• Ran Yu is the VIE, but the entities financials are not consolidated in 2016
  • Will consolidate Ran Yu's operating results for the fiscal year ending December 2017
  • Key Excerpts
  • VIE Structure
  • VIE Risks
  • VIE Revenue

Key excerpts from filing(s) - related to VIEs

Prior to the Reorganization, the combined financial statements include the financial statements of the Transferred Entities since the date of incorporation, and were prepared on a combined basis. Following the Reorganization, the consolidated financial statements include the accounts of Yintech and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon combination and consolidation. The Group has no involvement with variable interest entities.
...foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in 2007, as amended in 2011 and in 2015, respectively, and other applicable laws and regulations.
We are a Cayman Islands company and our PRC subsidiaries are considered foreign invested enterprises. To comply with PRC laws and regulations, we conduct certain operations in China through a series of contractual arrangements entered into among Shanghai Xie Luo Information Technology Co., Ltd., or Xie Luo, Shanghai Ran Yu Information Technology Co., Ltd., or Ran Yu, and the shareholders of Ran Yu on January 3, 2017. As a result of these contractual arrangements, we exert control over Ran Yu and will consolidate its operating results in our financial statements under U.S. GAAP beginning with our financial statements for the fiscal year ending December 31, 2017.
For the avoidance of doubt, we did not consolidate the operating results of Ran Yu in our financial statements for the fiscal years ended on or before December 31, 2016.
These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entity. For example, Ran Yu and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.
The equity interests of Ran Yu, our variable interest entity, are held by Mr. Gang Xu and Mr. Dikuo Bo, both our Vice Presidents.
Their interests in Ran Yu may differ from the interests of our company as a whole. These shareholders may breach, or cause Ran Yu to breach, the existing contractual arrangements we have with them and Ran Yu, which would have a material adverse effect on our ability to effectively control Ran Yu and receive economic benefits from it.

Risks identified in filing(s) - related to VIEs

If the PRC government deems that the contractual arrangements in relation to Ran Yu, our variable interest entity, do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
We expect to rely on contractual arrangements with Ran Yu, our variable interest entity, and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.
Any failure by Ran Yu, our variable interest entity, or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.
The shareholders of Ran Yu, our variable interest entity, may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
Contractual arrangements in relation to Ran Yu, our variable interest entity, may be subject to scrutiny by the PRC tax authorities and they may determine that we or Ran Yu, our PRC variable interest entity, owe additional taxes, which could negatively affect our financial condition and the value of your investment.

Revenue information for VIEs not provided in SEC filings

Ownership and Voting power details

Related Blog Entries

Source(s)