(By You Yunting) The other day I had a conversation with a lawyer of a foreign law firm. That lawyer, who specializes in handling legal affairs of VIE financing on behalf of the investment side, told me that many startups would sign investment agreements proposed by investors directly without any argument. To be honest, I can hardly understand nor agree with this kind of practice. I think investors may actually feel ambivalence in face of such situation, too. On one hand, they can get more control over the invested business as well as other extra benefits. With probably unfair terms being included in an investment agreement, investors may be happy to have a favorable position in the relationships with startups. On the other hand, the investors are expecting to gain lucrative profits, so they may doubt whether the startups will be able to win fierce competitions of the market as they behaved so obediently when making investment agreements. This article talks about common points of financing negotiation between startups and investors as well as startups’ internal equity allocation issues.
The Guiding Catalogue of Foreign Investment in China (the Catalogue) revised in the last year has come into effect on 30th January, 2012. The new Catalogue contains some modified regulation on foreign investment in China, and today Bridge IP Law Commentary would like to introduce you the change in respect of internet business in the Catalogue. (the image above is the logo of myspace.cn, invested by Mr. Rupert Murdoch through VIE, which is claimed temporary shut down for technology reasons)
I. Permission of foreign investment in online music industry
Highlights: To introduce the legal restrictions on foreign companies to invest in service of operating online music in China and the practical ways that multinationals provide local online music services in China.
As recent news says, the streaming subscription music website Pandora (NYSE:P) will enter into P.R. China, and is head-hunting a capable CEO. However, Pandora’s online music service by China laws shall be categorized as telecom value-added service as well as internet culture service. Though the foreign investment in telecom value-added service is legally permitted, the internet culture service remains banned.