A Research On The Risk Management And Strategies On VIE Contracts Structure

VIE is the abbreviation for Variable Interest Entities,we also could call it as agreement control.It is a model for Chinese companies to get foreign investment to circumvent the state's foreign investment restrictions or cumbersome approval procedures for restricted industries.Agreement control not only helped the domestic excellent enterprises across the heavy obstacles to the realization of overseas financing market,but also helped foreign assets into China's restrictive industry.However,since the Alipay event happenned,the hidden riskes of VIE structure can not be ignored and would bring huge negative impact on the development of company.Thus,it is an indispensable step that enterprises explore the specific risks which come from the VIE structure and put forward some reasonable and targeted risk responses.At first,this paper systematically introduced and analyzed the concept of the VIE structure and the risk management.The second step was to make an introduction on the processes of the VIE structure of the Education Company Limited and to analyze the possible risks included the legitimacy risk of VIE structure,the risk of foreign exchange control,the information disclosure risk,the tax risk and the corporate governance structure risk in the company.This essay put forward several specific measures to deal with the risks of the VIE structural from three aspects that were domestic companies,foreign companies and relevant departments of the country.Domestic companies should avoid and prevent risks through those strategies.Firstly,the company should strengthen the internal governance and internal control by improving the internal management structure of company.Secondly,the company should enhance the internal control,internal supervision and legal supervision of the enterprise.Thirdly,the company should establish a sound corporate image and a completed information disclosure rules and regulations.Last but not least,the company should clarify the corporate trust responsibilities.It is important for overseas companies to make sufficient investigations of the domestic operating entities before entering into an agreement with them.Since the contract was signed,the overseas entity should also have established an effective independent director system to supervise the domestic entities.The relevant state departments should strengthen the regulatory functions and improve the introduction of relevant laws and regulations.The research and conclusions of this paper could provide references for the enterprises that will use or already use the VIE structure to identify,prevent and deal with the risks of VIE and make contributions to standardize the domestic and international capital market order.