Many companies doing business in China are using a structure which includes a company formed under the laws of the Cayman Islands (“CI”). Chinese technology and internet companies listed on U.S stock exchanges such as Actions Semiconductor, Baidu, CTrip, China Medical Technologies, China Sunergy, Focus Media, Longtop Financial Technologies, Noah Education Holdings, Shanda, Suntech Power, Tom Online,VanceInfo Technologies and Vision China Media are actually CI companies. The primary business reasons for an offshore structure are flexibility in an exit strategy, whether in connection with an initial public offering (“IPO”) or an acquisition; the possibility of reducing U.S. taxes; and reducing the impact of China’s currency exchange restrictions.

In the simplest form, the structure is a CI company with a China subsidiary. Investments are made in the CI company and the subsidiary is the operating company.

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