On The Legal Effect Of Control Protocol In Agreement Control Mode

Recently,with the arrival of the Chinese Depository Receipt(CDR)pilot,the agreement control model has once again been focused on by Chinese investors,further weakening the need for corporate financing in the Protocol control mode.Since Sina used the protocol control model for the first time in 2000 and successfully listed on NASDAQ,the agreement control model has been widely concerned by Chinese and foreign investors.Subsequently,companies mimicking Sina's use of the protocol control model for overseas listings abound,once becoming the mainstream model for overseas listing.However,there is a shadow behind the scenery of the protocol model.Since the model's inception,there has been a risk of compliance and legality.Since the Alipay incident,investors have been sceptical about the stability of their structure,and even once caused a sharp fall in the stock prices of Chinese concept stocks in overseas markets.In order to break through the difficulties of private enterprises financing difficulties,to avoid the supervision of national laws and regulations and policies,and also based on tax avoidance considerations,Chinese private enterprises created an agreement control model for overseas indirect listing.This model allows private enterprises to obtain overseas financing,allows enterprises to obtain development,and controls agreements as an important way for foreign investors to control the actual operations in China.Through a series of dazzling architectural designs at home and abroad and the formulation of a series of agreements,the agreement control model establishes awholly foreign-owned enterprise agreement to control the actual operating companies in the country by setting up one or more offshore companies abroad.Making the agreement to control alternative equity control has become the only magic weapon for foreign companies to control the actual operation of domestic companies.This mode of operation not only undermines the order of our country's laws,it also threatens the security of our country's related economic industries and causes damage to public interests.The control agreement circumvents the provisions of the laws and regulations that restrict foreign investment access.On the surface,the controlling party and the controlled party of the agreement control do not have an equity relationship.In essence,they already have the basic elements of equity control,and they violate the foreign-related equity investment related industries.Laws and regulations.From a formal point of view,each control agreement does not violate the constitutive elements of the contract,but as a series of contracts,it is in fact a violation of the constitutive requirements of the effectiveness of the contract in China's "Contract Law."Based on the above understanding of the company law and the interpretation of the contract law,I believe that the control agreement should be considered invalid because it does not substantially have the necessary conditions for the contract.The conclusion that the control agreement is invalid is only a discussion based on academic theory.Based on the consideration of institutional interests,it reasonably balances the conflict of interests between economic security and the development of private enterprises.Civil and commercial law has the principle of encouraging transactions.The contract is deemed to be invalid and requires extra caution.Based on the above considerations,the existing agreement control model should be encouraged to split and return to the domestic capital market.For enterprises that have not yet used the protocol control model to go public overseas,their adoption should be strictly prohibited.For enterprises that still use the protocol control mode after being forbidden,their control agreement is deemed to be invalid according to law.In view of the current lack of relevant legislation,in order to take into account the long-termoperation,it is necessary to speed up the formulation of a normative document at the legal level(such as the “Foreign Investment Enterprise Law(Draft Consultation Draft)” as published in 2015).If the agreement control model is explicitly prohibited and the effectiveness of its control agreement is denied,then there is no controversy over the invalidity of the control agreement.