On 17 February 2023, the China Securities Regulatory Commission (CSRC) released “Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies” along with relevant notes and five regulatory guidelines (collectively, the New Overseas Listing Rules), which came into effect on 31 March 2023. The New Overseas Listing Rules introduced a new filing regime for overseas public offerings and listings by China-based companies. Companies incorporated outside of China (e.g. in the Cayman Islands) by Chinese individuals, but with their main business operations in China, must undertake a filing with CSRC when they seek an IPO on any capital market outside of Mainland China (CSRC Filing). 

This CSRC Filing requirement also applies to, if relevant thresholds are met, overseas-incorporated companies operating in Mainland China under a “variable interest entity” structure (VIE Structure), typically in business sectors that are subject to foreign ownership prohibitions or restrictions (VIE-structured Companies)1. At the time when the New Overseas Listing Rules were promulgated, there was speculation in the market as to whether these VIE-structured Companies  would be able to complete a CSRC Filing for their overseas listings. CSRC’s recent practice has shed some light on this issue.

On 14 and 15 September 2023, CSRC released two filing acknowledgement notices on its official website indicating the completion of CSRC Filings by two VIE-structured Companies. These are the first two examples of such companies which have successfully completed CSRC Filings under the New Overseas Listing Rules. 

We set out below a brief introduction to these two VIE-structured Companies based on publicly available information:

1. J&T Global Express Limited (极兔速递环球有限公司)

Company name J&T Global Express Limited (J&T) 
Place of incorporation
 Cayman Islands
Stock exchange to be listed Hong Kong Stock Exchange
Corporate structure summary2
  • In October 2019, J&T was incorporated by its Chinese founders as the ultimate offshore holding company of the group’s subsidiaries and affiliated entities.
  • In April 2020, J&T established a wholly foreign-owned entity in China (J&T WFOE) through its 100%-owned HK subsidiary.
  • J&T WFOE entered into a set of contractual arrangements (VIE Agreements) with the domestic operating entity (which in turn owns various subordinated operating entities) and its nominated shareholders in China, so as to gain control over, and  beneficiary interests in, the Chinese operating entities.
Main business
  • J&T is a global logistics service provider with business operations throughout Southeast Asian region, China, Saudi Arabia, UAE, Mexico, Brazil and Egypt.
  • In China, J&T primarily offers express delivery services, achieving a market share of 10.9% by parcel volume in 2022.
Reasons for adopting VIE Structure
  • Relevant PRC laws and regulations prohibit foreign investments in a business that operates and provides postal services and domestic express delivery of letters.
  • Given that the China operating entities of J&T group provide an integrated service with respect to its express delivery services, J&T believes it is neither legally nor commercially practicable to separate the domestic express delivery of non-letters business from J&T’s domestic express delivery of letters business (which is subject to foreign investment prohibitions).
  • In order to carry out the courier business operations (including domestic express delivery of letters) and maintain the licence and permits currently held by J&T group in China, J&T trusts that it is in the best interests of J&T to control the business in China through a VIE Structure.

 

2. Cheche Technology Inc. (车车开曼公司)

Company name Cheche Technology Inc. (CCT)
Place of incorporation
 Cayman Islands
Stock exchange to be listed Nasdaq
Corporate structure summary
  • In September 2018, CCT was incorporated by its Chinese founders as the ultimate offshore holding company of its PRC subsidiaries and affiliated entities.
  • In October 2018, CCT incorporated an entity in Hong Kong, which in turn established a wholly foreign-owned entity in China (CCT WFOE).
  • In October 2019, CCT WFOE entered into a set of VIE Agreements with the domestic operating entity and its nominated shareholders in China so as to gain control over, and  beneficiary interests in, the aforesaid operating entity (and its various subsidiaries).
Main business
  • CCT operates an online platform in China offering digital auto insurance transaction services, through which it provides auto insurance products from major insurance carriers or intermediaries to end consumers, and facilitates these transactions. CCT receives service fees from the insurance carriers or intermediaries for facilitating such transactions. As of December 2022, more than 95% of CCT’s revenue is generated through such business line.
  • CCT also provides, through the online platform, insurance SaaS solution products for insurance carriers and intermediaries.
  • The China operating entity controlled by CCT through a VIE Structure currently holds a value-added telecommunication licence (type B25) and an insurance brokerage licence.
Reasons for adopting VIE Structure
  • The value-added telecommunication services provided by CCT in China are subject to strict business licensing requirements and limitations on foreign ownership in the entity holding such licence.
  • In order to gain a greater flexibility in carrying out business and implementing business strategies in compliance with PRC laws and regulations, CCT decides to operate its business in China through VIE Structure.

 

Both the filing acknowledgement notices issued by CSRC to J&T and CCT include, amongst others, the following requirements:

  • within 15 working days of a successful offshore public offering and listing, the applicant should report to CSRC through an online information filing system; and
  • if the applicant fails to complete an offshore public offering within 12 months after the date of the CSRC’s filing acknowledgement notice, but intends to continue with the offshore IPO application, then an update filing should be made with CSRC.

The success of J&T and CCT in their CSRC Filings under the New Overseas Listing Rules conveys a positive message to the market. They demonstrate that CSRC Filings for overseas listings by VIE-structured Companies could be completed (subject of course to CSRC’s case-by-case review and discretions), even if the operating entity under this structure operates in a business sector in China which is prohibited or restricted from foreign ownership or investment.

Footnotes

1   Please refer to our article dated July 2023 for further discussions on China’s regulations on variable interest entity structure and their relevant developments: https://www.nortonrosefulbright.com/en/knowledge/publications/60b9aba5/chinas-regulations-on-variable-interest-entity-structure-and-recent-developments.

2   J&T operates its logistics business globally under a wider corporate structure. Only the corporate structure relating to its operations in China is included for the purpose of this article.



Contacts

Sun Hong
Sun Hong
Partner
Email
hong.sun@nortonrosefulbright.com
T: +86 (21) 61377020
Shibin Zhao
Shibin Zhao
Senior Associate
Email
shibin.zhao@nortonrosefulbright.com
T: +86 21 61377005

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