WSJ - Sep 15 - Western regulators are grappling with a growing list of frauds at Chinese companies listed overseas. Jiayuan.com is by all accounts an entirely above-board Chinese company. Because foreign investment is technically forbidden in the Internet services sector, Jiayuan.com created a "variable-interest entity," or VIE—a common feature of many Chinese listings. Under this structure, the operating part of the company and the overseas listed part are two completely separate entities. The Chinese-owned part signs a series of contracts with the listed entity to transfer revenues in a way that allows the books of the two companies to be consolidated under U.S. accounting rules. It's a risky structure since the foreign shareholders don't actually own the Chinese company. A rule issued in 2006 requires Chinese residents to register with the State Administration of Foreign Exchange (SAFE) before setting up offshore companies. Jiayuan's founders failed to do this when they created the offshore entities used in the VIE structure. Jiayuan says it has now completed the required registrations, but the question remains: Why was the IPO brought to market before this potentially fatal problem was resolved?
by Paul Gillis
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Posted by: Mark Brooks | Sep 18, 2011 at 02:27 PM
About VIE: China is a developing country. Its legal system is still not mature but keeps improving. VIE has certain risks although not huge, rather like a lot of companies in China. However VIE's provide a quick and easy way for foreign investors to invest in China's explosive internet market. Without it, there wouldn't be such great companies as Sina, Baidu, etc. Without it the China internet wouldn't have developed so fast.
About TradeMark: JiaYuan is a well managed company and has good support from the government. We believe the trade mark issue will be resolved peacefully.
As always, great returns comes from great risks.
Johnny DU, CEO, 51Taonan
Posted by: Johnny Du | Sep 18, 2011 at 02:45 PM
Its legal system is still not mature but keeps improving. VIE has certain risks although not huge, rather like a lot of companies in China. However VIE's provide a quick and easy way for foreign investors to invest in China's explosive internet market.
Posted by: web design Landon | Sep 26, 2011 at 06:13 AM