20th Apr 2015 08:35
LONDON (Alliance News) - A number of foreign companies and some Chinese internet companies with stock market listings in the US could be facing a challenge in China under a proposed law which which may make a corporate structure they use illegal, the Wall Street Journal reported on Sunday.
Pearson PLC has been cited among a number of companies that use a structure called a variable interest entity in order to conduct business in areas of the Chinese economy in which foreign investment is restricted by the Chinese government.
But a law proposed by he Chinese government in January would mean the companies would not be able to continue those operations or could have to sell controlling stakes in the businesses to China-based companies.
In the case of Pearson, this could effect its Global Education & Technology Group Ltd subsidiary, acquired in a USD294 million deal in 2011. The company provides test-preparation services in China and is run under the variable interest entity structure.
"Like all business with a substantial presence in China, we are following the development of the new regulations closely. These regulations are still under review," a spokesman for Pearson told the paper.
http://www.wsj.com/articles/foreign-companies-at-risk-from-proposed-chinese-law-1429474352
By Sam Unsted; [email protected]; @SamUAtAlliance
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