[Abstract] The Variable Interest Entity structure is adopted broadly for Chinese enterprises in sensitive areas， such as restricted and prohibited industries， to seek overseas listing. The VIE structure is operated through a Listed Company typically domiciled in Cayman Islands， through a series of contractual agreements among the Listed Company， the Wholly Foreign Owned Enterprise in China， the Operating Company. This thesis aims to study VIE structure using Alibaba as an example， and analyze relevant impacts and risks.
[Key Words] Variable Interest entity； VIE structure； Alibaba； overseas listing； foreign investment； control
I.Introduction
The Variable Interest Entity （VIE） structure is designed typically for Chinese companies in sensitive areas in China， such as the Internet industry， to get listed in other countries. It has been 15 years for many Chinese giants to seek overseas listing ever since the Sina Corporation first adopted the VIE structure in 2000 Alibaba Group Holding Ltd. （Alibaba） had its Initial Public Offering in New York Stock Exchange in September， 2014， which was the third largest in history. Alibaba now has a greater market capitalization than CitiGroup and Facebook.
A.1.Regulatory Restrictions in China
a.⑴Restrictions Regarding Company Listing- Domestic Listed Company
In addition to procedural requirements demonstrated in various Chinese regulations including Corporation Law， Security Law and Administrative Measures for the Initial Public Offering and Listing of Stocks， public listing in China is scrutinized.
When an issuer seeks its initial public offering， it shall have a positive net profit of over 30 million Yuan accumulatively within the latest 3 accounting years. There are other mandatory requirements regarding issuer’s financial capacity， such as its total amount of stock capital and the proportion between intangible assets and its net assets.
b.⑵Restrictions Regarding Company Listing- Companies Listing Overseas
As policies loosen up， regulations no longer require the issuer to meet significantly high financial standards. However， when issuing stocks to given or non-given investors or listing overseas listing， intending companies shall get approval from the Securities Committee of the State Council， which is more difficult in practice than domestic listing and rather unpredictable.
c.⑶Restrictions on Foreign Investment
For the purpose of introducing advanced technology and protecting local economy， the Guidance Catalog of Industry with Foreign Investment divides all industries into four categories： encouraged， permitted， restricted and prohibited. The Ministry of Commerce restricts or prohibit foreign investment in sensitive areas， among other things， the Internet industry.