary technology, site use rights, etc. And its price can be determined by all parties through consultation, so its transfer can also be determined by the transferor and the transferee through consultation with the consent of the investor, which should be the proper meaning.
Second, the laws and regulations of foreign-invested enterprises and the provisions on the change of foreign-invested equity only stipulate that if investors transfer all or part of their equity to a third party, they only need to obtain the consent of other investors, but there is no evaluation requirement. Therefore, the above provisions actually exclude the requirement of evaluating the transfer of non-state-owned shares in the Regulations on Mergers and Acquisitions. At the same time, investors of foreign-invested enterprises can decide the way of equity transfer price by themselves, which has been recognized by the practice of equity transfer of foreign-invested enterprises in China.
Therefore, we believe that in the process of overseas reorganization of foreign-invested enterprises, in addition to the transfer of state-owned shares, assets must be evaluated and the transfer price must be determined according to the evaluation value. The transfer price of overseas holding companies in overseas reorganization of foreign-invested enterprises should be determined through consultation between the transferor and the transferee, with the consent of other investors, without evaluation.
Another feature of overseas reorganization of foreign-funded enterprises is different from domestic-funded enterprises. According to the Regulations on the Change of Foreign Equity, the effective time of equity transfer shall come into effect after the approval of the foreign investment examination and approval department or the change of the approval certificate of foreign-invested enterprises according to law, regardless of whether the equity transfer price is paid or not. Therefore, as long as the overseas holding company's acquisition of the original investor's equity of a foreign-funded enterprise is approved by the foreign investment examination and approval department, the overseas holding company will obtain the legal right to the acquired equity according to law. This has a great influence on determining the effective time of the acquisition in the audit.
The main ways to reorganize the sources of funds
The biggest problem faced by non-state-owned enterprises in the process of overseas restructuring is the source of funds to purchase the rights and interests of domestic enterprises. According to the Regulations on Mergers and Acquisitions, the overseas holding company shall pay all the consideration to the original shareholders of domestic enterprises within 3 months from the date of issuing the business license of foreign-invested enterprises. If the time limit needs to be extended due to special circumstances, after approval by the examination and approval authority, more than 60% of the total consideration shall be paid within 6 months from the date of issuance of the business license of the foreign-invested enterprise, and all the consideration shall be paid within 1 year, and the income shall be distributed in proportion to the paid-in capital contribution. How to raise a large amount of funds needed for overseas restructuring is a realistic problem that must be considered in the process of overseas restructuring.
Due to the strict management of foreign exchange under capital account in China, foreign exchange payment under capital account must be approved by the foreign exchange administration department, and foreign exchange can be sold and paid in banks only with the approval documents. According to the above provisions, when shareholders of domestic enterprises (including actual controllers) transfer their cash assets to the name of overseas holding companies, they must go through the formalities of examination and approval for overseas investment and obtain the approval of the State Administration of Foreign Exchange before making external payments. At the same time, because a large number of cash assets of shareholders of domestic enterprises exist in RMB, they need to be converted into foreign exchange first, and China strictly restricts the use of foreign exchange purchase under the capital of domestic residents. Therefore, it is difficult for domestic enterprises and shareholders to legally complete the payment of the restructuring price in the above-mentioned overseas restructuring with their own assets. In the practice of red chip listing, in order to solve the above problems, the following two solutions are usually adopted in practice.
First, the way to go abroad to bridge loan. That is, overseas qualified lending institutions provide overseas loans to overseas holding companies and their individual shareholders to pay the purchase price in overseas restructuring. The funds raised in this way are usually only used to pay the transfer price of overseas restructuring equity.
Second, the way of issuing convertible preferred shares overseas. That is to say, the overseas holding company conducts private placement on the condition that the acquisition is completed, and issues preferred shares (usually referred to as "preferred shares") that can be converted into common shares of overseas companies to overseas investors. The shareholding ratio between the shareholders of the overseas holding company and the new private investors of the overseas holding company shall be determined by both parties through consultation. These preferred shares can be converted into common shares in an agreed proportion after the company is reorganized or listed. This method can be used to raise the transfer price of overseas restructuring equity, and can also be used as the liquidity needed by overseas holding companies to issue shares in a targeted manner.
The choice of the above two methods depends largely on the company's operating conditions and its attractiveness to investors. The company's business and operating performance have exploded, and the company's operating performance is attractive enough for investors. The funds needed for overseas restructuring can be raised by issuing preferred shares. The equity ratio between the original shareholders and new investors of an overseas company shall be settled by both parties through consultation according to the operation and financial status of the enterprise.
The influence of American GAAP on overseas restructuring and its financial consequences
The influence of American GAAP on overseas restructuring and its financial consequences is mainly FASB141("FASB" is the abbreviation of American Financial Accounting System Committee, namely "Financial Accounting Standards Committee") and FIN 46 (FASB Interpretation 46) on variable stakeholders.
The main influence of FASB 14 1 is that different accounting treatment methods adopted in overseas reorganization will directly affect the financial statements of listed entities after the completion of overseas reorganization. Under American general standards, there are two main accounting methods for overseas reorganization, namely, purchase accounting method and joint accounting method. The Purchase Law regards overseas reorganization as the acquisition of domestic enterprises by overseas holding companies, so it is regarded as a new subject with no continuing business relationship with the original enterprises, and requires the acquiring enterprises (overseas holding companies) to record the assets and liabilities of enterprises (domestic enterprises) according to the acquisition cost (acquisition price). At the same time, the concept of fair market value (FMV) is introduced into the purchase method, which requires the fair market price evaluation of the net assets of the purchased enterprise, and the difference between the acquisition cost and the fair market price is recognized as goodwill and amortized. The equity merger law regards the overseas holding company, the main body of overseas reorganization of enterprises, as the continuation of the owners' rights and interests of domestic enterprises. The assets and liabilities of the enterprise are recorded at the original book value, and goodwill is not recognized, that is, the overseas holding company is only a continuation of the domestic enterprise.
The biggest difference between the purchase method and the equity method lies in the different financial impact on overseas holding companies. Under the purchase method, the assets and liabilities of overseas holding companies must be reflected in the consolidated balance sheet at fair market value, and the difference between the cost and the fair value of net assets is partially recognized as goodwill amortization. This problem does not exist in equity. As a result, the income of listed entities in the future accounting period will be quite different, thus affecting investors' enthusiasm for investment in the company. Because the two methods have different financial effects on enterprises, American accounting standards have always restricted the choice of equity combination method, and recently cancelled the application of equity combination method in the process of enterprise merger. Only when the reorganization has the same control and meets certain standards and conditions can the equity merger method be applied. Therefore, how to combine the requirements of FASB 14 1 to carry out overseas restructuring, especially private placement, directly affects the financial consequences of listed entities.
Due to the different situations of overseas reorganization, the financial results of enterprises before and after reorganization may be quite different. In order to avoid the above-mentioned financial treatment leading to great changes in the company's operating performance, and thus affecting the listing process, we suggest actively introducing financial consultants who are proficient in American accounting standards and have practical operation ability to participate in the planning and formation of overseas restructuring plans.
FIN46 is FASB's opinion on how to determine the variable interest entity (VIE) and merge it into the financial statements of the parent company according to the fact that traditional voting rights cannot decide whether to merge the financial statements. If an entity has no control relationship with another entity, but its interests and risks depend entirely on this other entity, then this entity constitutes a VIE of another entity, and the statements of both parties should be merged. The determination of VIE should usually meet the following two criteria: first, the risk capital of VIE is obviously insufficient, that is, if all its capital is not supported by the merging party (parent company or its affiliated company), the enterprise operation will be unsustainable; Second, the shareholders of VIE are only nominal shareholders in law and cannot enjoy the actual voting rights. At the same time, due to the promises or guarantees of the merging parties, the losses they caused to the company were exempted. They have no real interest in the company's operating results, nor do they enjoy the right to distribute the remaining property after the liquidation of VIE Company. When the above two conditions are met, the company shall merge its financial statements with the parent company that actually controls it.
In the process of red-chip listing, when domestic enterprises are engaged in franchise industries and cannot be directly controlled by foreign investors, FIN 46 is usually used as the accounting basis for overseas restructuring plans. As foreign investors, overseas holding companies cannot directly enter the industries where domestic enterprises are located and wholly own or control domestic enterprises. Therefore, the original shareholders usually hold domestic enterprises in name, and at the same time, overseas holding companies monopolize all the business activities of domestic enterprises and control all the income and profits of domestic enterprises by setting up foreign-funded enterprises directly or in China. Except for a small amount of profits left in the company, the rest of the income and profits all flow to overseas holding companies through various operating arrangements. At the same time, the board of directors of domestic companies grants all the control rights to the personnel appointed by overseas holding companies, and the overseas holding companies pledge the original shareholders' shares of domestic companies, thus realizing absolute control over the shares of domestic companies and the board of directors. Through the above-mentioned series of arrangements, although domestic enterprises are still regarded as independent domestic enterprises in law and will not violate the restrictions on foreign capital transfer, in fact, all the operations of the company and its corresponding assets, income and profits are owned by and actually controlled by overseas holding companies. In this case, domestic enterprises meet the above criteria of VIE, that is, the VIE should be incorporated into the declaration scope of overseas holding companies. China Internet companies listed in the United States, such as Shanda and Sohu, all completed their overseas restructuring through VIE. I hope it helps you!