Own a significant stake in a US based company (Company A)
Want to set up a China operation (Company C) for a similiar biz space, but not direct compete with the US biz
Both or one of the entities above will IPO in US and/or China
Solution used:
Set up a holding company B in BVI
B holds both A & C. C is considered a WOFI entity in China.
Stake holders in A and C are issued stocks in B. A conversion ratio is also set up to convert existing or new company A and company C shares to company B share.
The advantage of this set up:
Tax benefit - C will not make any profit, so no profit tax will be paid in China. B ownes all IPs and license them to use by A & C, thus can flow profit as license fee payment from both A and C, further reduce tax
B controls majority/all ownership to A & C
