Legal Consideration Of Looking At The VIE Mode From The Perspective Of Alibaba Alipay Case

VIE is a mode used more for overseas red chip listing currently. In this mode, theshareholding control of original traditional red chip mode is replaced by VIE, which isa disguised red chip structure. In the current legal supervision in China, VIE mode hasthe highest efficiency and lowest economic cost for overseas listing of medium andsmall-sized enterprises and is featured by predictability. However, as medium andsmall-sized enterprises become more and more in the global capital market, instabilityof protocol control leads to intense contradiction. The Alipay case set out in this textis a representative case of contradiction outbreak.In this text, the traditional mode (i.e. RTO and SPAC) of overseas listing ofdomestic enterprises as well as advantages and disadvantages of both modes wereanalyzed. How will protocol control mode, an optimized protocol control modestructure, occur in the SPAC mode? The maximum disputed point of protocol controlmode is identification of legality. In this text, the legality was analyzed from theperspective of legal practice operation, legal regulations and legal theory. Besides,stability of VIE is also the hotspot that draws public attention, how to guarantee thestability and protect the interests of all parties concerned are also very worthy ofanalysis.The current situation of VIE was analyzed and the improvement suggestionswere given at the end of this text. Firstly, the risks of VIE, how to mitigate risks and how to relieve after occurrence of risks were analyzed. The regulatory process ofChinese laws related to red chip listing was compared with legal supervision overprotocol control conducted by NASDAQ, New York Stock Exchange (NYSE) and theStock Exchange of Hong Kong (SEHK), which are main exchange market for listingof domestic enterprises, in detail, especially the main overseas exchanges’ attitudetowards demonstration of VIE after occurrence of Alipay case. The author analyzedthe current laws and regulations concerning supervision over VIE in detail and madehis own comments on the shortcoming by mainly analyzing the No.75document andNo.10Ordinance (Related party M&A) issued by the Ministry of Commerce. At theend of this text, the author made the long-term improvement comments, because theproblems existed in red chip listing may not be solved according to laws andregulations perfectly and need the sound development of the whole market. The Stateshould provide medium and small-sized enterprises with relevant supporting facilitiesof financing, e.g. improving the domestic main board, lowering the threshold oflisting and safeguarding the rights and interests of investors. Win-win can be obtainedonly if the whole economic market develops in a reasonable, healthy and orderly way.