Getting the most out of your call options

As per various merger and acquisition laws, restrictions on round-trip investment, examination and approval procedures for overseas listing and other related laws, when PRC private enterprises seek overseas financing by means of overseas listing, some PRC controlling shareholders realise their rights and interests in an overseas-listed company by means of entrusting foreign entities or individuals to hold their shares of said company (or in shares in shareholder entities of said company). This type of arrangement is often set up or executed in coordination with a call option scheme that will enable the PRC individuals to directly hold shares in the overseas company at a later point. In such a situation, one of the more difficult issues encountered is how to go through the foreign exchange legal procedures under PRC laws and regulations in order to ensure that those domestic individuals legally possess the overseas interests of such shares and that the proceeds from overseas with regards to the call option plan can be obtained.

Typical legal structure and applicable PRC laws and regulations