The Department of the Treasury and other regulators have adopted Form SLT, used to gather information on holdings by foreign residents in long-term U.S. securities and holdings by U.S. residents of long-term foreign securities. Any U.S. resident entity, including private equity firms, holding reportable long-term securities equaling or exceeding $1 billion as of Sept. 30, 2011, need to file by Oct. 24.
Affected firms will need to file a single consolidated Form SLT. The Department of Treasury will use information gathered from the form to help formulate international financial and monetary policies, according the law firm Weil Gotshal & Manges LLP.
China Reviews Structure Used For PE Deals
China’s securities regulator is asking the government to clamp down on the controversial corporate structure called Variable Interest Entities, which are used by private equity firms to invest in Chinese companies, sister news service Reuters recently reported.
Any change could hurt China’s booming private equity market. “If this structure is prohibited, you’re going to see a shrinkage on a massive scale in terms of the number of potential foreign investors in China,” one lawyer said.
Variable Interest Entities have been used by non-Chinese investors to gain financial control of companies in industries that limit foreign ownership, such as telecoms, Reuters reported. These tend to involve a domestic Chinese company with licenses to operate in a restricted sector; the company is typically controlled through a series of service agreements, rather than shares, by foreign investors. Internet companies Sina, Baidu and Netease use these control agreements to give investors in holding companies listed offshore contractual rights to the domestic licenses and their earnings. They also have been used by some investors in some non-restricted sectors in order to avoid having to get regulatory approval from the Chinese authorities.
Rules On Raising Private Capital Reviewed
The Securities and Exchange Commission has formed an advisory panel of fast-growing companies and venture capital funds as it reviews whether to update rules on how private companies can access public investors, sister news service Reuters reported.
Specifically, the agency is examining whether its share issuance rules for private companies are outdated and impair innovation and job creation. The issue gained traction recently because banks and electronic markets allow investors to trade stakes in Internet companies such as Facebook and Twitter before they go public. Any changes to the rules could have implications for companies owned by buyout firms if a market for stakes in those companies develops further.