Sea Limited (SE), a Singapore based company, uses VIE structure

Tencent backed Sea Limited, a newly listed company in NYSE, is using the VIE structure similar to some of the Chinese technology companies.

  • Sea (name stands for South East Asia) provides gaming/ecommerce/digital pay services for countries in the south east asia markets (Thailand, Vietnam, Taiwan, Philippines, Malaysia, Singapore and Indonesia)
  • Sea is using the VIE contract structure to avoid any foreign investment restrictions issues - Looks like VIEs are used for Taiwan, Vietnam and Thailand

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  • And the risks mentioned in the registration statement sounds similar to some of the chinese tech company filings

    We rely upon structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations.

    We rely on contractual arrangements with our VIEs and their respective shareholders for a significant portion of our business operations, which may not be as effective as direct ownership in providing operational control.

    Our VIEs or their respective shareholders may fail to perform their obligations under our contractual arrangements with them.

    The shareholders of our VIEs may have potential conflicts of interest with us.

    Contractual arrangements in relation to our VIEs may be subject to scrutiny by the local tax authorities and they may determine that we or our VIEs owe additional taxes.

    We may lose the ability to use and benefit from assets held by our VIEs if such VIE goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

  • The major difference in Sea’s structure is that the VIEs are owned by local employees of the countries who do not have much (or may be none) equity interest in the company - In the Chinese VIE model, for the most part the VIEs are owned by the founders or executive management who has significant equity ownership.

    The shareholders of our VIEs are our local employees or other local citizens of the respective markets in which our VIEs operate. None of these shareholders has a significant equity interest in our company and thus their interests may not be aligned with ours, or they may have other potential conflicts of interest with us.

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