Chinese Self-Filing? Absolutely.

Can a Chinese company file on its own to start being a reporting company without a merger with a shell? We know that domestic companies can and do decide to file their own Form S-1 or Form 10 and go public without a shell. As we have written here, there are more attractions to this approach given some additional regulatory burdens on former shells included in last year’s Rule 144 amendments, but the process does take longer than a typical shell merger, so some companies are unable to delay going public and need a shell. So how would a Chinese company complete a self-filing if conditions warrant?

There are several options. First is to reorganize with a US-based parent company, and then that company completes the self-filing. The other approach is to reorganize with a non-US entity (many are set up in the British Virgin Islands) and consider filing as a “foreign private issuer.” The filing requirements are lower and either the common shares of the BVI company can trade or it can set up an American Depositary Receipt (ADR) arrangement with a custodian bank. Some financing sources, however, are less interested in FPIs because of the very fact that they report less often and less in general. I am not a Chinese legal expert, but I am thinking because of the nature of equity ownership of PRC companies, having the actual Chinese company directly list its ownership or ADRs here would be difficult. We are definitely seeing more interest in this approach.

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