Silicon Valley Legal Bible（19）SHEIN's Road to De-Chinaisation｜Why is SHEIN headquartered in Singapore? Is Singapore becoming the new Cayman? Mysterious tycoon Xu Yangtian
SHEIN is a brand that is "mysterious" if you want to use one word to describe it. Founder Xu Yangtian's photo can't be found on the whole internet, there is no Chinese version of the website, and even the name "SHEIN" is translated by netizens according to their company's English name "SHEIN".
More mysterious than its company structure, neither belongs to the VIE structure, nor belongs to the Zoom structure, another way to use Singapore as the headquarters. This also makes a lot of entrepreneurs to ask me, Singapore is not to replace Cayman? We open the company also want to go to Singapore? What are the differences and connections between the "two Zoom" structures of Jitterbug and Hitchhiker's? Let's take a look today.
Silicon Valley's 42 chapters, a customized legal encyclopedia for founders. I'm U.S. attorney Xiaoxiao Liu, and I'm here in Silicon Valley to provide you with an in-depth explanation of the legal logic behind entrepreneurship.
Shein is indeed a very mysterious company, at first you know nothing about it, but once you start to understand it, you will find that it is one of the world's largest e-commerce giants, valued at more than $100 billion, with the Peach Blossom Garden inside the "mountain there is a small mouth, as if there is light. Repeat dozens of steps, open up." To describe it, it couldn't be more appropriate.
Let's take a look at the companies under the global structure of Shein. Among the "two tones", Shein's corporate structure is obviously much simpler than that of Jitterbug's. After all, Shein's company structure is much simpler than that of Jitterbug. After all, SHEIN is a seller of goods, unlike Jitterbug, which has so many business units.
1. Brand Matrix
It is obvious that all the companies of Shein in China are held by Guangzhou Shein International Import & Export Co. And the foreign part of it, because the equity of foreign companies is usually not publicly available to find, we can only speculate through some clues, there is really no clue we can only be placed there piecemeal, so you will find that there are some companies can not see the equity relationship.
1.1 Romwe
First, let's take a look at the Shenzhen-based Romwe, which is the most prominent in the Shein brand matrix, with a more youthful female demographic and a focus on low-to-mid-priced women's apparel, such as students. Shein (SHEIN) was already cheap enough, this even lower price, then really do not know to what extent.
1.2 Zoetop Business Co., Limited
This company is mainly responsible for the e-commerce platform of Shein.
1.3 SHEIN Distribution Corporation
SHEIN also has a logistics company in California, which, as the name suggests, is responsible for logistics supply.
1.4 SHEIN Group, Limited
This is responsible for the retailers of SHEIN.
1.5 Make Me Chic
This is an online women's fashion store, a brand acquired by SHEIN in 2015.
1.6 Fashion Marketing and Merchandising Group, Inc
This is a digital marketing company based in Los Angeles.
2. The financing process
Further to the top of the architecture chart, you will see the investors of Shein (SHEIN), the valuation of Shein (SHEIN) also went from $44 million to $100 billion during the decade 2013-2023, ooh, up 2,000 times, and last year, the overall financing environment was not good, dropped to $66 billion, but still very high. The grade of investors is also rising step by step, there have been JAFCO Asia (JAFCO Asia), Sequoia Capital (Sequoia Capital), Pan-Atlantic Investment Group (General Atlantic), Tiger Global Management (Tiger Global Management), and other world's top venture capitalists to join.
3. The "de-Chinaization" nationality change process
As mentioned above, all of Shein's Chinese companies are held by Guangzhou Shein International Import & Export Co., Ltd. which is a wholly foreign owned enterprise, and some people start to wonder if this structure saves any taxes. I can tell you, in fact, many times the company structure is not to save tax, and may not even have any special intention, sometimes often because of some historical reasons, such as Guangzhou Shein International Import & Export Co. Shein Group (SHEIN Group) companies are basically in China, Guangzhou Shein International Import & Export Co., Ltd. is the headquarters, so it has been the Guangzhou company as a holding company, then later to set up a holding company higher than the Guangzhou company. The company's holding company, you say is directly to the Guangdong company's shareholders to change it, or the following companies in Hainan, Yiwu, Shenzhen, one by one to the new holding company below it? The former is obviously more convenient. In addition, if the Singaporean company directly holds each of the specific operating companies below it, then each of them will become a WFOE (Wholly Foreign Owned Enterprise), whereas if each of these specific operating companies is held by Guangzhou Shein International Import & Export Co. and if each of these specific operating companies is controlled by Guangzhou Shein International Import & Export Co. The review and maintenance costs of a WFOE are much higher than those of a domestic enterprise. This is also a cost consideration.
The "de-Chinaization" of Shein, or the process of nationality change, was accomplished by the change of shareholders twice in three years by Guangzhou Shein International Import & Export Co. Ltd. changed its shareholders twice in three years.
- The initial shareholder of Guangzhou Shein International Import & Export Co., Ltd. was Nanjing TOP PLUS Information Technology Co. Ltd., a domestic enterprise.
- Later, its shareholders became ZOETOP Business Co., Limited, a wholly-owned Taiwan, Hong Kong and Macao enterprise. This wholly-owned Taiwan, Hong Kong and Macao enterprise also belongs to the foreign capital, but compared to other foreign capital, there are many preferences, so it is categorized as a separate one.
- After that, its shareholders have become the Singapore-based Roadget Business Pte. Ltd. (Roadget Business Pte. Ltd.), we do not want to be too surprised by this "Pte. Ltd.", Singapore's companies are called what Pte. Ltd. After this step, Guangzhou Shein International Import & Export Co., Ltd. became a wholly foreign owned enterprise.
In addition to this, 9 out of the 10 companies that Shein's founder, Xu Yangtian, worked for in China have been canceled. This is one of the manifestations of the "de-Chinaization" of SHEIN, as its Chinese founder has withdrawn from holding shares in Chinese companies, is no longer active in the Chinese market, and has made the blood of SHEIN even more non-Chinese in every way. In addition to moving the company overseas, SHEIN has also become more non-Chinese in blood.
In addition to moving the company overseas, SHEIN founder Xu Yangtian has also become a permanent resident of Singapore. In the Hurun 100 list released in October 2023, Koh Yang Thian's place of residence has been labeled as Singapore.
4. Why set the headquarters in Singapore?
As soon as many people see that the headquarters of SHEIN is set up in Singapore, they start to think of it, and what kind of questions do they ask me?
"Mr. Liu, is it true that we have to set up our company in Singapore in the future?"
"Liu lawyer, Singapore is not replace the status of Cayman?"
"Lawyer Liu, is it possible to save a lot of tax by registering a company in Singapore?"
If you also want to come to ask these questions, I can tell you that the conclusion is "No", in fact, Haiyin (SHEIN) to set up the headquarters in Singapore is mainly for Haiyin (SHEIN) the company itself tailor-made program, does not have universal applicability. On the one hand, this unconventional architectural design of the public information was very little, on the other hand, Shein (SHEIN) this company is indeed too mysterious, can find the information is even less pathetic.
However, after my analysis, I can at least identify the following factors:
4.1 Avoid the label of "Chineseization".
Not only has the relationship between China and the United States become tense in recent years, but even during the honeymoon period of the past two or three decades, the relationship between China and the United States was characterized by both cooperation and competition. The Western world has always been wary of China. As a company that originated from China but only operates in overseas markets, it would like nothing more than to be treated fairly as a global enterprise rather than being labeled as a "Chinese company", and to minimize the possibility of being held back by a pair of invisible hands in the race for the global market.
4.2 Singapore Preferential Policies
Singapore has launched the Regional Headquarters Award/RHQ and the International Headquarters Award/IHQ. Companies that meet the requirements for setting up a Regional Headquarters Award/RHQ or International Headquarters Award/IHQ in Singapore will enjoy a preferential tax rate of 15% (as opposed to 17% overall corporate tax rate) on incremental qualifying income sourced from overseas for a period of 3+2 years. 17% overall corporate tax rate) on incremental qualifying income from overseas for 3+2 years. This policy has led to one-third of the world's Fortune 500 companies choosing to set up their regional headquarters in Singapore, including Chinese companies such as Alibaba, ByteDance, Tencent and IQIYI. Shein, on the other hand, has set up its global headquarters directly in Singapore, where it can be seen to have access to more tax incentives.
4.3 Uncertainty of listing site selection
Even after so many layouts, when SHEIN attempted to go public in the United States in 2023, it was still halted by the U.S. Securities and Exchange Commission (Securities and Exchange Commission/SEC), and more than two dozen U.S. members of Congress have jointly called for a halt to SHEIN's initial public offering in the United States, calling for a halt to any initial public offering in the United States. SHEIN is required to certify that it does not use forced labor. We won't go into the details, but the fundamental reason is that Shein sells things so cheaply that American retailers can't do business with them, so the Americans are leaning on Shein for dumping and unfair competition. Therefore, it is very uncertain where SHEIN can be listed, in this case, Singapore as a temporary place of incorporation becomes the most feasible choice for SHEIN.
4.4 The necessity of operation
Unlike ByteDance (ByteDance) or NVIDIA (NVIDA) this kind of heavy R & D company, Shein (SHEIN) does not have too much technical content, is a seller, so this kind of company heavy operation, it's the source of supply stability, smooth logistics is the whole Shein (SHEIN) the key to success, can't have any link off the chain, there was once a problem with the shipment of Guangzhou, Xu Yangtian all the staff in Nanjing transferred to Guangdong overnight, no matter manager or secretary, all ran to move the goods, visible Shein (SHEIN) is a very heavy operation company. Once there was a shipping problem in Guangzhou, Xu Yangtian transferred all the staff in Nanjing to Guangdong overnight, no matter the manager or secretary, they all ran to move the goods, it can be seen that SHEIN is a very heavy operation of the company, at this point I should say that we have to analyze a few multinationals, there is no one more than SHEIN needs the founder's hands-on. Under such circumstances, it was a good choice for SHEIN to choose a location that is not in China but is relatively close to China.
Jitterbug and Shein, the "two sounds", one "de-byte" and the other "de-China", can be called "de-globalization". These two companies, one "de-byteized" and the other "de-Chinaized", can be regarded as two classic cases of "de-globalization" in the new situation. However, the new company structure is far from being limited to this one, and what are the other companies' various ways of playing? In the next few issues, we will analyze some cases of multinational companies' equity structure.
Silicon Valley's Forty-Two Chapters, a customized legal encyclopedia for founders. I'm Liu Xiaoxiao, a U.S. attorney, and I'll see you in the next issue.
