Relevant Legal Issues Of Variable Interest Entity In Foreign Investment

VIE (Variable Interest Entities), means that an interest entity is the real or potential financial source of an enterprise, but the enterprise has no full control over the interest entity. The enterprise controls the interest entity by means of several contracts signing between the enterprise and the interest entity. VIE structure has been widely used in China in the business which foreign investment are banned or restricted for entering, such as internet, education, publication and medicine.In the past10years, many outstanding internet companies have landed on overseas stock market. VIE structure is an innovation on the background that domestic private enterprises and innovative enterprises cannot obtain adequate funding. However, in reality, the application of VIE structure has been experiencing many risks, including the possibility of changing of the policy, the unstability of the contractual control, and so on.To satisfy the financing demands of the enterprises and prevent the risks of VIE structure, the writer suggests to revise existing regulations, improve the financing environment and include VIE into the regulation of the authorities.