Will the Door Open Wider in the Aftermath of Alibaba? —Placing (or

34 Pages·2012·0.28 MB·English

Will the Door Open Wider in the Aftermath
of Alibaba? —Placing (or Misplacing) Foreign
Investment in a Chinese Public Law Frame
(cid:81)
Shen Wei*
Recent years witnessed a rising chorus of complaints from the foreign business
community concerning China’s protectionist regulatory environment and
increasing hostility to foreign multinationals. Among others, Google, Rio
Tinto and Walmart experienced various diffi culties in doing business in China.
Alibaba’s dispute with Yahoo and Softbank over Alipay’s ownership in 2011
again brought China’s telecommunications law and foreign investment policies
into the spotlight. This article examines China’s regulatory measures in tackling
the “variable interest entity” structure which has been widely adopted by foreign
industrial players and investors in order to access China’s telecommunications
market, and tries to “rationalise” these regulatory movements by offering a
political economy analysis.
Amid the global economic downturn, Eurozone crisis and Libya war in
2011, Alibaba, Yahoo and Softbank’s dispute over Alipay brought China’s
telecoms industry and, more importantly, foreign investment policies into
the global spotlight. The centre of this dispute is the legality of the “variable
interest entity” structure or the VIE structure, a transactional model or
device most foreign investors adopted in investing into China’s telecoms
sector, which is now under much tighter scrutiny of Chinese authorities.
This article considers recent regulatory instruments Chinese
authorities have taken in tackling the VIE structure in telecoms industry
and offers a possible rationale underpinning such movements in light of
China’s policy direction. The article is structured as follows. Part 1 details
the recent dispute among Alibaba, Yahoo and Softbank over Alipay’s
ownership. Part 2 discusses the creation and utility of the VIE structure
by foreign investors in order to sneak around restrictive Chinese laws
governing foreign investment in the telecoms sector. The VIE structure
will be analysed in terms of its functions and foreign investors’ incentives
* Special Oriental Scholar Professor of Law, Shanghai Jiao Tong University Law School; PhD
(LSE); Attorney-at-Law, New York; FHKIArb. The author is very grateful for Yu Baolu and an
anonymous referee’s comments on an earlier draft of this article, and of Yu Yue, Xu Mengshan
and Deng Yuyu for their assistance in researching the Alipay dispute. Special thanks also go to
Shanghai Education Commission for its research grant under the Eastern Scholarship scheme.
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562 Shen Wei (2012) HKLJ
of doing so against China’s regulatory background. Part 3 outlines recent
regulatory measures tightening up the regulatory space of the VIE
structure. Part 4 offers an insight into the underlying rationale of these
regulatory movements and an outlook of possible future developments
based on a political econ omy line of thinking. A short conclusion follows
in Part 5.
Episodes of Alibaba’s Alipay
The episode of Alipay brought the VIE structure into the global spotlight.
On 10 May 2011, Yahoo! Inc, which is a 43 per cent shareholder of
Alibaba.com Corporation (Alibaba), one of the largest Chinese Internet
companies, disclosed in its quarterly report that Alibaba’s online
e-commerce payment processing business, Alipay (similar to eBay Inc’s
PayPal), had been restructured. Hundred per cent of Alipay’s ownership
was transferred to a Chinese domestic company.1 The following day
Yahoo! Inc released a press statement indicating that Alibaba’s spinning
Alipay out of Alibaba occurred without the approval of Alibaba’s board
of directors or shareholders,2 which was rejected by Jack Ma, the CEO
of Alibaba.3
According to the notice of Alipay (China) Network Technology
Company’s application for the online payment business operating
license published by the Hangzhou Branch of the People’s Bank of
China (PBOC), China’s central bank, on 22 December 2010, the
current sole investor of Alipay was Zhejiang Alibaba E-Commerce Co.,
Ltd. (Zhejiang Alibaba).4 The basic information of Zhejiang Alibaba
retrieved from the offi cial web site of Zhejiang Administration of
Industry and Commerce, the local company registrar, shows that the
legal representative of Zhejiang Alibaba is Jack Ma,5 an 80 per cent
shareholder of the company.6
1 SEC fi lling Form 10-Q of Yahoo! Inc, 29 Apr 2011, http://www.sec.gov/Archives/edgar/
data/1011006/000119312511134295/d10q.htm. Unless otherwise indicated, web site materials
were checked in Nov 2011.
2 Press Release of Yahoo! Inc, 12 May 2011, http://www.sec.gov/Archives/edgar/
data/1011006/000119312511139078/dex991.htm.
3 “Xinhua Insight: Alipay Case Shows VIE Structure May Not be Safe Anymore”, Available at
http://news.xinhuanet.com/english2010/china/2011-06/22/c_13944523.htm.
4 The Original source is no longer available on the web site of Hangzhou Branch of the People’s
Bank of China. For a screen shot, see “Alipay Disturbance a False Alarm?”, available at http://
seekingalpha.com/instablog/911206-ichinastock/178174-is-alipay-disturbance-a-false-alarm.
5 Ibid.
6 “Alipay’s Buy-back”, Southern China Weekend (in Chinese), 4 August 2011, D 17.
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Vol 42 Part 2 Will the Door Open Wider? 563
Prior to the Alipay dispute, Alipay was a subsidiary of Alibaba.7 On
24 July 2009, the board of Alibaba decided by passing board minutes
t o transfer 70 per cent of shares in Alipay (then incorporated in
Cayman Islands) from Alibaba to Zhenjiang Alibaba. However, Alibaba
maintained its control over Alipay through a VIE structure, which was
used to circumvent the Chinese telecoms laws and rules under which a
telecoms business operation license can only be lawfully and validly held
by a pure Chinese company rather than a foreign invested enterprise
(FIE). Through the VIE structure, Yahoo and Softbank can continue to
control and enjoy economic benefi ts of Alipay via various contractual
arrangements while Alipay would be safe to secure a valid operating
license from competent Chinese authorities. Zhejiang Alibaba, labelled
as a consolidated affi liate of Alibaba in Alibaba’s 2009 Annual Report,8
was under control of Alibaba via the VIE structure until the fi rst quarter
of 2011.
Fearing that Alipay, being an FIE, might not be duly licensed in
accordance with a new set of administrative measures9 issued by the
PBOC in 2011, Alibaba then transferred the remaining 30 per cent of
equity to Zhejiang Alibaba on 6 August 2010 so that Alipay was able to
secure the license it needed to continue operating. In this sense, having
Alipay owned 100 per cent by a domestic entity is a necessary move. In an
interview with the China Entrepreneur magazine, Jack Ma disclosed that
Alibaba’s board had been in discussions of reorganising Alipay for almost
three years in order to comply with China’s regulatory restrictions on
foreign investment in e-payment operators. After the spin-off, Zhejiang
Alibaba owns 100 per cent of Alipay, which satisfi es the regulatory
requirement that Alipay is not owned by any foreign investor, via equity
or contracts. At this point, Zhejiang Alibaba became Alibaba’s VIE,
whose benefi ciary is Alibaba though its equity is owned by Jack Ma et al.
Things have changed dramatically since 26 January 2011 when the
PBOC sent a fax to Alipay requesting it to declare whether or not it
had a VIE arrangement with any foreign investor. This fax implicitly
indicated that Alipay’s application would not be accepted unless it is a
pure Chinese-owned company without any VIE type of arrangement.10
7 Jack Ma’s interview with China Entrepreneur Magazine, Available at http://www.slideshare.
net/stevenmillward/jack-ma-interview-july-2011.
8 Alibaba.com Limited Annual Report 2009, 82, Available at http://img.alibaba.com/ir/
download/201102/e1688_AR.pdf.
9 For details, see section 3.6 below.
10 “Termination of VIE Structure Not Necessary for License, But Different for Alipay?”,
iChinastock, 15 June 2011, Available at http://news.ichinastock.com/2011/06/termination-of-
vie-structure-not-necessary-for-license-but-different-for-alipay/.
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564 Shen Wei (2012) HKLJ
The PBOC’s fax indeed left Alibaba with no options as the validity and
effectiveness of Alipay’s existing VIE structure triggers the endorsement
of the State Council, which is almost a mission impossible in China’s
bureaucratic system. Consequently, Jack Ma decided to terminate the
VIE structure,11 with the sole purpose of complying with Chinese law
governing online payment businesses, and securing a valid license to
maintain the normal operation of Alipay.12
Thereafter, Alibaba, Yahoo and Softbank (a 29.3 per cent
shareholder) have been under negotiation to monetise Alipay, and
eventually reached a compensation agreement, under which Alibaba
would participate in the distribution of Alipay’s future profi ts but would
be subject to a cap on the amount of money it could receive in a sale
or initial public offering (IPO) of Alipay. Alibaba will receive between
$2 and $6 billion in proceeds from an IPO or any other type of liquidity
event (ie the evaluation of Alipay is $1 billion, or the sale of entire
Alipay’s assets).13 The amount to be paid to Alibaba in such events will
be calculated by multiplying Alipay’s equity value by 37.5 per cent.
Although there is no visibility into a timeline for Alipay’s IPO, Yahoo,
as a major shareholder, is entitled to force a liquidity event after 10
years from now on. Under the deal, Alipay will pay to Alibaba, prior to
a liquidity event like an IPO, a royalty and software technology services
fee, which consists of an expense reimbursement and a 49.9 per cent
share of the consolidated pre-tax income of Alipay and its subsidiaries.14
In addition, Alipay will continue to offer payment services to Alibaba
on preferential terms. This settlement agreement reduced both the
ownership and the share of earnings as Alibaba is no longer a benefi ciary
under a VIE structure after the restructuring given the fact that Alipay
is the largest online platform in the world in terms of its registered users
(550 million compared to PayPal’s 94.4 million), transactions and total
payment volume.15 Although the VIE structure has been abolished, this
compensation agreement continues to entitle Yahoo and Softbank to
11 Jack Ma’s interview with China Entrepreneur Magazine, Available at http://www.slideshare.
net/stevenmillward/jack-ma-interview-july-2011; “Jack Ma Terminated Alipay’s VIE Structure
in Q1 2011”, iChinastock, 15 June 2011, Available at http://news.ichinastock.com/2011/06/
jack-ma-terminated-vie-structure-with-alipay-in-q1-2011.
12 “Alibaba Group Clarifi cation with respect to Alipay Status and Related Statements by
Yahoo!”, Alibaba News, 15 May 2011, Available at http://news.alibaba.com/article/detail/
alibaba/100474800-1-alibaba-group-clarifi cation-respect-alipay.html.
13 Ibid.
14 “Alibaba Group, Yahoo and Softbank Reach Agreement on Alipay”, 29 July 2011, Available at
http://www.softbank.co.jp/en/news/press/2011/20110729_01/ (visited 15 January 2012).
15 Eric Savitz, “Yahoo Discloses Jack Ma Takes Control Of Alipay From Alibaba”, Available at
http://www.forbes.com/sites/ericsavitz/2011/05/11/yahoo-discloses-jack-ma-takes-control-of-
alipay-from-alibaba/.
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Vol 42 Part 2 Will the Door Open Wider? 565
enjoy Alipay’s economic benefi ts before and after its IPO or any other
liquidity event. Hence, the compensation agreement may, at least
economically, serve the function the VIE structure has played before
Alipay’s latest restructuring.
“Creative Compliance”—How and Why Is a VIE Structure Used?
The centre of the dispute among Alibaba, Yahoo and Softbank is the VIE
structure, which is essentially a set of contracts between a foreign entity
and an Internet company in China. In practice, foreign investors often
utilise the VIE structure to circumvent the entrance barriers imposed by
Chinese laws16 in some heavily regulated, highly restricted but lucrative
industrial sectors, which have not been entirely opened to foreign
investors.17
A VIE structure (as illustrated in Figure 1 below) is set up so that
foreign investors can invest in an offshore holding company, that is a
special purpose vehicle (SPV) that channels equity capital into a wholly
foreign-owned enterprise (WFOE) while Chinese shareholders of the
local telecoms entity will own shares of the SPV. Meanwhile, as the
WFOE, due to its foreign equity, is not qualifi ed to apply for a telecoms
operating license from the Chinese government authority, it nominates
the Chinese shareholders to own the operating entity that possesses a
valid telecoms operating license necessary for a business and operates
telecoms assets in China.
A control mechanism, involving use of pledges, proxies and
powers of attorney, will be established between the WFOE and the
nominee shareholders, thereby securing the WFOE’s control through
contracts and exercise all corporate controls over the operating
16 The most infl uential legislation relating to foreign investment in China’s telecoms industry is
the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises,
issued in 2001 and amended in 2008, according to which the ultimate foreign equity ownership
in a value-added telecoms services business must not exceed 50 per cent. PRC law remains, on
paper, compliant with the PRC’s WTO obligations. However, this has effectively proved to be
illusory since in practice it has been extremely diffi cult for FIEs to obtain telecoms operating
licenses even though the foreign equity is less than 50 per cent. Based upon this author’s
no-names basis enquiries to the Ministry of Industry and Information Technology (MIIT),
practically speaking, the MIIT has rarely approved an application for foreign investment into
a PRC telecoms business. It was reported that China had granted 22,000 telecoms operating
licenses but only 7 of them were granted to FIEs. Qingjiang Kong, “EU’s Monitoring of China’s
Compliance with WTO Obligations” (December 2008) EAI Background Brief No. 417.
17 Apart from the telecoms industry, China still maintains ownership caps on foreign investors
in such industries as banking and construction. Wei Shen, “Financial Services Regulation in
China”, in Andrew Halper and Carl Hinze (eds), Financial Services Regulation in Asia Pacifi c
(Oxford: Oxford University Press, 2nd edn, 2008) 58, 91–92.
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566 Shen Wei (2012) HKLJ
company whilst a shareholding control is not able to be achieved
under the current law. The nominee shareholders will also grant
an option to purchase their interest in the operating company to
the WFOE or the SPV, to be exercised at the optionee’s discretion
when relevant PRC laws relax the regulatory restrictions and allow
foreign investors to directly and solely invest in the industry. A
voting agreement may be necessary so as to enable the nominee
shareholders to take instructions from the WFOE or SPV when they
cast votes in the shareholders’ meetings. These contracts make the
nominee shareholders contractually act on behalf of the WFOE as
the shareholders of the operating company.18
Meanwhile, a cash extraction mechanism is put in place between
the operating company and the WFOE in the form of a bundle of
contracts by and between the WFOE and the operating company.
Pursuant to these contracts the operating company engages the
WFOE as its exclusive technology consultant and service supplier
to provide the technological consulting, technical training and
other services to the operating company in return for an annual
fee in the form of royalties or licensing fees. Other contracts such
as accounting services agreement and know-how or trademark
licensing contract can be entered into so that an increased revenue
stream can be secured. These commercial contracts can help the
WFOE to not only capture the operating company’s profits in
the form of service fees and royalties, but also effectively control
Chinese shareholders in exercising their shareholder power in
the voting process in the operating company. The VIE structure
may allow a foreign investor to be paid for its equity investment
(through the WFOE) based on the performance of the Chinese
telecoms company.
Through the VIE structure, the SPV invested by both Chinese and
foreign investors can successfully get access to the operating assets in
18 Nominees are customarily used to structure corporate transactions in order to circumvent some
regulatory or corporate default rules. One of the earliest company law cases probably was Pender
v Lushington (1877) 6 Ch D 70 (Court of Chancery), in which nominees were appointed by
the shareholder to defeat a provision in the articles that fi xed the maximum number of votes
to which any one shareholder was entitled. The chairman of the company refused to accept
the nominees’ votes and declared lost a resolution proposed by the shareholder who appointed
the nominees. The Master of the Rolls granted the shareholder an injunction restraining the
directors from acting on the basis of that the nominees’ votes had been bad. The ruling was
treated as an exception to the Foss v Harbottle rule, under which the company is the proper
plaintiff in an action relating to a wrong done to the company, and no action could be brought
if the wrong would be ratifi ed by shareholders in general meeting.
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Vol 42 Part 2 Will the Door Open Wider? 567
China, lawfully owned by the Chinese shareholders, which in turn helps
secure the telecoms operating license. More importantly, Chinese laws
and regulations are technically complied with.
Figure 1: VIE (or Nominee) Structure.
Chinese Foreign
Shareholders Investors
Equity
Equity
Offshore Holding
Investment
Co (SPV)
Dividends Equity
Offshore
China
Loan agreement
Pledge agreement
Option agreement
Assignment agreement Chinese
WFOE Escrow agreement
Shareholders
Business agreements
(for management Royalties and Equity
consultancy, technical service fees
services, split of
Operating Company
revenue, etc)
A less complicated transactional device, the “round-trip investment”
model, has been used by Chinese investors in restructuring their
businesses located in mainland China with the aim of achieving
various tax, regulatory and legal purposes. In a “round-trip
investment” model (as illustrated in Figure 2), an SPV needs to
be incorporated in a “satellite” common law jurisdiction, typically
Hong Kong, Cayman Islands, British Virgin Islands or Bermuda.
The SPV, owned or controlled by Chinese investors, then controls
an onshore operating entity either through direct acquisition or
contractual arrangement. If direct acquisition, the SPV acquires
and owns the equity capital in the onshore operating company,
which retains ownership and operates existing business assets. Thus,
the original Chinese investors own both the offshore SPV and the
onshore operating company. After the restructuring is completed,
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568 Shen Wei (2012) HKLJ
foreign investors invest into the offshore SPV. In essence, the
“round-trip investment” model is a less advanced variation to the
VIE structure.
Figure 2: “Round-trip Investment” Model.
Chinese Industrial or PE
Shareholders Investors
Equity Acquisition of
equity
Offshore Holding
Company (SPV)
Equity Dividends
Offshore
China
Onshore Operating
Company
Both the VIE structure and the “round-trip investment” model refl ect
the local business community’s preference to be “packaged” as foreign
investment,19 and thereby (i) achieving a preferential tax treatment;20
(ii) circumventing rigid Chinese FIE laws and thus attracting foreign
19 Terry Sicular, “Capital Flight and Foreign Investment: Two Tales from China and Russia”
(1998) 21 World Economy 589–602.
20 Prior to the promulgation of the uniform Enterprise Income Tax Law, the income tax rate
for an FIE was 15–25 per cent, while a tax rate of 33 per cent was applicable to a pure
domestic entity. By adopting a VIE structure or “round-trip investment” model, Chinese
companies and domestic shareholders may capture a tax break and enjoy more preferential
tax treatment. Even after the enactment of the Enterprise Income Tax Law, under which
both FIEs and Chinese enterprises are subject to the same enterprise income tax rate of 25
per cent, these transactional structures still enable shareholders to enjoy more preferential
tax treatment. The SPV is only subject to a withholding tax on the distribution of dividends
from the WFOE. The withholding tax rate is 10 per cent depending on the application of a
tax treaty and can be as low as fi ve per cent if the SPV is incorporated in Hong Kong. Any
payments of interest or dividends made by the SPV, and/or capital gains derived from the
exiting investment through the sale of shares in the SPV, are free of PRC tax. By contrast,
sales proceeds in a share transfer for a purely domestic company in China are deemed to
be taxable income. Together with other taxable incomes received in the same fi scal year
the proceeds are subject to a 25 per cent enterprise income tax after the deduction of the
deductible costs in that fi scal year.
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Vol 42 Part 2 Will the Door Open Wider? 569
investment;21 (iii) smoothening the overseas listing process;22 and (iv)
utilising concepts of preferred shares and preferential rights and thus
facilitating execution of merger and acquisition or private equity (PE)
transactions.
The VIE structure has now become the prevailing market practice
for foreign investors to invest into a China venture. Many China-based
Internet search engines or e-commerce sites such as Baidu.com, Sohu.
com, Alibaba.com, 51job.com, eLong.com, KongZhong.com adopted
the VIE structure, and these e-portals have been successfully listed in
either New York or Hong Kong. As of April 2011, 42 per cent of Chinese
companies listed in the United States have used the VIE structure to
run an Internet search engine or an e-commerce platform in China, and
thousands of unlisted companies continue to operate through the use of
the VIE structure.23
As a “forum shopping” strategy foreign investors land investments
into China through offshore vehicles because the offshore regime is more
fl exible and has higher standards, thus better supports multiple rounds of
debt and equity fi nancings. The VIE structure, like a “locked-in” market
norm, is the result of effi cient bargaining in a series of transactional
21 For example, if a foreign investor directly invests into a Chinese company and becomes
a shareholder afterwards, any amendments to the articles of association of the company,
transfer of equity capital, increase and reduction of the equity capital, and liquidation and
dissolution of the company are subject to unanimous consent of all the board members
(appointed by the shareholders in proportion to their respective equity percentages) and
approval of the original approval authority, which can be a painful and time-consuming
exercise. Exiting through a sale of equity in a company will also trigger approval from the
competent Chinese authority, ie the Ministry of Commerce, (MOFCOM) or its local branch
depending on the total investment amount. Moreover, under the PRC Equity Joint Venture
Law or PRC WFOE Law, other shareholders have a pre-emptive right to acquire the equity
of the selling shareholder and have the absolute consent right to any general transfer. No
transfer of an interest in an equity joint venture (EJV) or cooperative joint venture (CJV)—
including transfers of interests between the joint venture shareholders—can be made without
an amendment to the articles of association, the other parties’ consent, unanimous consent
of the board, and approval of the original approval authority. In the VIE structure or “round-
trip investment” model, however, the amendments to the articles of association of the SPV,
transfer of equity capital, increase and reduction of equity capital, and liquidation and
dissolution of the SPV do not require unanimous consent of all shareholders or the approval
of any governmental authority. This partially motivates both Chinese and foreign investors
to utilise these transactional structures.
22 Chinese companies seeking to list abroad generally prefer to use an offshore SPV as the listed
company due to various tax, legal and regulatory concerns. Taking Alibaba as an example,
the listed company is Alibaba, which is incorporated in Cayman Islands. Then, this offshore
holding company would be listed so as to fi nance from an offshore stock exchange. This can
avoid the troublesome securities regulations in China and the problematic stock exchange in
the domestic market.
23 Kathrin Hille, “China in New Push on Web Ownership”, Financial Times, 2 September 2011,
p 14.
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570 Shen Wei (2012) HKLJ
events.24 The advantages of this model are the possibility of avoiding
the burdensome Chinese corporate law and regulatory regime and,
in spite of the “switching costs”, reducing transaction costs. This
transactional device, as a type of an informal sanction, has helped more
and more Chinese companies “piggyback” on more user-friendly offshore
jurisdictions in order to facilitate private placement and future overseas
listings in Hong Kong, New York or elsewhere, thereby partially replacing
formal legal institutions in China.
Legality of the VIE Structure and Recent Regulatory C o unter Measures
Although VIEs have been widely used for years in China, the recent
Alipay case reaffi rmed that the VIE structure, having an ad hoc character,
is a matter of dubious legality, enforceability and sustainability. To date,
the VIE structure has never been tested in a PRC court25 and there is
therefore no certainty that the legality of such structure will be recognised
or that such a structure will not encounter regulatory scrutiny (or even a
crackdown) at a later stage. Foreign industrial and PE investors seem to
have taken the commercial view that the adoption of the VIE structure
is a business risk worth bearing.
The broad use of the “round-trip investment” model per se has had
a damaging impact on China’s tax pool, State-owned assets, foreign
exchange control and regulatory effi ciency. In addition, the “round-
24 This assumption is largely based on the effi ciency theory that lawyers, as a transaction-cost
engineer, are well-compensated and sophisticated enough to structure the transaction in the
most feasible and effi cient way. As a result, transaction costs in negotiating a new transactional
structure changing the existing equilibrium among the parties may be high in an economic
sense. See Ronald J. Gilson, “Value Creation by Business Lawyers: Legal Skills and Asset
Pricing” (1984) 94 Yale Law Journal 239, 243; Ian Ayres and Robert Gertner, “Filling Gaps in
Incomplete Contracts: An Economic Theory of Default Rules” (1989) 99 Yale Law Journal 87,
91–93.
25 The dispute between GigaMedia Limited, an online gaming company using the VIE structure
to do business in China, and Wang Ji, the shareholder of the VIE entity, was brought to both
Chinese and American courts. GigaMedia Limited lost its control over the VIE as Wang Ji
took away the company seal, fi nance chop and business license of the VIE entity. However,
GigaMedia Limited only sued Wang Ji on the ground of the latter’s breach of his fi duciary duty
in the Chinese court. On its face, the lawsuit in the Chinese court has nothing to do with the
legality and enforceability of the VIE structure. In the US court, Wang Ji made a claim that
the VIE structure is not effective and valid under Chinese law. It appears that the effectiveness
of the VIE structure in this case will only be adjudicated by the US court rather than the
PRC court. For details, see SEC Filing FORM 6-K of GigaMedia Limited, Available at http://
sec.gov/Archives/edgar/data/1105101/000134100410001910/giga_6k.htm (visited 30 Aug
2010); SECFiling Form 20-K of GigaMedia Limited (2010), Available at http://www.sec.gov/
Archives/edgar/data/1105101/000095012311063164/c19286e20vf.htm; Leodis C. Matthews,
“Its VIE structure Claimed a Sham: Allegations against China Variable Interest Entity (VIE)
Operations”, Available at http://www.eworldwire.com/pressreleases/212206.
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