Alibaba tweaks a controversial legal structure


IF YOU want to study how the legal title to assets worth many billions of dollars changes hands in China, then peer carefully at page 116 of Alibaba’s new annual report. The text is dense and you may have to put a cold towel on your head and read it several times. The gist is that the Chinese internet giant is reforming its legal structure, which uses a fragile and ingenious device known as a variable interest entity (VIE). Alibaba’s attempt to make its VIEs safer is to be welcomed and will be watched closely by China’s richest entrepreneurs, many of whom use them, too.

VIEs are ubiquitous, especially among the country’s internet firms, which have a total market capitalisation of over $1trn. The structure dates back to the early 2000s, when Chinese technology companies wanted to tap global capital markets in New York and Hong Kong and to set up international holding companies domiciled outside of mainland China. Yet their sensitive internet assets, such as licences, may not be owned…

Link to article: www.economist.com/news/business/21747699-jack-mas-role-firms-variable-interest-entities-will-be-reduced-alibaba-tweaks?fsrc=rss%7Cbus

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