The investment operation route and current situation of private equity investment in China Private equity investment (Private Equit) includes what is usually called venture capital (or venture capital) that invests in early-stage and growth-stage companies and non-venture capital (mainly venture capital).

M&A investment, buy-out}. Private equity investment funds use perfect closed-loop operations to enter Chinese companies through equity investment, help Chinese companies increase their intrinsic value and help them go public, and then exit through equity transfer or sale at the appropriate time.

Obtain return on investment. When listed in the Mainland or Hong Kong, it is difficult to solve the exit problem of private equity investment funds due to policy restrictions such as listing thresholds, approval procedures, and equity liquidity issues. Therefore, the current popular approach in the market is generally

Through a certain method, local Chinese enterprises are transformed into companies controlled by overseas offshore companies, thereby achieving "overseas curve IPO" or "red chip listing". 1. Characteristics of offshore companies Offshore Company refers to.

A company registered outside its original domicile is simply a company whose place of registration and place of business are separated. Most of the countries and regions where the place of registration is located are British colonies, and the British legal system and judicial system have been retained to a large extent.

, has the most complete corporate law in the world and is protected by international commercial law. In order to attract investment, this country and region has used legal means to formulate and cultivate an economic area with particularly loose legal controls, allowing foreign business investors to operate in the country.

They set up international trade business companies and charge only a small annual management fee to these companies. After completing the necessary registration locally, these companies can carry out commercial activities in other regions, but they are not allowed to carry out actual business in the place of registration.

The world's famous offshore companies are registered in the British Virgin Islands, Cayman Islands, Bermuda and the Bahamas. As a relatively independent company form, offshore companies have the following characteristics: ① The business is highly confidential.

The places where offshore companies are registered clearly stipulate that the company's shareholder information, equity ratio, income status, etc. have the right to keep confidential. This confidentiality policy fully guarantees the security of the listed company and greatly reduces the risk of various incidents.

Risk. ②Light tax burden. Taxes in Cayman, Bermuda, Virgin Islands and other places are quite favorable, and no income tax and capital gains tax are levied on companies registered here. This means that domestic companies choose to set up offshore companies overseas.

Then it controls domestic companies through capital operations. Although companies engaged in actual operations in mainland China must pay corporate income tax, as the offshore holding company it invests in, the government of the place where it is registered does not tax the investment income of the holding company. The entire overseas

The corporate system of listed companies can avoid double taxation. ③ There are no foreign exchange controls in offshore jurisdictions. It is easy to raise funds and there are no restrictions on the transfer of funds and profits. Therefore, it is easier to attract private equity investment and is more convenient for private investors.

Complete withdrawal of equity investment funds.

Domestic startups can introduce the funds needed for development through offshore companies.

2. Reasons why private equity investment prefers offshore companies. Since my country’s capital account has not yet been fully opened, and in order to maintain national economic security, my country’s foreign investment policy strictly controls foreign securities investment.

This approach is very unfavorable to the investment, transfer and exit of equity.

For overseas private equity investment institutions, equity investment requires smooth exit channels and requires high liquidity of investment assets.

Therefore, they tend to invest in Chinese companies through offshore companies, taking advantage of the freedom of equity transfer in offshore companies to realize self-transfer of equity and facilitate exit at the appropriate time.

For company mergers and acquisitions, once overseas investors plan to transfer their investment projects, they only need to transfer their equity in the offshore company to the acquirer.

3. Offshore reorganization operation route The offshore reorganization process usually includes the following three steps: In the first step, domestic enterprises set up offshore companies overseas.

Shareholders of domestic companies (usually individuals) set up offshore holding companies with independent legal person status overseas so that overseas private equity investment institutions can inject funds into their offshore companies and invest in their own companies.