Chapter 10.1

“Boss can you give me a hint to track down Xu Jun’s hidden property?”

Qian Heng drank some water and asked, “Now what do you know about Xu Jun’s company, Tuan Tuan Online, which he’s planning to make public?”

Cheng Yao pulled out the industrial and commercial information she found on the company, “I have read it very well. Tuan Tuan Online has not experienced any abnormal changes since Xu Jun officially received his marriage license in China, nor has it had any capital increase or equity change.”

Qian Heng raised his eyebrows, “If I were you, I would not waste time looking into the operations of Tuan Tuan Online. Does Xu Jun look stupid to you? Do you think he does not know that Bai Xingmeng is staring at Tuan Tuan Online?”

“That’s……”

“In three years, Tuan Online has been able to raise about $210 million in capital through four successive injections1 from Temasek, IDG, Sequoia Capital and SoftBank.It’s going to go public on Nasdaq2, in the US.”

Cheng Yao nodded, ” Well, I’ve seen these too.”

Qian Heng stared at Cheng Yao: “So you’ve read it and thought you’re done? You didn’t find out the information that’s in there?”

Cheng Yao thought, ‘what information could she get there?’ Xu Jun and Bai Xingmeng had a prenuptial agreement and these few financings occurred either before the marriage or after the divorce…

“Have you never looked into the Chinese Internet companies? That if they want to be listed outside the United States they generally use the VIE model?”

“VIE?”

Cheng Yao was confused and looked up at Qian Heng. Seeing this, the corners of Qian Heng’s mouth twitched. If he wasn’t particular about his image, he would have rolled his eyes at this moment.

“VIE is the acronym for Variable Interest Entity. In our country, it is called “Agreement Control”, which means that the overseas registered listed entity is separated from the domestic business operation entity. Overseas listed entities control the domestic business entities through agreements, and the business entities are the VIE of the listed entity.”

Cheng Yao got to know a new term and she quickly noted it down, digesting the new knowledge in her mind.

“But why do we need to study the VIE structure? Isn’t that what lawyers, who deal with company listings and mergers and acquisitions need to learn…”

Qian Heng paused for a moment, and then glanced at Cheng Yao, “What kind of family lawyer is in your mind?”

“Huh?”

“Do you think that family lawyers only just help people mediate marriage disputes and investigate infidelity all day long? So you think to be a family lawyer, it’s enough to know about the “Marriage Law” and the “Inheritance Law” and there’s no need to master other laws? It may be enough for an average family lawyer, but I’m not an average family lawyer. A truly elite and professional family lawyer must also be an excellent commercial lawyer. One must not only be proficient in family law, but also in corporate laws, securities and fiscal laws, and taxation laws. Only then can you provide customers with differentiated services that no one else can replace, expand your service market, and be like me. Even if you have a bad temper, others can only pay.”

Cheng Yao grumbled in her heart, ‘It’s the first time I’ve heard someone say that he has a bad temper in such a straightforward way…’

“If you don’t understand the business structure, and the listing procedures of the Internet companies, how can you help your party to investigate the other party’s possible hidden property?”

“I have compiled information about all the various shareholding relationships of Xu Jun’s company with the related companies and subsidiaries. There are 15 companies that were set up during the marriage. Although I don’t know about the listing of the Tuan Tuan company, I know that I can keep a close eye on the 15 companies that can be used for asset division in the marriage.”

Qian Heng snorted coldly, “Of course you would put all these 15 companies in the list of subdivided properties without thinking about it. However, there are only 2 months before the statute of limitations expires. Within 2 months, do you think you can sort out all the financial and equity situations of these 15 companies one by one, and then figure out which one of them is the hidden property? Xu Jun is not a fool. He also has a dedicated accounting and taxation team. How many loopholes do you think we can find in the negative earnings report? Besides, many Chinese Internet companies lose money before going public.”

Cheng Yao bit her lip and did not speak.

“So we must find out which ones of these 15 companies play a crucial role in Tuan Tuan’s online listing, focus on investigating and collecting evidence, and make good use of the critical time of listing.”

” Okay, you don’t seem to know anything.” Qian Heng frowned, “Then I’ll start from scratch. First of all, why did Xu Jun choose to list in the United States instead of China? Do you know this ?”

“I know this! Because if Tuan Tuan wants to be listed on the domestic stock market, it has to meet the requirements in terms of income scale and profitability. However, Internet companies suffer losses in the early stages, including the long and complicated review of domestic listings. So, many companies transfer to overseas listings “

After Cheng Yao answered, Qian Heng’s face finally became better: “It seems that you can still be rescued.”

“……”

“There are usually two models for Chinese companies to choose to list overseas, one is that domestic companies list overseas directly, but the direct listing needs to meet the net assets of more than 400 million yuan and at the same time the after-tax profit over the past year should be more than 60 million yuan. They also must have the standard of raising funds of more than 50 million US dollars. Most internet companies can’t achieve this scale of earnings, so they can only seek another indirect listing model, which is to transfer assets to holding companies established in tax havens such as the Cayman Islands and the Virgin Islands and list them using the VIE structure.”

Cheng Yao was fascinated by this new information. She listened attentively, and subconsciously asked: “And then? How exactly does the structure of VIE help these companies get listed indirectly through these holding companies? What impact will it have on Xu Jun and Tuan Tuan Online? Why will studying the structure of VIE be a breakthrough point in finding the hidden property?”

“I have cooked your food, now do you also want me to feed it to you?”

“…”

Qian Heng snorted coldly, “I have given you the direction. If you want to be an excellent lawyer, you must have the ability to independently think and research. Don’t always reach out to others for your work.”

Cheng Yao nodded in shame. Although she was helped by Qian Heng this time, she was convinced. Even though Qian Heng had a bad temper and toxic personality, his business ability was really strong. Cheng Yao saw the huge gap between her and him. In front of Qian Heng who talked about work and professional issues, she was really only a primary school chicken3. Cheng Yao felt strangely satisfied to be scolded by such a talented person.

“Wait.”

”

”

Footnotes

A capital injection is an investment of capital into a company or institution, typically in the form of cash, equity, or debt.

NASDAQ, is an American stock exchange at One Liberty Plaza in New York City.

The term refers to someone who’s naive or immature.