What does vie architecture mean?

1. In the early days, most companies will set up a domestic-funded company by domestic founders, and then attract foreign investment when the enterprise becomes bigger.

2. Shareholders of domestic companies set up an overseas holding company overseas (generally in Cayman Islands or Virgin Islands) according to the same or similar proportion of their shares in domestic companies, which is the main body of overseas listing in the future.

3. Cayman or Virgin Islands companies usually set up primary subsidiaries in Hong Kong, because there are some reciprocal tax treaties between Hong Kong and Chinese mainland.

4. The Hong Kong company will set up a foreign-invested enterprise in China, namely WOFE, which will be a wholly-owned subsidiary of the Hong Kong company.

5. The wholly foreign-owned enterprise actually controls the domestic company, and obtains the economic benefits arising from the business activities of the domestic company by signing a set of control agreements (ie VIE agreements) with the domestic company and its shareholders.

6. After the 6.VIE structure is completed, the domestic rights and interests of representatives of domestic companies are injected into overseas holding companies, and their financial statements can also be merged by overseas holding companies. As a result, overseas holding companies become valuable, and the equity interests of all shareholders are also reflected at the level of overseas holding companies.