As filed with the Securities and Exchange Commission on August 10, 2018
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Weidai Ltd.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
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Cayman Islands
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6199
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Not Applicable
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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50/F, West Building, Fortune Finance Center
No. 33 Jiefang East Road
Jianggan District, Hangzhou
Zhejiang Province
The People’s Republic of China
+86-571-5812-3844
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Cogency Global Inc.
10 East 40
th
Street, 10
th
Floor
New York, N.Y. 10016
+1(800)221-0102
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Shuang Zhao, Esq.
Cleary, Gottlieb, Steen & Hamilton LLP
c/o 37
th
Floor, Hysan Place
500 Hennessy Road
Causeway Bay, Hong Kong
+852 2521-4122
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Chris K.H. Lin, Esq.
Simpson Thacher & Bartlett LLP
35
th
Floor, ICBC Tower
3 Garden Road
Central, Hong Kong
+852-2514-7600
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Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
†
provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered
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Proposed maximum aggregate
offering price
(2)(3)
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Amount of
registration fee
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Class A ordinary shares, par value US$0.0001 per share
(1)
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US$
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100,000,000
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US$
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12,450.00
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(1)
American depositary shares issuable upon deposit of Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333- ). Each American depositary share represents Class A ordinary shares.
(2)
Includes Class A ordinary shares that are issuable upon the exercise of the underwriters’ over-allotment option. Also includes Class A ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These Class A ordinary shares are not being registered for the purpose of sales outside the United States.
(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated , 2018.
American Depositary Shares
Weidai Ltd.
Representing Class A Ordinary Shares
This is an initial public offering of American depositary shares, or ADSs, representing Class A ordinary shares of Weidai Ltd.
We are offering ADSs to be sold in this offering. [The selling shareholders identified in this prospectus are offering an additional ADSs.] Each ADS represents Class A ordinary shares, par value US$0.0001 per share. We anticipate the initial public offering price per ADS will be between US$ and US$ .
Prior to this offering, there has been no public market for the ADSs or our shares. We will apply to list the ADSs on the New York Stock Exchange, under the symbol “WEI .”
We are an “emerging growth company” under applicable United States federal securities laws and are eligible for reduced public company reporting requirements.
See “Risk Factors” on page
13
to read about factors you should consider before buying the ADSs.
Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Per ADS
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Total
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Initial public offering price
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US$
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US$
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Underwriting discounts and commissions
(1)
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US$
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US$
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Proceeds, before expenses, to us
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US$
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US$
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[Proceeds before expenses, to the selling shareholders
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US$
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US$ ]
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(1)
For additional information on underwriting compensation, see “Underwriting.”
To the extent that the underwriters sell more than ADSs in this offering, the underwriters have a 30-day option to purchase up to an aggregate of additional ADSs from us at the initial public offering price less the underwriting discounts and commissions.
Subject to the approval of our existing shareholders, immediately prior to the completion of this offering, our outstanding share capital will consist of Class A ordinary shares and Class B ordinary shares. Mr. Hong Yao, our founder, chairman and chief executive officer, will beneficially own all of our issued Class B ordinary shares. These Class B ordinary shares will constitute approximately % of our total issued and outstanding share capital immediately after the completion of this offering and % of the aggregate voting power of our total issued and outstanding share capital immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five votes and is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.
The underwriters expect to deliver the ADSs against payment in New York, New York on , 2018.
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MORGAN STANLEY
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CREDIT SUISSE
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CITIGROUP
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Prospectus dated , 2018
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TABLE OF CONTENTS
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Page
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1
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13
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60
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61
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143
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F-1
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No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or any filed free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus or any filed free writing prospectus outside of the United States.
Until , 2018 (the 25
th
day after the date of this prospectus), all dealers that buy, sell or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to invest in our ADSs. This prospectus contains information from an industry report commissioned by us and prepared by Oliver Wyman, an independent market research firm, to provide information on the auto-backed loan market and several other markets in China, which we refer to as the Oliver Wyman Report
.
Our Business
Our Mission
Provide accessible credit for China’s small and micro enterprises.
Overview
We are the largest auto-backed financing solution provider in China in terms of loan volume in each of 2015, 2016 and 2017, with a market share of approximately 35% in 2017, according to the Oliver Wyman Report. Our platform connects borrowers, the majority of which are small and micro enterprise owners, with both online investors and institutional funding partners. Established in 2011 by a group of entrepreneurs with backgrounds in small and micro enterprises, we are dedicated to providing small and micro enterprise owners with accessible credit. We pioneered auto-backed financing in China in the form of title loans. We believe our products and services create exceptional value for both borrowers and investors.
Small and micro enterprises are vital to China’s economic growth, contributing 32% of the country’s gross domestic product, or GDP, in 2017 and creating significant job opportunities. However, they have substantial and growing unmet financing needs for daily operation and business expansion. Small and micro enterprises often have financing needs that are frequent, unpredictable and time-sensitive. Due to fast-evolving business nature, limited planning abilities and the lack of a nationwide credit rating system in China, small and micro enterprises face difficulties including limited access to banks and other traditional financing channels, high costs of alternative lending channels, and the uncertainty of funding from families and friends. Auto-backed financing represents an attractive solution for small and micro enterprise owners, as automobiles are their most commonly held valuable assets and proper collaterals enhance their credit profiles and enable them to obtain higher credit limit at lower cost. In addition, auto-backed loans currently have a low penetration rate of 1.1% in 2017 in China and the loan volume is expected to grow at a compound annual growth rate, or CAGR, of 48.6% from 2017 to 2022, according to the Oliver Wyman Report.
We were the first in China to introduce auto-backed financing product in the form of title loan with “collateral registration + GPS system” features in 2011, which has replaced the traditional model of lenders keeping automobiles in custody and has since become the industry standard, according to the Oliver Wyman Report. Our auto-backed loans generally have principal amounts between RMB30,000 and RMB200,000, tenures from one to 36 months and APRs from 20% to 36%. In the six months ended June 30, 2018, the auto-backed loans we facilitated had an average amount of RMB61,779 and an average tenure of three months. In the six months ended June 30, 2018, 55.7% of borrowers who took out auto-backed loans through our platform were repeat borrowers.
The following chart sets forth the outstanding loan balance of auto-backed loans we facilitated as of the dates indicated:
We have built a nationwide network of 517 service centers across more than 300 cities over the past seven years, which we believe present significant barriers to entry. This extensive offline network, seamlessly integrated with our centralized technology platform and risk management system, has enabled a fast and highly automated transaction process. Our lending decisions are generally made within 30 minutes of application after information collection and automobile appraisal, and loans are generally disbursed within the same day, including weekends, delivering superior user experience. In addition, through this geographically dispersed network, we have gained a large and increasing volume of transaction data and local know-how. The breadth and depth of these transaction data have enabled us to make accurate credit assessments, effectively preventing fraud and enhancing collection efforts.
We believe our auto-backed loan products, which transform used automobiles, a type of “non-standard” collateral, into investable assets, represent a relatively high-quality and low-risk asset class that is hard for investors to access elsewhere. We primarily serve online investors who can choose to invest in individual loans using our smart investing tools or a portfolio of loans through our investment programs. In 2017 and the six months ended June 30, 2018, the average net annualized rate of return, or the annualized rate of return after service fees, for our online investors was 8.0% and 7.6%, respectively. We also collaborate with institutional funding partners.
We maintain a sophisticated and effective risk management system spanning across our entire transaction process, from borrower acquisition to loan collection. With a team of over 760 dedicated automobile appraisers, we adopt a multi-dimensional risk management approach from both “borrower” and “automobile” perspectives, and gain further insights from our proprietary data and a broad spectrum of third-party data sources, resulting in our best-in-class automobile appraisal capabilities. Our advanced GPS tracking system and dedicated post-loan management mobile app serve as powerful tools for detecting fraud and taking automobiles into custody. As a result, we have achieved robust credit performance, with the lowest delinquency ratio as of December 31, 2017 among the top five marketplace lending platforms in terms of loan volume in 2017, and none of the other four marketplace lending platforms offers any auto-backed financing, according to the Oliver Wyman Report. As of June 30, 2018, the M3+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.5% and 0.7%.
We have achieved significant growth in the past few years. We generate revenues primarily from service fees charged to borrowers for our facilitation and management of loans. We also charge fees to online investors for facilitating their investments via our platform, and the transfer of their investments on our secondary loan market. Our net revenues increased by 101.3% from RMB1,761.4 million in 2016 to RMB3,545.4 million (US$535.8 million) in 2017. Our net revenues increased by 20.1% from RMB1,568.6 million in the six months ended June 30, 2017 to RMB1,883.3 million (US$284.6 million) in the same period in 2018. Our net income increased by 63.2% from RMB291.0 million in 2016 to RMB474.8 million (US$71.7 million) in 2017. Our net income increased by 14.6% from RMB268.2 million in the six months ended June 30, 2017 to RMB307.4 million (US$46.4 million) in the same period in 2018. Our adjusted net income increased by 59.4% from RMB323.4 million in 2016 to RMB515.5 million (US$77.9 million) in 2017. Our adjusted net income increased by 26.4% from RMB287.1 million in the six months ended June 30, 2017 to RMB362.9 million (US$54.9 million) in the six months ended June 30, 2018.
Our Competitive Strengths
We believe the following competitive strengths contribute to our success and differentiate us from our competitors:
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largest auto-backed financing solution provider in China;
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superior products addressing unfulfilled financing needs of small and micro enterprise owners;
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robust, proprietary risk management system powered by data, technology and know-how;
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nationwide service center network presenting significant barriers to entry;
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seamlessly integrated omni-channel operational capabilities enabling fast, efficient and highly-automated transaction process; and
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diversified investor base and trusted investor relationship.
Our Strategies
We intend to achieve our mission by pursuing the following strategies:
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grow borrower base;
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enhance and expand product offerings;
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improve omni-channel operational capabilities;
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invest in technology;
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expand and diversify investor base; and
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selectively pursue strategic investments and acquisitions.
Our Challenges
Our ability to achieve our mission and execute our strategies is subject to risks and uncertainties, including those relating to:
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our operations in China’s emerging and evolving marketplace lending industry;
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our ability to ensure our business practices are in compliance with evolving laws and regulations governing the marketplace lending industry in China;
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our ability to continue to rectify our business to ensure full compliance with laws and regulations governing the marketplace lending industry in China;
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our ability to retain existing borrowers and investors and attract new ones, and maintain and increase the volume of loans facilitated through our platform in a cost-effective manner;
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our ability to ensure our existing and new loan products and investment products achieve sufficient market acceptance;
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the effectiveness of our service centers operations;
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our ability to adapt our business model as China’s auto-backed loan market develops; and
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the adequacy of our risk management system.
In addition, we face risks and uncertainties related to our corporate structure and regulatory environment in China, including:
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uncertainties associated with the interpretation and application of laws and regulations governing the marketplace lending industry in China;
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risks associated with our control over Weidai (Hangzhou) Financial Information Service Ltd., or Weidai Financial Information, our variable interest entity in China, which is based on contractual arrangements rather than equity ownership; and
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changes in China’s economic, political or social conditions or government policies.
See “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.
Corporate Structure
The following diagram illustrates our corporate structure as of the date of this prospectus, including our principal subsidiaries and our variable interest entity.
(1)
Shareholders of Weidai Financial Information include (i) Mr. Hong Yao, our founder, chairman and chief executive officer, who holds 73.3% of equity interest in Weidai Financial Information (60.1% of which is directly held by him and 13.2% of which is held by Deqing Jinxiu Management Consultancy Partnership (Limited Partnership), or Deqing Partnership, an entity wholly owned by him and his wife), (ii) Zhejiang Hakim Unique Finance Service Co., Ltd., or Zhejiang Hakim, an affiliate of Hakim Unique Technology Limited, who holds 15.5% of equity interest in Weidai Financial Information, and (iii) seven affiliates of our minority shareholders, who in aggregate hold 11.2% of equity interest in Weidai Financial Information.
We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Hong Yao will beneficially own a majority of the aggregate voting power of our company upon completion of this offering.
Corporate Information
Our principal executive offices are located at 50/F, West Building, Fortune Finance Center, No. 33 Jiefang East Road, Jianggan District, Hangzhou, Zhejiang Province, People’s Republic of China. Our telephone number at this address is +86-571-5812-3844. Our registered office in the Cayman Islands is located at the offices of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is
www.weidai.com.cn
. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Cogency Global Inc., located at 10 East 40
th
Street, 10
th
Floor, New York, N.Y. 10016.
Implications of Being an Emerging Growth Company
As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Conventions that Apply to this Prospectus
Unless otherwise indicated or the context otherwise requires in this prospectus:
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“active borrower” refers to borrowers who have borrowed at least once on our platform during a specific period of time;
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“active online investor” refers to online investors who have invested at least once on our platform during a specific period of time;
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“ADSs” refers to our American depositary shares, each of which represents Class A ordinary shares;
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“APRs” or “annual percentage rate” represents the annualized cost of borrowing over the term of a loan, which equals to the annualized amount of finance charges (including interest and service and other fees) generated from a loan, divided by the principal amount of the loan;
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“auto-backed loan” refers to secured loans using automobiles already owned by borrowers as collateral.
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“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, Macau and Taiwan;
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“Class A ordinary shares” are to our Class A ordinary shares, par value US$0.0001 per share;
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“Class B ordinary shares” are to our Class B ordinary shares, par value US$0.0001 per share;
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“delinquency rate” refers to the loan principal and interest that were 15 to 30, 31 to 60, 61 to 90 and over 90 calendar days past due as a percentage of the total outstanding principal balance of loans on our platform as of a specific date. Loans that are charged-off and loan products that have been discontinued prior to the date of this prospectus (including home equity loans, and certain types of consumption loans and auto-financing loans, which contributed 8.1% and 2.4% of our revenues in 2017 and the six months ended June 30, 2018, respectively) are not included in the delinquency rate calculation;
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“investors” refers to both online investors and institutional funding partners;
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“LTV ratio” refers to loan-to-value ratio;
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“M1+ Delinquency Rate by Vintage” refers to the total balance of outstanding principal of a vintage for which any payment of principal or interest is over 30 calendar days past due as of a particular date (adjusted to reflect total amount of past due payments for principal and interest that have been subsequently collected), divided by the total initial principal in such vintage. For purpose of this prospectus, loans facilitated or originated during a specified time period are referred to as a vintage. Loan products that have been discontinued prior to the date of this prospectus (including home equity loans, and certain types of consumption loans and auto-financing loans) are not included in the calculation of M1+ Delinquency Rate by Vintage;
•
“M3+ Delinquency Rate by Vintage” refers to the total balance of outstanding principal of a vintage for which any payment of principal or interest is over 90 calendar days past due as of a particular date (adjusted to reflect total amount of past due payments for principal and interest that have been subsequently collected), divided by the total initial principal in such vintage. For purpose of this prospectus, loans facilitated or originated during a specified time period are referred to as a vintage. Loan products that have been discontinued prior to the date of this prospectus (including home equity loans, and certain types of consumption loans and auto-financing loans) are not included in the calculation of M3+ Delinquency Rate by Vintage;
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“online investors” includes both individual investors and corporate investors, who invest in loans using our smart investing tools or through our investment programs. The term “online investors” does not include institutional funding partners;
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“ordinary shares” refers to our ordinary shares, par value US$0.0001 per share, and upon the completion of this offering, are to our Class A and Class B ordinary shares, par value US$0.0001 per share;
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“repeat borrowers” refers to borrowers who have borrowed at least twice on our platform since our inception;
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“repeat online investors” refers to online investors who have invested at least twice on our platform since our inception;
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“RMB” and “Renminbi” refer to the legal currency of China;
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“small and micro enterprises” refers to businesses with annual revenues less than RMB20 million;
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“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States; and
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“We,” “us,” “our company,” “our” and “Weidai” refer to Weidai Ltd., its subsidiaries, variable interest entity and its subsidiaries.
Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.
Our reporting currency is the Renminbi. This prospectus also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at RMB6.6171 to US$1.00, the noon buying rate on June 29, 2018 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. The PRC government restricts or prohibits the conversion of Renminbi into foreign currency and foreign currency into Renminbi for certain types of transactions. On August 3, 2018, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.8309 to US$1.00.
The Offering
We currently estimate that the initial public offering price will be between US$ and US$ per ADS.
ADSs (or ADSs if the underwriters exercise their over-allotment option in full).
[ADSs offered by the selling shareholders
ADSs (or ADSs if the underwriters exercise their over-allotment option in full).]
ADSs outstanding immediately after this offering
ADSs (or ADSs if the underwriters exercise their over-allotment option in full), which constitute % of the aggregate voting power of our total issued and outstanding share capital upon completion of this offering.
Ordinary shares outstanding immediately after this offering
ordinary shares, comprised of Class A ordinary shares and Class B ordinary shares (or ordinary shares if the underwriters exercise their over-allotment option in full, comprised of Class A ordinary shares and Class B ordinary shares).
Each ADS represents Class A ordinary shares of par value US$0.0001 per share.
The depositary (or its custodian) will hold Class A ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement among us, the depositary and all holders and beneficial owners of ADSs from time to time.
We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.
Subject to the terms of the deposit agreement, you may surrender your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any such exchange.
We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.
To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.
Our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares immediately prior to the completion of this offering. Holders of Class A ordinary shares and Class B ordinary shares will have the same rights except for voting and conversion rights. In respect of matters
requiring a shareholder vote, each Class A ordinary share will be entitled to one vote, and each Class B ordinary share will be entitled to five votes. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares. For a description of Class A ordinary shares and Class B ordinary shares, see “Description of Share Capital.”
We [and the selling shareholders] have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of additional ADSs.
We expect that we will receive net proceeds of approximately US$ million from this offering, assuming an initial public offering price of US$ per ADS, which is the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investment in product development, sales and marketing activities, technology infrastructure, capital expenditures, improvement of corporate facilities and other general and administrative matters. We may also use a portion of these proceeds for the investment in, or acquisition of, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any investments or acquisitions. See “Use of Proceeds” for more information.
[We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.]
We, our directors, executive officers and existing shareholders have agreed with the underwriters not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus. See “Shares Eligible for Future Sales” and “Underwriting.”
We intend to apply to have the ADSs listed on the New York Stock Exchange under the symbol “WEI.” Our ADSs and shares will not be listed on any other stock exchange or traded on any automated quotation system.
The underwriters expect to deliver the ADSs against payment therefor through the facilities of the Depository Trust Company on , 2018.
Citibank, N.A.
Summary Consolidated Financial and Operating Data
The following summary consolidated statements of comprehensive income data and summary consolidated cash flows data for the years ended December 31, 2016 and 2017, and summary consolidated balance sheets data as of December 31, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of comprehensive income data and summary consolidated cash flow data for the six months ended June 30, 2017 and 2018, and summary consolidated balance sheet data as of June 30, 2018 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future periods. You should read this Summary Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands, except for share and per share data)
|
|
Summary Consolidated Statements of Comprehensive Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,396,102
|
|
|
|
|
|
2,529,980
|
|
|
|
|
|
382,340
|
|
|
|
|
|
1,219,947
|
|
|
|
|
|
1,335,713
|
|
|
|
|
|
201,858
|
|
|
Other secured loans
(1)
|
|
|
|
|
9,791
|
|
|
|
|
|
107,564
|
|
|
|
|
|
16,255
|
|
|
|
|
|
41,235
|
|
|
|
|
|
69,801
|
|
|
|
|
|
10,549
|
|
|
Unsecured loans
(2)
|
|
|
|
|
4,353
|
|
|
|
|
|
54,409
|
|
|
|
|
|
8,223
|
|
|
|
|
|
8,577
|
|
|
|
|
|
61,005
|
|
|
|
|
|
9,219
|
|
|
|
|
|
|
|
1,410,246
|
|
|
|
|
|
2,691,953
|
|
|
|
|
|
406,818
|
|
|
|
|
|
1,269,759
|
|
|
|
|
|
1,466,519
|
|
|
|
|
|
221,626
|
|
|
Post facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
144,524
|
|
|
|
|
|
283,182
|
|
|
|
|
|
42,795
|
|
|
|
|
|
136,685
|
|
|
|
|
|
151,405
|
|
|
|
|
|
22,881
|
|
|
Other secured loan
(1)
|
|
|
|
|
1,044
|
|
|
|
|
|
10,958
|
|
|
|
|
|
1,656
|
|
|
|
|
|
4,069
|
|
|
|
|
|
7,464
|
|
|
|
|
|
1,128
|
|
|
Unsecured loans
(2)
|
|
|
|
|
483
|
|
|
|
|
|
6,045
|
|
|
|
|
|
914
|
|
|
|
|
|
953
|
|
|
|
|
|
6,522
|
|
|
|
|
|
985
|
|
|
|
|
|
|
|
146,051
|
|
|
|
|
|
300,185
|
|
|
|
|
|
45,365
|
|
|
|
|
|
141,707
|
|
|
|
|
|
165,391
|
|
|
|
|
|
24,994
|
|
|
Other revenues
|
|
|
|
|
204,953
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
|
|
152,936
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
Financing income
|
|
|
|
|
9,053
|
|
|
|
|
|
303,292
|
|
|
|
|
|
45,835
|
|
|
|
|
|
15,425
|
|
|
|
|
|
234,607
|
|
|
|
|
|
35,455
|
|
|
Less: Funding costs
|
|
|
|
|
(2,439
)
|
|
|
|
|
|
(39,056
)
|
|
|
|
|
|
(5,903
)
|
|
|
|
|
|
(4,628
)
|
|
|
|
|
|
(78,202
)
|
|
|
|
|
|
(11,818
)
|
|
|
Net financing income
|
|
|
|
|
6,614
|
|
|
|
|
|
264,236
|
|
|
|
|
|
39,932
|
|
|
|
|
|
10,797
|
|
|
|
|
|
156,405
|
|
|
|
|
|
23,637
|
|
|
Total net revenues
|
|
|
|
|
1,761,380
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
|
|
|
1,568,585
|
|
|
|
|
|
1,883,270
|
|
|
|
|
|
284,608
|
|
|
Provision for loans and advances
|
|
|
|
|
(144,617
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
|
|
|
(159,677
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
|
|
Net revenues after provision for loans and advances
|
|
|
|
|
1,616,763
|
|
|
|
|
|
3,061,367
|
|
|
|
|
|
462,645
|
|
|
|
|
|
1,408,908
|
|
|
|
|
|
1,644,412
|
|
|
|
|
|
248,511
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and servicing
|
|
|
|
|
(993,623
)
|
|
|
|
|
|
(1,784,914
)
|
|
|
|
|
|
(269,743
)
|
|
|
|
|
|
(820,784
)
|
|
|
|
|
|
(916,160
)
|
|
|
|
|
|
(138,453
)
|
|
|
Sales and marketing
|
|
|
|
|
(71,139
)
|
|
|
|
|
|
(273,838
)
|
|
|
|
|
|
(41,383
)
|
|
|
|
|
|
(72,111
)
|
|
|
|
|
|
(104,994
)
|
|
|
|
|
|
(15,867
)
|
|
|
General and administrative
|
|
|
|
|
(117,004
)
|
|
|
|
|
|
(316,772
)
|
|
|
|
|
|
(47,872
)
|
|
|
|
|
|
(133,378
)
|
|
|
|
|
|
(165,148
)
|
|
|
|
|
|
(24,959
)
|
|
|
Research and development
|
|
|
|
|
(56,142
)
|
|
|
|
|
|
(100,966
)
|
|
|
|
|
|
(15,258
)
|
|
|
|
|
|
(34,081
)
|
|
|
|
|
|
(67,214
)
|
|
|
|
|
|
(10,158
)
|
|
|
Total operation costs and expenses
|
|
|
|
|
(1,237,908
)
|
|
|
|
|
|
(2,476,490
)
|
|
|
|
|
|
(374,256
)
|
|
|
|
|
|
(1,060,354
)
|
|
|
|
|
|
(1,253,516
)
|
|
|
|
|
|
(189,437
)
|
|
|
Income from operations
|
|
|
|
|
378,855
|
|
|
|
|
|
584,877
|
|
|
|
|
|
88,389
|
|
|
|
|
|
348,554
|
|
|
|
|
|
390,896
|
|
|
|
|
|
59,074
|
|
|
Net income before income taxes
|
|
|
|
|
396,159
|
|
|
|
|
|
668,024
|
|
|
|
|
|
100,954
|
|
|
|
|
|
369,926
|
|
|
|
|
|
409,365
|
|
|
|
|
|
61,865
|
|
|
Income tax expenses
|
|
|
|
|
(105,130
)
|
|
|
|
|
|
(193,203
)
|
|
|
|
|
|
(29,197
)
|
|
|
|
|
|
(101,691
)
|
|
|
|
|
|
(102,014
)
|
|
|
|
|
|
(15,417
)
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
|
|
Dividends declared to preferred shareholders
|
|
|
|
|
—
|
|
|
|
|
|
(8,604
)
|
|
|
|
|
|
(1,301
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
(861
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Accretion to redemption value of Series C redeemable convertible preferred shares
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Reversal of accretion on Series C preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
120,000
|
|
|
|
|
|
18,135
|
|
|
Net income and comprehensive income attributable to Weidai Ltd.’s ordinary shareholders
|
|
|
|
|
170,168
|
|
|
|
|
|
466,217
|
|
|
|
|
|
70,456
|
|
|
|
|
|
268,235
|
|
|
|
|
|
428,096
|
|
|
|
|
|
64,696
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(in thousands, except for share and per share data)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
|
|
204.79
|
|
|
|
|
|
326.84
|
|
|
|
|
|
49.39
|
Diluted
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
|
|
204.79
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
Shares used in earnings per share computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
Diluted
|
|
|
|
|
967,841
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
The following table presents our summary consolidated balance sheets data as of December 31, 2016 and 2017 and June 30, 2018:
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Summary Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,314,814
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
266,820
|
|
|
|
|
|
1,823,295
|
|
|
|
|
|
275,543
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
1,092,921
|
|
|
|
|
|
165,166
|
|
|
|
|
|
911,796
|
|
|
|
|
|
137,794
|
|
|
Loans and advances, net (net of allowance of RMB67.5 million, RMB404.9 million (US$61.2 million) and RMB414.4 million (US$62.6 million) as of December 31, 2016 and 2017 and June 30, 2018, respectively)
|
|
|
|
|
293,158
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
292,952
|
|
|
|
|
|
1,725,015
|
|
|
|
|
|
260,690
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
328,853
|
|
|
|
|
|
433,597
|
|
|
|
|
|
65,527
|
|
|
|
|
|
628,063
|
|
|
|
|
|
94,916
|
|
|
Total current assets
|
|
|
|
|
2,011,025
|
|
|
|
|
|
5,248,250
|
|
|
|
|
|
793,135
|
|
|
|
|
|
5,137,421
|
|
|
|
|
|
776,386
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
4,000
|
|
|
|
|
|
604
|
|
|
|
|
|
8,000
|
|
|
|
|
|
1,209
|
|
|
Loans and advances, net (net of allowance of nil, RMB1.4 million (US$212 thousand) and RMB1.2 million (US$183 thousand) as of December 31, 2016 and 2017 and
June 30, 2018, respectively)
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
Total non-current assets
|
|
|
|
|
94,465
|
|
|
|
|
|
1,019,551
|
|
|
|
|
|
154,078
|
|
|
|
|
|
808,115
|
|
|
|
|
|
122,125
|
|
|
Total assets
|
|
|
|
|
2,105,490
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
947,213
|
|
|
|
|
|
5,945,536
|
|
|
|
|
|
898,511
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
94,663
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
267,592
|
|
|
|
|
|
1,341,677
|
|
|
|
|
|
202,759
|
|
|
Current account with online investors and borrowers
|
|
|
|
|
890,192
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
284,633
|
|
|
|
|
|
1,774,143
|
|
|
|
|
|
268,115
|
|
|
Deferred revenue
|
|
|
|
|
13,196
|
|
|
|
|
|
12,330
|
|
|
|
|
|
1,862
|
|
|
|
|
|
8,299
|
|
|
|
|
|
1,254
|
|
|
Total current liabilities
|
|
|
|
|
1,360,563
|
|
|
|
|
|
4,633,990
|
|
|
|
|
|
700,305
|
|
|
|
|
|
3,829,208
|
|
|
|
|
|
580,195
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
—
|
|
|
|
|
|
416,118
|
|
|
|
|
|
62,885
|
|
|
|
|
|
536,774
|
|
|
|
|
|
81,119
|
|
|
Deferred revenue
|
|
|
|
|
1,100
|
|
|
|
|
|
887
|
|
|
|
|
|
134
|
|
|
|
|
|
2,473
|
|
|
|
|
|
374
|
|
|
Total non-current liabilities
|
|
|
|
|
9,433
|
|
|
|
|
|
457,724
|
|
|
|
|
|
69,173
|
|
|
|
|
|
599,765
|
|
|
|
|
|
90,638
|
|
|
Total liabilities
|
|
|
|
|
1,369,996
|
|
|
|
|
|
5,091,714
|
|
|
|
|
|
769,478
|
|
|
|
|
|
4,438,973
|
|
|
|
|
|
670,833
|
|
|
Total mezzanine equity
|
|
|
|
|
388,910
|
|
|
|
|
|
388,910
|
|
|
|
|
|
58,773
|
|
|
|
|
|
250,054
|
|
|
|
|
|
37,790
|
|
|
Total shareholders’ equity
|
|
|
|
|
346,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
118,962
|
|
|
|
|
|
1,256,509
|
|
|
|
|
|
189,888
|
|
|
|
The following table presents our summary consolidated cash flow data for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2017 and 2018:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Summary Consolidated Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
924,388
|
|
|
|
|
|
2,284,077
|
|
|
|
|
|
345,178
|
|
|
|
|
|
531,733
|
|
|
|
|
|
23,596
|
|
|
|
|
|
3,566
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
(337,051
)
|
|
|
|
|
|
(2,941,921
)
|
|
|
|
|
|
(444,594
)
|
|
|
|
|
|
(707,663
)
|
|
|
|
|
|
216,060
|
|
|
|
|
|
32,651
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
458,614
|
|
|
|
|
|
2,205,523
|
|
|
|
|
|
333,307
|
|
|
|
|
|
163,462
|
|
|
|
|
|
(359,058
)
|
|
|
|
|
|
(54,261
)
|
|
|
Net increase (decrease) in cash, cash equivalents and
restricted cash
|
|
|
|
|
1,045,951
|
|
|
|
|
|
1,547,679
|
|
|
|
|
|
233,891
|
|
|
|
|
|
(12,468
)
|
|
|
|
|
|
(119,402
)
|
|
|
|
|
|
(18,044
)
|
|
|
Cash, cash equivalents and restricted cash at beginning of year/period
|
|
|
|
|
268,863
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
198,699
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
Cash, cash equivalents and restricted cash at end of year/period
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
|
|
|
1,302,346
|
|
|
|
|
|
2,743,091
|
|
|
|
|
|
414,546
|
|
|
Non-GAAP Financial Measures
We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision making purposes.
We believe that adjusted net income help identify underlying trends in our business that could otherwise be distorted by the effect of the expenses we include in net income. We believe that adjusted net income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
Adjusted net income should not be considered in isolation or construed as an alternative to net loss or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted net income presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
Adjusted net income represents net income before share-based compensation expenses. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for information regarding the limitations of using adjusted net income as a financial measure and for a reconciliation of our net loss to adjusted net income.
The table below sets forth a reconciliation of our net income to adjusted net income for the periods indicated:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Reconciliation of Net Income to Adjusted Net
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expenses
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
|
|
|
18,836
|
|
|
|
|
|
55,595
|
|
|
|
|
|
8,402
|
|
|
Adjusted net income
|
|
|
|
|
323,355
|
|
|
|
|
|
515,540
|
|
|
|
|
|
77,911
|
|
|
|
|
|
287,071
|
|
|
|
|
|
362,946
|
|
|
|
|
|
54,850
|
|
|
|
Summary Operating Data
The table below sets forth our summary operating data for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2017 and 2018:
|
|
|
Year ended December 31,
|
|
|
Six months ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(except for number of users)
|
|
Loan volume by type of loan product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans (in millions)
|
|
|
|
|
45,429
|
|
|
|
|
|
80,201
|
|
|
|
|
|
12,120
|
|
|
|
|
|
38,089
|
|
|
|
|
|
35,600
|
|
|
|
|
|
5,380
|
|
|
Other secured loans
(1)
(in millions)
|
|
|
|
|
2,124
|
|
|
|
|
|
10,934
|
|
|
|
|
|
1,652
|
|
|
|
|
|
5,035
|
|
|
|
|
|
5,634
|
|
|
|
|
|
851
|
|
|
Unsecured loans
(2)
(in millions)
|
|
|
|
|
441
|
|
|
|
|
|
5,801
|
|
|
|
|
|
877
|
|
|
|
|
|
518
|
|
|
|
|
|
3,405
|
|
|
|
|
|
515
|
|
|
Total loan volume (in millions)
|
|
|
|
|
47,993
|
|
|
|
|
|
96,937
|
|
|
|
|
|
14,649
|
|
|
|
|
|
43,643
|
|
|
|
|
|
44,639
|
|
|
|
|
|
6,746
|
|
|
Number of active auto-backed loan borrowers (in thousands)
|
|
|
|
|
216
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
198
|
|
|
|
|
|
225
|
|
|
|
Number of active online investors
(in thousands)
|
|
|
|
|
300
|
|
|
|
|
|
561
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
521
|
|
|
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
The table below sets forth our summary operating data as of December 31, 2016 and 2017 and June 30, 2017 and 2018:
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in millions)
|
|
Loan balance by type of loan products:
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
9,582
|
|
|
|
|
|
15,203
|
|
|
|
|
|
2,298
|
|
|
|
|
|
11,966
|
|
|
|
|
|
17,161
|
|
|
|
|
|
2,593
|
|
|
Other secured loans
|
|
|
|
|
1,314
|
|
|
|
|
|
2,885
|
|
|
|
|
|
436
|
|
|
|
|
|
2,698
|
|
|
|
|
|
2,605
|
|
|
|
|
|
394
|
|
|
Unsecured loans
|
|
|
|
|
177
|
|
|
|
|
|
1,928
|
|
|
|
|
|
291
|
|
|
|
|
|
409
|
|
|
|
|
|
2,357
|
|
|
|
|
|
356
|
|
|
Total loan balance
|
|
|
|
|
11,074
|
|
|
|
|
|
20,017
|
|
|
|
|
|
3,025
|
|
|
|
|
|
15,073
|
|
|
|
|
|
22,123
|
|
|
|
|
|
3,343
|
|
|
RISK FACTORS
An investment in our ADSs involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material and adverse effect on our business, financial condition and results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.
Risks Related to Our Business and our Industry
We operate in China’s marketplace lending industry, an emerging and evolving industry, which makes it difficult to evaluate our future prospects.
China’s marketplace lending industry is in a preliminary stage of development and evolving. The PRC regulatory regime governing the industry may change in ways that do not favor development of the industry and this may negatively affect our business. Prospective borrowers and investors may not be familiar with the industry and may have difficulty to distinguish our services from those of our competitors. In addition, borrowers may not view a default of credit obligation under the loans we facilitate as having the same consequences as a default of credit obligation under more traditional loans provided by banks or other financial institutions. Any default on borrowers’ payment obligations may adversely affect investors’ confidence in the loans we facilitate, which may lead to a reduction of capital available for loans and materially and adversely affect our business. Our ability to retain and attract investors is critical to us for maintaining and increasing the volume of loans we facilitate. In addition, our business has grown substantially in recent years; however, our past growth rates may not be indicative of our future growth.
You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving industry. These risks and challenges include our ability to, among others:
•
navigate an evolving regulatory environment;
•
expand the base of borrowers and investors served on our platform;
•
broaden our loan and investment product offerings;
•
efficiently operate our nationwide network of service centers;
•
enhance our data analytical and risk management capabilities;
•
continue to scale our technology infrastructure to support the growth of our platform and loan volume;
•
operate without being adversely affected by the negative publicity about the industry in general and our company in particular;
•
maintain the security of our platform and the confidentiality of the information provided and utilized across our platform;
•
anticipate and adapt to changing market conditions, including government restrictions on automobile purchases and ownership and changes in the competitive landscape;
•
attract, retain and motivate talent; and
•
defend ourselves from any potential litigations, regulatory proceedings, or any other claims.
If China’s marketplace lending industry does not develop as we expect, or if we fail to educate prospective borrowers and investors about the value of our platform, products and services or address their needs, our reputation, business, financial condition and results of operations may be materially and adversely affected.
If any of our business practices is deemed to violate any laws or regulations governing the marketplace lending industry in China, our business, financial condition and results of operations will be materially and adversely affected.
The marketplace lending industry in China has a relatively short history and relevant laws and regulations are developing and evolving. Since mid-2015, the PRC government and relevant regulatory authorities have issued various laws and regulations governing the marketplace lending industry , which regulate the activities of online lending intermediaries, online microcredit companies and those who collaborate with these entities in operating marketplace lending platforms. See “Regulation — Regulations on Online Lending Information Intermediaries” and “— Regulations on Microcredit Companies” for more details. There are uncertainties as to the interpretation of these PRC laws and regulations and their applicability to our business. If any aspect of our operations is deemed to have violated these laws or regulations, we may be required to modify or even suspend relevant operations and/or be subject to administrative penalties.
As of the date of this prospectus, we have not been subject to any material fines or other penalties under any PRC laws or regulations, including those governing the marketplace lending industry. However, the growth in the popularity of the marketplace lending industry increases the likelihood that the PRC government will seek to further regulate this industry. We are unable to predict with certainty the impact, if any, that future laws or regulations governing the marketplace lending industry will have on our business, financial condition and results of operations.
(i)
If we fail to complete record-filing for our online lending information services and obtain telecommunication service license, we may be forced to terminate our online lending information intermediary business.
The Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures, introduced a record-filing and licensing regime, which requires online lending information intermediaries to (i) make relevant record-filing with local financial regulatory authorities for their online lending information services; (ii) apply for relevant telecommunication service license after the completion of record-filing with local financial regulatory authorities; and (iii) specify online lending information services in their business scope. In addition, the Notice on the Rectification and Inspection Acceptance of Risk of Online Lending Intermediaries, or Circular 57, requires online lending information intermediaries to complete their record-filing with the local authorities by the end of June 2018 at the latest. The Interim Measures authorize local financial regulatory authorities to formulate detailed implementation rules regarding the filing procedures. However, as of the date of this prospectus, the financial regulatory authorities of Hangzhou, Zhejiang Province are still in the process of formulating detailed implementation rules regarding the filing procedures and, to our knowledge, none of the online lending information intermediaries in Zhejiang Province, including us, have been permitted to submit filing applications.
We cannot assure you when we will be able to submit our filing application and once submitted, whether such application will be accepted by the local financial regulatory authorities or any other competent regulatory authorities as relevant laws and regulations continue to develop and evolve. The delay in completing such record filing has had, and may continue to have, adverse impacts on our business growth. If we fail to complete such record-filing, we will not be able to obtain the relevant telecommunication service license, in which event we may be forced to terminate our online lending information intermediary business.
(ii)
Increasing restrictions on our custodian bank arrangement may require us to amend our custody account agreement with Xiamen Bank or seek an alternative qualified custodian bank.
We have entered into a custody account arrangement with Xiamen Bank, under which investors’ and borrowers’ funds are deposited directly into and settled by their designated custody accounts at Xiamen Bank. Circular 57 requires online lending information intermediaries to set up custody accounts at qualified banks that have passed the National Online Lending Rectification Office’s tests and evaluations. It remains uncertain when the relevant regulatory authorities will conduct such tests and evaluations. If Xiamen Bank fails such tests and evaluations, we may need to seek an alternative custodian bank to satisfy the relevant regulatory requirement, which may delay our rectification progress and record-filing with local financial
regulatory authorities. In addition, in the event that any new laws, regulations or rules impose additional restrictions on our custody account arrangement with Xiamen Bank, we may need to amend our agreement with Xiamen Bank or seek an alternative qualified custodian bank, which may materially and adversely affect our business.
(iii)
The aggregate amount extended to any borrower through our platform and other online lending information intermediaries may exceed the applicable borrowing limits.
The Interim Measures require that the aggregate amount of loans extended to any individual must not exceed RMB200,000 through a single online lending information intermediary or RMB1 million in aggregate through all online lending information intermediaries in the PRC. Furthermore, the aggregate amount of loans extended to any entity must not exceed RMB1 million through a single online lending information intermediary or RMB5 million in aggregate through all online lending information intermediaries in the PRC.
We currently do not facilitate loans to any individual in aggregate amount exceeding RMB200,000 or to any entity in aggregate amount exceeding RMB1 million. In addition, when assessing the creditworthiness of a prospective borrower, we determine whether he has outstanding loans through other marketplace lending platforms using proprietary and third-party databases. However, due to the lack of industry-wide information sharing arrangement, there can be no assurance that the aggregate amount extended to any borrower through our platform and other online lending information intermediaries does not exceed the applicable borrowing limits set out by the Interim Measures.
(iv)
Our purchase of delinquent loans and provision of guarantees may be prohibited under the Interim Measures and Circular 57. If we are unable to procure alternative means of investor protection in a timely and cost-effective manner, our business and results of operations may be materially and adversely affected.
The Interim Measures prohibit online lending information intermediaries from providing any security interest or guarantee to investors as to the return of loan principal or interest. We have been voluntarily purchasing delinquent loans from online investors in order to timely compensate them for default losses; we provide guarantees for certain of our consumption loan products (the loan volume of which totaled RMB2.2 billion (US$0.3 billion) and RMB788.7 million (US$119.2 million) in 2017 and the six months ended June 30, 2018, respectively, accounting for 2.3% and 1.8% of our total loan volume in 2017 and the six months ended June 30, 2018, respectively). We have ceased to offer consumption loans involving smaller loan amounts and shorter tenures starting from the fourth quarter of 2017; we provide guarantees to a portion of institutional funding partners and corporate investors in case of borrower defaults (the loan volume of which totaled RMB4.0 billion (US$0.6 billion) and RMB2.5 billion (US$0.4 billion) in 2017 and the six months ended June 30, 2018, respectively, accounting for 4.1% and 5.7% of our total loan volume in 2017 and the six months ended June 30, 2018, respectively). We ceased to facilitate any new investment made by such corporate investors through our platform or provide guarantee to new corporate investors starting from the fourth quarter of 2017. However, these historical and current practices may be deemed as providing guarantees to investors as to the return of loan principal or interest, which is prohibited under the Interim Measures and Circular 57.
We are in ongoing discussion with third-party insurance companies, asset management companies and other financial institutions to provide alternative means of investor protection. In June 2018, we entered into a framework agreement with PICC Property and Casualty Company Limited to explore cooperation opportunities in this area. In July 2018, we entered into a collaboration agreement with a new institutional funding partner and an insurance company, under which we engaged the insurance company to provide insurance coverage for the institutional funding partner’s default losses. However, if we are unable to procure alternative means of investor protection in a timely and cost-effective manner, investors may reduce their investment on our platform and our business operations may be materially and adversely affected.
(v)
The operations of our online microcredit company are exposed to regulatory uncertainties.
We, through Fuzhou Weidai Online Microcredit Co., Ltd, or Fuzhou Online Microcredit, a subsidiary of our variable interest entity incorporated in Fuzhou, Jiangxi Province, offer borrowers advances once their loan applications on our platform are approved and the loans are listed for investors to subscribe to. Borrowers typically take such advances and subsequently use loan proceeds received from investors to repay the advances. We cannot assure you that such practice will not be deemed by PRC authorities as “self-financing through our platform”, which is prohibited under the Interim Measures.
Fuzhou Online Microcredit has obtained the establishment approval and business license as an online microcredit company to provide up to three times of its registered capital, or RMB600 million, in loans; however, it has not obtained the operating certificate as of the date of this prospectus. Fuzhou Online Microcredit was in the process of applying for the operating certificate when the approval process for all online microcredit companies’ applications for licenses, permits and certificates was suspended as a result of a number of regulations issued by the RPC regulatory authorities in November and December 2017. This industry-wide suspension of regulatory approval was implemented with an aim to strengthen the regulatory compliance of the online microcredit industry, which is relatively new and rapidly developing.
We cannot assure you that Fuzhou Online Microcredit is able to obtain the operating certificate in due course. It remains unclear when the regulatory authorities will resume the approval process and whether they will conduct any onsite inspections of Fuzhou Online Microcredit. As advised by Grandall Law Firm (Shanghai), our PRC counsel, Fuzhou Online Microcredit may continue its current operations (including making advances) before the approval process is resumed. However, in the event that an inspection is conducted by the relevant authorities and Fuzhou Online Microcredit fails to rectify any non-compliance identified during such inspection, its future application for the operating certificate could be denied and its business operations could be suspended. As of the date of this prospectus, Fuzhou Online Microcredit has not been subject to any administrative or other penalties due to the lack of operating certificate. We believe that Fuzhou Online Microcredit is in compliance with the applicable requirements for the issuance of operating certificate, and plan to re-apply for such certificate as soon as the regulatory approval process is resumed.
Fuzhou Online Microcredit has not been, and is not expected to be, our major funding source, and we have recently acquired a financial leasing company which will allow us to provide funding to borrowers in the form of financial leasing. However, if Fuzhou Online Microcredit is unable to obtain the operating certificate or obtain, maintain or renew any other requisite approvals applicable to its business, we may no longer be able to provide advances to borrowers through Fuzhou Online Microcredit, and borrower experience on our platform may be adversely affected.
(vi)
Our X Investment Program may be deemed to violate Circular 57, in which case we may be required to modify our business practice or be subject to fines or other penalties.
Even though Circular 57 permits online lending information intermediaries to provide infrequent loan transfers between investors for liquidity purposes, it expressly prohibits certain transfers, including transfer of loans that will result in the investment period to be inconsistent with the tenures of underlying individual loans. Circular 57 also prohibits online lending information intermediaries from facilitating investors to pledge their creditors’ rights to borrow loans.
The duration of our X Investment Program may be different from the tenures of the underlying individual loans, and we allow online investors that participate in our X Investment Program to transfer the underlying individual loans that have tenures different from the duration of the program to other online investors on our platform at the end of such program. Due to the lack of detailed implementations to Circular 57, we cannot assure you that such practice will be deemed to be in full compliance with Circular 57. If such practice is deemed to violate Circular 57 or other applicable PRC laws or regulations, we may be required to modify our business practice or be subject to fines or other penalties.
(vii)
Some of the loans we facilitate may be deemed as loans with no designated purposes and we may be required to track the actual use of these loans or cease facilitating these loans and our business, financial condition and results of operations may be materially and adversely affected.
The Notice on Regulating and Rectifying “Cash Loan” Business, or Circular 141, prohibits online lending information intermediaries from facilitating loans with no designated purpose. It is unclear whether some of the loans we facilitate, such as professional credit loans and consumption loans, would be deemed as loans with no designated purpose, and if they were, we would need to take necessary measures to track the actual use of these loans, which could cause us to incur substantial additional expenses. If we were unable to effectively implement the foregoing or other rectification measures, we might need to reduce or even cease facilitating these loans, and our business, financial condition and results of operations may be materially and adversely affected.
(viii)
Our historical practice of deducting interests and fees upfront may be deemed to have violated Circular 141 or Circular 56 and we may be subject to fines, penalties or other liabilities.
Circular 141 prohibits online lending information intermediaries from deducting interests, commissions, management fees or margins from investors’ loan disbursements to borrowers. In addition, pursuant to the Notice on Specific Rectification Implementation Measures for Risk of Online Microcredit Businesses of Microcredit Companies, or Circular 56, third-party institutions cooperating with microcredit companies are prohibited from collecting any interests or fees from borrowers. Historically, we deducted service fees payable to us from online investors’ loan disbursements to borrowers. We have ceased such practice since early 2017. Since early 2017, we, through Fuzhou Online Microcredit, offer borrowers advances while their loans are being listed for investors to subscribe to. Borrowers typically take such advances, and subsequently repay such advances using the loan proceeds received from online investors. Historically, Fuzhou Online Microcredit, pursuant to the borrowers’ authorization, deducted relevant fees payable to us directly from the advances. Starting in the first half of 2018, we have implemented a new fee structure and stopped deducting relevant fees payable to us from the advances. Under the current fee structure, borrowers receive full amounts of the loan proceeds, and pay service fees to us and principal and interest to online investors on a monthly basis, with the first payment due one month from the time of loan disbursement. See “Business — Our Borrowers and Loan Products — Loan Products and Services Offered to Borrowers” and “— Our Transaction Process” for more details. However, we cannot assure you that our historical practices will not be deemed by the PRC authorities to have violated Circular 141, Circular 56 or other PRC laws and regulations, in which case we may be subject to fines, penalties or other liabilities.
Our cooperation with institutional funding partners exposes us to regulatory uncertainties faced by those partners, and we may be required to obtain government approval or license due to our cooperating with those partners, which requirement will impose negative impacts on our business and results of operations.
Our cooperation with institutional funding partners (who funded 1.5% and 3.3% of our total loan volume in 2017 and the six months ended June 30, 2018, respectively) has exposed us to, and may continue to expose us to, regulatory uncertainties faced by such institutional funding partners. We are obligated to compensate a portion of our institutional funding partners for delinquent principal and interest payments in the event of borrower defaults. We cannot assure you that the business operations of our institutional funding partners or our cooperation with these institutional funding partners are, or will continue to be in compliance with the relevant laws and regulations. For instance, Circular 141 requires that financial institutions cooperating with third parties to engage in lending businesses (i) not to outsource any core lending business (including credit assessment and risk control), (ii) not to accept any credit enhancement provided by third parties with no guarantee approval or license, whether or not in a disguised form (including commitment to absorbing default risks), and (iii) to ensure that no interests or fees are collected from borrowers by such third parties. Furthermore, Circular 141 prohibits online lending information intermediaries from facilitating financial institutions’ participation in online lending services. Our cooperation with institutional funding partners may need to be modified, suspended or terminated, which may be time consuming and lead to insuffient funding supply on our platform and materially or adversely affect our business. We are in the process of rectifying our business to ensure that our collaboration with institutional partners is in full compliance with Circular 141, including, among others, to collect service fees from institutional funding partners instead of from borrowers.
Pursuant to the Regulations on the Administration of Financing Guarantee Companies promulgated by the State Council on August 2, 2017, or the Financing Guarantee Rules, entities operating “financing guarantee business” are required to obtain approval from the local regulatory authorities. If any entity operates financing guarantee business without an approval, it may be subject to penalties, including termination or suspension of business, fines ranging from RMB500,000 to RMB1,000,000, confiscation of illegal gains, and if the violation constitutes a criminal offense, criminal liabilities. The Financing Guarantee Rules have not defined what constitutes as operating “financing guarantee business”. It is uncertain whether our cooperation with institutional funding partners would be deemed as operating financing guarantee business. As of the date of this prospectus, we have not been subject to any fines or other penalties with regard to operating financing guarantee business. However, given the evolving regulatory environment of the financing guarantee business, we cannot assure you that we will not be required by the relevant governmental authorities to obtain approval or license for operating financing guarantee business in the future.
We have been and may continue to rectify our business to ensure full compliance with laws and regulations governing the marketplace lending industry.
We have rectified certain aspects of our business operations to ensure full compliance with laws and regulations governing the marketplace lending industry and may need to do so continuously as laws and regulations develop.
For instance, following an onsite inspection in May 2017 of our variable interest entity Weidai Financial Information conducted by the Hangzhou branch of the Office of Leading Group on Special Rectification of Risks in the Internet Finance Sector, or the Hangzhou Rectification Office, and several other regulatory authorities, and an onsite inspection in November 2017 of Weidai Financial Information conducted by the financial service office of Zhejiang province, the Hangzhou Rectification Office issued two rectification notices in August 2017 and December 2017, respectively, to Weidai Financial Information. These rectification notices identified certain issues in Weidai Financial Information’s business operations which were deemed not to be in full compliance with applicable laws and regulations governing online lending information intermediaries, which include, among others, (i) offering loans with interest rates that exceed the statutory limit of 36%; (ii) holding investors’ funds; (iii) conducting offline marketing activities for its loan products; (iv) lack of anti-fraud mechanism; (v) lack of risk assessment and investor management; (vi) lack of periodic audits for key business segments, security evaluation and compliance issues; (vii) insufficient risk disclosure to investors; (viii) insufficient information disclosure; and (ix) conducting misleading advertisements.
We have implemented various measures in response to the above alleged non-compliance, including, (i) discontinuation of loan products with interest rates that exceeded the statutory limit. Since the first half of 2018, we have ceased offering new loans with APR exceeding 36% (calculated using the internal rate of return method, which is more stringent than the total interest rate method), the loan volume of which totaled RMB17.1 billion (US$1.6 billion) in 2017 and accounted for 17.7% of our total loan volume in 2017, and loan applications with APRs exceeding 36% will be automatically rejected by our system; (ii) setting up custody accounts with a qualified bank and separating investors’ funds from our own funds; (iii) discontinuation of conducting offline marketing activities for our loan products; (iv) adoption of anti-fraud mechanism; (v) implementation of risk assessment and investor management; (vi) improving periodic audits for key business segments, security evaluation and compliance issues; (vii) improving risk disclosure to investors; (viii) improving information disclosure; and (ix) discontinuation of misleading advertisements. We have completed these rectifications as of the date of this prospectus. However, it is uncertain whether our rectification measures will be sufficient to ensure full compliance with the regulatory requirements due to the lack of detailed interpretation and implementation of these requirements. As of the date of this prospectus, we have not received final clearance from the local financial authorities that our rectification efforts were sufficient, and there can be no assurance that we will be able to receive such final clearance.
In addition, as the PRC laws and regulations for online lending information intermediaries, including their interpretation and implementation, continue to evolve, further regulations regarding the marketplace lending industry may be implemented, which may require us to make further rectifications.
If we are unable to retain existing borrowers or investors or attract new ones, or maintain or increase the volume of loans facilitated through our platform in a cost-effective manner, our business and results of operations will be adversely affected.
Our business involves matching borrowers and investors through our platform. The growth and success of our future operations depend on the availability of adequate lending capital to meet borrowers’ demand for loans on our platform. In order to grow our business, we must continuously increase the volume of loans facilitated through our platform by retaining existing and attracting new borrowers and investors.
The volume of loans facilitated through our platform may be affected by a number of factors, including our brand recognition and reputation, interest rates offered and service rates charged to borrowers and investors, the effectiveness of our risk management, the default rate of borrowers on our platform, the operating efficiency of our platform and the macroeconomic environment. We may not be able to attract a sufficient number of borrowers or investors, or obtain sufficient investor commitments, our business and results of operations may be adversely affected.
•
Insufficient number of borrowers
We may not be able to attract a sufficient number of qualified borrowers due to a variety of reasons. For example, we currently acquire borrowers through our own channels as well as third-party online and offline sales channels. If any of our borrower acquisition channels become less effective, if we are unable to continue to use any of these channels or if we are not successful in developing new channels, we may not be able to attract new borrowers in a cost-effective manner and may even lose existing borrowers to our competitors. If there are insufficient number of borrowers, investors may not be able to deploy their capital in a timely or efficient manner and may seek alternative investment options.
In addition, in connection with the introduction of new loan products or in response to changing economic conditions, we have imposed, and may continue to impose more stringent requirements on borrowers. For example, as a result of our more stringent requirements, the average amount of auto-backed loans we facilitated was reduced to RMB61,779 in the six months ended June 30, 2018 from RMB63,888 in 2017. More stringent requirements may negatively affect borrower experience on our platform and growth of the volume of loans facilitated through our platform. If we do not increase the volume of loans facilitated through our platform, our business and results of operations may be adversely affected.
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Insufficient investor commitments
Our platform may not be able to attract sufficient investor commitments due to a variety of reasons. For example, changes in market conditions or decrease in investment returns may result in investors seeking other investment options such as equities, bonds and bank savings. In addition, as we continue to expand our investor base to include an increasing number of smaller investors, the average investment amounts of online investors on our platform decreased from RMB125,124 in the six months ended June 30, 2017 to RMB73,236 in the six months ended June 30, 2018. If there are insufficient investor commitments, borrowers may not be able to obtain capital through our platform and may turn to other sources for their borrowing needs, and the volume of loans facilitated through our platform may be significantly impacted. To the extent that it is necessary to obtain additional lending capital from investors, such lending capital may not be available to our platform on acceptable terms or at all. If our platform is unable to provide prospective borrowers with loans or fund the loans on a timely basis due to insufficient lending capital, we may experience a loss of market share or slower than expected growth, which would harm our business, financial condition and results of operations.
Since 2017, we have expanded our funding sources to include institutional funding partners. In 2017 and the six months ended June 30, 2018, RMB1.5 billion and RMB1.5 billion of loans, or 1.5% and 3.3% of our total loan volume, was funded by institutional funding partners, respectively. These institutional funding partners agree to provide funding to borrowers referred by us who meet their predetermined criteria and pass their internal loan approval. While our borrowers’ loans are generally approved by the institutional funding partners if they fall within such institutional funding partners’ predetermined criteria, the institutional funding partner may decline to fund the loans, which is outside of our control. There is no assurance that our institutional funding partners will continue to provide reliable, sustainable and adequate funding to support borrowers’ financial needs. In addition, if PRC laws and regulations impose more restrictions regarding cooperation with institutional funding partners, these institutional funding partners may become more selective in choosing cooperation partners, which may drive up the funding costs and increase competition. Any of the above reasons may materially increase our funding costs, which may adversely affect our results of operations and profitability.
If our existing and new loan and investment products do not achieve sufficient market acceptance, our financial results and competitive position may be harmed.
We have devoted significant resources to, and will continue to place an emphasis on, upgrading and marketing our existing loan and investment products and enhancing their market awareness. We also incur expenses and expend resources to develop and market new loan products and investment products that may incorporate new features, improved functionalities or otherwise make our platform more desirable to borrowers and investors. New loan products and investment products must achieve high levels of market acceptance in order for us to recoup our development costs.
Our existing and new loan products and investment products could fail to attain sufficient market acceptance for many reasons, including:
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borrowers may not find terms of our products, such as costs and credit limit of our loan products, competitive or appealing;
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our failure to predict market demand accurately and offer products that meet borrowers’ demand in a timely fashion;
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borrowers and investors using our platform may not like, find useful or accept, any changes we make;
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there may be negative publicity about our loan products or our platform’s performance or effectiveness; and
•
there may be competing products introduced by our competitors.
If our existing and new loan and investment products do not achieve sufficient market acceptance, our competitive position, results of operations and financial condition may be harmed.
We may not be able to effectively operate our service centers, which could harm our business, results of operations and growth potential.
We have rapidly expanded our service center network over the past few years. As of the date of this prospectus, we operate 517 service centers across 30 of the 32 provinces, municipalities and autonomous regions in China. We cannot assure you that our managerial, financial, operational, technological and other resources will be adequate to effectively operate this nationwide service center network. For example, we may not be able to continue to attract and retain a sufficient number of qualified personnel at reasonable costs or to train these personnel to provide high-quality services in accordance with our operating and risk management procedures and protocols. Moreover, if we fail to adequately predict borrower demand or otherwise optimize our service center network, it could result in excess or insufficient service center capacity.
We operate 129 service centers through service center operation partners as of the date of this prospectus. If we are unable to effectively address risks associated with the partner-operated service center business model, our reputation and results of operations may be materially and adversely affected:
•
Our control over our service center operation partners is based on cooperation agreements, which may not be as effective as direct ownership. If our service center operation partners fail to maintain service standards we have set up, our revenues may be negatively affected. In addition, deterioration in business operations of our partner-operated service centers can result in, among other things, delayed or reduced payments to us.
•
Our service center operation partners are responsible for hiring and managing employees for the respective service centers. In the event of any unsatisfactory performance or illegal actions by these employees or any incidents or operational issues at our partner-operated service centers, we may suffer reputational or financial damage.
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Our cooperation agreements with service center operation partners may be suspended or terminated for various reasons, including our service center operation partners’ serious violation of our operating protocols, or our service center operation partners’ failure to maintain requisite approvals, licenses or permits or to comply with other governmental regulations, which may negatively impact our brand image. We may not be able to find replacement service center operation partners in a timely manner or at all. Any resulting service disruption could materially and adversely affect our brand image, reputation and financial performance.
In addition, pursuant to the Regulation on the Administration of Commercial Franchises, companies that engage in franchise business shall make filings with local regulatory authorities within 15 days after execution of the franchise agreements. Companies that fail to make such filings may be subject to penalties, including remedy measures, imposition of fines that range from RMB10,000 to RMB50,000, and
companies that fail to make remedy measures in a timely manner may be subject to fines that range from RMB50,000 to RMB100,000 and public announcements. We intend to make filings with local regulatory authorities with respect to the cooperation agreements entered into as soon as practical. However, failure to make such filing may subject us to fines.
Our current level of fee rates may decline in the future. Any material reduction in our fee rates could reduce our profitability.
We generate revenues primarily from fees charged to borrowers for our services in matching them with investors and for other services that we provide over the life of the loans. We also charge fees to online investors for facilitating their investments via our platform and the transfer of their investments on our secondary loan market. These fee rates may change over time due to competition in the marketplace lending industry, the different types of products and services we may offer in the future, competition, regulatory environment and macroeconomic factors. Any material reduction in our fee rates could have a material adverse effect on our business, results of operations and financial condition.
Changes in PRC regulations relating to interest rates and fees for marketplace lending platforms and microcredit lending could have a material adverse effect on our business.
The interest rate permitted to be charged on loans facilitated through our platform is subject to limitations set forth in the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court in August 2015 and effective in September 2015. The Private Lending Judicial Interpretations provide that (i) when the interest rate agreed between the borrower and investor does not exceed an annual interest rate of 24%, the People’s Court will uphold the interest rate charged by the investor, and (ii) when the interest rate agreed between the borrower and investor exceeds an annual interest rate of 36%, the portion in excess of 36% is void and the People’s Court will uphold a borrower’s claim for return of the excess portion to the borrower. For loans with interest rates per annum between 24% and 36%, if the interest on the loans has already been paid to the funding sources, and so long as such payment has not damaged the interest of the state, the community or any third parties, the courts will likely not enforce a borrower’s demand for the return of such interest payment.
Fuzhou Online Microcredit is subject to regulations applicable to microcredit companies. See “Regulation — Regulations on Microcredit Companies” for more details. These regulations provide that “integrated real interest” (namely the aggregated borrowing costs charged to borrowers in the forms of interest and various fees) shall be subject to the limit on interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court. The loans facilitated through our platform and the advances made by Fuzhou Online Microcredit will be subject to the aforementioned interest rate restrictions, which could affect our platform’s to facilitate loans for certain borrowers and may have a material adverse effect on our business.
Certain Opinions Regarding Further Strengthening the Financial Judgment Work issued by the Supreme People’s Court in August 2017, or the Opinions for Financial Judgment Work, provide more detailed rules on the legal limits of interest and fees charged in connection with a loan and specify that the intermediary service fees charged by an online lending intermediary to circumvent the legal limit of interest of private lending shall be invalid. Circular 141 further clarifies that the total amount of interest and fees charged to borrowers must be within the limit set forth in the Private Lending Judicial Interpretations. See “Regulation — Regulations on Online Lending Information Services — Regulations on Online Lending Information Intermediaries” and “— Regulations on Loans and Intermediation” for more details.
As of the date of this prospectus, loans facilitated through our platform do not have annual interest rate exceeding 36%, however, certain loans facilitated through our platform have overall borrowing costs over 24% per annum. We may continue to facilitate loans at or above the borrowing costs of 24% but no more than 36% per annum. In the event that any of such loans become delinquent, we may not be able to collect the part of borrowing costs that exceed 24% per annum through PRC judicial enforcement. Furthermore, though we believe our current service fees and various other fees charged to borrowers are reasonable and in compliance with relevant requirements under the Opinions for Financial Judgment Work, if the method of calculation of the costs used by the PRC governmental authorities or the PRC courts is different from us and thus the overall borrowing costs of some of our loan products are deemed as
exceeding 36% per annum, the parts of the borrowing costs exceeding 36% per annum may be ruled as invalid, and we may face, among others, regulatory warning, correction order, condemnation, fines and criminal liability and we may be required to reduce fees and annual interest rate we charge to our borrowers. If such situations were to occur, our business, financial condition, results of operations and prospects would be materially and adversely affected.
We may need to adapt our business model as China’s auto-backed loan market develops.
China’s auto-backed loan market is currently in a preliminary stage of development and features a small number of players. As the market continues to develop and borrowers become increasingly inclined to secure funding using automobiles as collateral, our existing business model and product offerings may face increasing competition and challenges. For example, we currently facilitate auto-backed loans using automobiles with clean title as collateral. However, as auto-backed loans become more prevalent and an increasing number of auto-backed loan providers emerge, automobiles may become more commonly used as collateral to secure funding and the same automobile may even be used as collateral to secure funding from multiple auto-backed loan providers, which may potentially increase the default rate of auto-backed loans we facilitate. For example, a borrower of auto-backed loans facilitated through our platform may take out auto-backed loans from other auto-backed loan providers using the same automobile as collateral, which will increase default risks to us. To reduce the default risks, we may need to modify our existing business practice to lower our loan-to-value ratio, or LTV ratio, or require additional collateral from borrowers, which could incur additional costs, reduce the attractiveness of our platform or otherwise materially and adversely affect our business, financial condition and results of operations.
Our risk management system may not be adequate and may adversely affect the reliability of our platform, and in turn damage our reputation, business and results of operations.
We have adopted stringent risk management protocols to assess loan applicants’ creditworthiness and appraise the value of automobiles. Due to the lack of a nationwide centralized credit reporting system in China, we conduct credit assessment of loan applicants and appraise the value of automobiles using data aggregated from various data sources, including our own proprietary database and third-party data service providers and credit scoring service providers’ databases. However, these risk management measures may not always be adequate or effective. For example, our risk management system may contain errors or defects that prevent us from effectively identifying fraudulent information supplied by borrowers. When there is indication of fraud, our risk management team’s further diligence and verification, such as site visits, may not completely eliminate the risk of fraud. In addition, the information and data in our own database or third-party databases may be inaccurate, incomplete or outdated. Any of these could prevent us from effectively detecting fraud, accurately determining the creditworthiness of loan applicants or appraise the value of automobiles, and our platform’s default rate may significantly increase. As a result, investors may lose confidence in our platform and our reputation, business and results of operations may be adversely affected.
Significant decrease in value of automobile used as loan collateral may lower our recoverability upon any default, which may adversely affect our results of operations.
We primarily facilitate auto-backed loans, which involves borrowers using their automobiles as collateral. We have implemented various measures in order to accurately determine the value of automobiles used as collateral, including our proprietary automobile appraisal system, third-party automobile appraisal systems, our own automobile appraisers and qualified third-party automobile appraisers. However, we may not be able to capture all factors that may affect the value of automobiles used as collateral. Changes in the value of automobiles may affect the recoverability of any outstanding balance if default incurs. The value of automobiles may fluctuate due to many reasons, including the market value of new and used automobiles. The historical restrictions on inter-city or inter-province transfer of used automobiles that were imposed by various local government authorities in China may also result in lower value of automobiles that are transferred to such cities with local transfer restrictions. Although the PRC government has recently issued several official opinions and circulars to prohibit such local restrictions and market segregation, certain transfer restrictions are still in practice, such as different emission standards imposed by various local government authorities. The deterioration of the condition of automobiles and
decrease in popularity of specific automobile models may also decrease the value of the automobiles. Thus, if there is any significant decrease in value of borrowers’ automobiles used as collateral, we may not be able to cash out all delinquent principal and interest when borrowers default, which may adversely affect our business, financial condition and results of operations.
We have obligations to verify information relating to borrowers and detecting fraud. If we fail to perform such obligations to meet the requirements of relevant laws and regulations, we may be subject to liabilities.
Our business of connecting investors and borrowers constitutes an intermediary service, and our contracts with investors and borrowers are intermediation contracts under the PRC Contract Law. Under the PRC Contract Law, an intermediary that intentionally conceals any material information or provides false information in connection with the conclusion of an intermediation contract, which results in harm to the client’s interests may not claim for any service fee for its intermediary services, and is liable for any damage incurred by the client. Therefore, if we fail to provide material information to investors and are found to be at fault, for failure to exercise proper care, or failure to conduct adequate information verification or supervision, we could be subject to liabilities as an intermediary under the PRC Contract Law. In addition, the Interim Measures have imposed additional obligations on online lending information intermediaries to verify the truthfulness of the information provided by or in relation to loan applicants and to actively detect fraud. We leverage a large database of past fraud cases, which is updated regularly, and sophisticated rule-based technologies, in detecting loan applicants’ fraudulent behaviors. As the Interim Measures are relatively new, it is still unclear to what extent online lending information intermediaries should exercise the duty of care in detecting fraud. Although we believe that, as an information intermediary, we should not bear the credit risk for investors as long as we take reasonable measures to detect fraudulent behaviors, we cannot assure you that we would not be subject to any liabilities under the Interim Measures if we fail to detect any fraudulent behavior. If that were to occur, our results of operations and financial condition could be materially and adversely affected.
Broader macro, political and socio-economic factors affecting market conditions can materially and adversely affect our business and operating results.
General economic, macro, political and socio-economic factors beyond our control may deter borrowers’ from seeking loans through our platform or investors attempting to lend through our platform. Such factors include the general interest rate ecosystem, unemployment rates, residential home values and availability of other investment opportunities. If any of these risk factors should materialize, the volume of loans facilitated through our platform may decline and our revenues and operating results may be adversely affected. For example, the fluctuation of interest rates may affect the demand for loan services on our platform, a decrease in interest rates may cause potential borrowers to seek lower-priced loans from other channels and a high interest rate environment may lead to an increase in competing investment options and dampen investors’ desire to invest on our platform. If we fail to respond to the fluctuations in interest rates in a timely manner and adjust our loan product offerings, potential and existing investors may delay or reduce their investments through our platform, and potential and existing borrowers may show less interest in our loan products and platform. As a result, fluctuations in the interest rate environment may discourage investors and borrowers from participating on our platform, which may adversely affect our business.
In addition, our business is subject to the credit cycle associated with the volatility of the general economy. If economic conditions deteriorate, we may face increased risk of default, which will result in lower returns or losses to investors. In the event that the creditworthiness of our borrowers deteriorates or we cannot track the deterioration of their creditworthiness, the criteria we use for the analysis of borrower credit profiles may be rendered inaccurate, rendering our risk management system ineffective. This in turn may lead to higher default rates and adverse impacts on our reputation, business, results of operations and financial positions.
We cannot guarantee that economic conditions will remain favorable for our business or industry and that demand and supply for loans we facilitate will continue to be met at current levels. If demand or supply reduces, or if the default rate increases, our growth and revenue will be negatively impacted.
We do not prohibit our borrowers from incurring other debt or impose financial covenants on borrowers during the term of a loan, which will increase the risk of default.
Subsequent to a loan disbursement, a borrower may:
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become delinquent in payment obligations;
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default on a pre-existing debt obligation;
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commit to further indebtedness; and/or
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experience events bringing about adverse financial effects.
We do not prohibit our borrowers from incurring additional indebtedness, nor do we impose any financial covenants on borrowers during the term of a loan. Furthermore, we may not be able to ascertain whether a loan applicant has outstanding loans on other marketplace lending platforms. We are faced with the risk that borrowers borrow money through our platform to pay off loans on other marketplace lending platforms, creating a snowball effect of debt. Any additional indebtedness may impair a borrower’s ability to observe his or her payment obligations on the loans we facilitated, and therefore adversely affect the relevant investor’s returns. If a borrower becomes insolvent or bankrupt or otherwise runs into financial distress, any unsecured loan (including those obtained through our platform) will rank pari passu to each other and our investor may suffer losses.
If we are unable to effectively maintain the quality of our loan portfolio, our business, financial conditions and results of operations may be materially and adversely affected.
Our financial condition and results of operations are affected by our ability to effectively maintain the quality of our loan portfolio. If we are unable to effectively maintain and manage the quality of our loan portfolio due to any reason, the delinquency rates of our loan portfolio may increase. As we have been voluntarily purchasing delinquent loans from online investors, and are obliged to compensate a portion of our institutional funding partners and corporate investors for their default losses, any deterioration in the quality of our loan portfolio or increase in our delinquency rate may materially and adversely affect our results of operations. In addition, if we no longer voluntarily purchase delinquent loans from online investors in the future, online investors will bear the default risk and their confidence and loan volume on our platform may decrease.
If our ability to collect delinquent loans is impaired, our business and results of operations might be materially and adversely affected.
We rely on both our in-house collection team and third-party collection service providers to collect delinquent loans. Our existing collection methods, such as phone calls, in-person visits and taking automobiles into custody, may not be as effective in the future. Although we are under no obligation to compensate online investors’ default losses (except that we provide guarantees for certain consumption loan products and to certain corporate investors), we have been voluntarily compensating online investors for their default losses by purchasing their delinquent loans in the event of borrower defaults. As a result, failure to collect these loans may have a material adverse effect on our business, financial condition and results of operations. In addition, as we provide guarantees to a portion of our institutional funding partners and corporate investors, failure to collect these loans may also have a material adverse effect on our business, financial condition and results of operations.
We follow standardized procedures and protocols to collect delinquent loans and closely monitor our risk management personnel’s collection activities to ensure compliance with these procedures and protocols. Our post-loan risk management personnel are required to undertake, among others, (i) to strictly adhere to our standardized procedures and protocols to collect delinquent loans, (ii) to speak in a well-mannered tone and act civil and polite toward the borrowers and avoid any conversations or interactions that may lead to heated arguments, (iii) to contact the borrowers at reasonable hours, and refrain from making constant collection calls or visits that may be seen as harassment, (iv) in the event of conflicts with borrowers, to take the initiative to contact the police, and (v) not to engage in any practice or take any action during loan collection in violation of any applicable laws or regulations. However, we cannot assure you that our risk management personnel will comply with such undertakings at all times. In addition, these collection
methods may be viewed by borrowers or regulatory authorities as harassments, threats or other illegal conducts, and we may be subject to lawsuits initiated by borrowers or prohibited by the regulatory authorities from using certain collection methods. If any of these were to happen and we fail to adopt alternative collection methods in a timely manner, or if the alternative collection methods are less effective, our ability in collecting delinquent loans may be impaired, and investors’ confidence and loan volume on our platform may decrease.
In addition, we place the automobiles we have taken into custody in parking lots or parking spaces we rent from third parties in close proximity to our service centers. We may not be able to properly store these automobiles before they are redeemed by borrowers or disposed of. For example, the automobiles we have taken into custody may be stolen, vandalized or suffer weather related damages. Even if the automobiles were stored properly, we cannot assure you that disposal value of the automobiles can fully cover the delinquent principal and interest. Furthermore, borrowers may dispute how we take into custody or dispose of the collaterals and our handling of proceeds from such disposal. If any of these were to occur, we may suffer losses and our brand image and relationship with borrowers may be harmed.
For certain auto-backed loans facilitated through our platform, investors’ rights to the automobile collateral have not been registered with the local automobile administrative offices. In the event that an automobile collateral for such loans is also used as collateral to secure another loan elsewhere and a third-party lender’s right to such automobile was registered with the local automobile administrative offices, the third-party lender will have priority to claim his rights to the automobile collateral over the investor on our platform if the borrower fails to repay the loans. As a result, the rights of investors on our platform may be negatively affected and our business and results of operations could be materially and adversely affected.
Our failure to compete effectively could adversely affect our results of operations and market share.
We face competition in auto-backed loan market in China. We compete directly with other auto-backed loan providers for both borrowers and investors, such as touna.cn and rrjc.com. As we focus on providing financial solutions to small and micro enterprise owners, we also compete with traditional financing channels and other marketplace lending platforms which provide loans to small and micro enterprise owners. In addition, we compete with other marketplace lending platforms for investors. Our competitors may operate with different business models, have different cost structures or participate selectively in different market segments. They may be more successful or more adaptable to new regulatory, technological and other developments. Some of our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their business. Our competitors may also have more extensive borrower or investor bases, greater brand recognition and brand loyalty and broader partner relationships than us. Additionally, our current or potential competitors may acquire or form strategic alliances with one or more of our competitors, which could adversely affect our business, results of operations, financial condition and future growth.
In addition, our competitors may be better at developing new products, responding faster to new technologies and undertaking more extensive marketing campaigns. When new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they sometimes undercut the pricing and/or terms prevalent in that market, which could adversely affect our market share or our ability to exploit new market opportunities. Our pricing and terms could deteriorate if we fail to act to meet these competitive challenges. If we are unable to compete with such companies and meet the need for innovation in our industry, the demand for our platform could stagnate or substantially decline, we could experience reduced revenues or our platform could fail to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.
Any failure to manage our growth or execute our strategies effectively may materially and adversely affect our business and prospects.
We have achieved rapid growth in our revenues and net income in the past few years, but such growth rates slowed down in the six months ended June 30, 2018. Our net revenues increased by 101.3% from RMB1,761.4 million in 2016 to RMB3,545.4 million (US$535.8 million) in 2017, and our net income
increased by 63.2% from RMB291.0 million in 2016 to RMB474.8 million (US$71.7 million) in 2017. In comparison, our net revenues increased by 20.1% from RMB1,568.6 million in the six months ended June 30, 2017 to RMB1,883.3 million (US$284.6 million) in the same period in 2018, and our net income increased by 14.6% from RMB268.2 million in the six months ended June 30, 2017 to RMB307.4 million (US$46.4 million) in the same period in 2018. The slower growth rate was primarily due to (i) a general downturn of China’s marketplace lending industry in 2018 due to various regulatory and economic factors, which caused a slow down in the growth of our loan balance and loan volume, and (ii) a decrease in auto-backed loans’ fee rates, as we adjusted the fee rates of auto-backed loans downward in the first half of 2018 to improve the competitiveness of our loan products. If we are not successful in managing our growth or executing our strategies effectively, our business, results of operations, financial condition and future growth may be materially and adversely affected.
Any negative publicity with respect to us, the marketplace lending industry in general or our business partners may materially and adversely affect our business and results of operations.
The reputation of our brand is critical to our business and competitiveness. Factors that are vital to our reputation include, but are not limited to, our ability to:
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maintain the quality and reliability of our platform;
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provide borrowers and investors with a superior experience on our platform;
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enhance and improve our risk management system;
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effectively manage and resolve borrower and investor complaints; and
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effectively protect personal information and privacy of borrowers and investors.
Any malicious or negative allegation made by the media or other parties about the foregoing or other aspects of our company, including, but not limited to, our management, business, compliance with law, financial condition or prospects, whether with merit or not, could severely compromise our reputation and harm our business and operating results.
As China’s marketplace lending industry is new and the regulatory framework for this industry is also evolving, negative publicity about this industry may arise from time to time. Negative publicity about China’s marketplace lending industry in general may also have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities. The PRC government has recently instituted specific rules to develop a more transparent regulatory environment for the marketplace lending industry. See “Regulation — Regulations on Online Lending Information Services” and “— Regulations on Microcredit Companies” for more details. Any players in China’s marketplace lending industry who do not comply with these regulations may adversely impact the reputation of the industry as a whole. Furthermore, any negative development in, or negative perception of, the marketplace lending industry as a whole, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established and imposed a negative impact on our ability to attract new borrowers and investors. Negative developments in the marketplace lending industry, such as widespread borrower defaults, fraudulent behavior and/or the closure of other marketplace lending platforms, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by marketplace lending platforms like us. For instance, since the second quarter of 2018, there were an increasing number of business failures of, or accusations of fraud and unfair dealing against, companies in the marketplace lending industry in China. Recently there has been increased media coverage of marketplace lending platforms’ business failures. If borrowers and investors associate us with these failed companies, our reputation may be harmed and investor and borrower confidence on our platform may be adversely affected.
In addition, negative publicity about our business partners, such as negative publicity about their loan collection practices, any failure by them to adequately protect the information of our borrowers and investors, or to otherwise meet required quality and service standards, could harm our reputation and materially and adversely affect our business and results of operations.
If we fail to promote and maintain our brand in a cost-efficient way, our business and results of operations may be harmed.
We believe that effectively developing and maintaining awareness of our brand is critical to attracting and retaining borrowers and investors on our platform. This depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our platform. If any of our current marketing channels become less effective, if we are unable to continue to use any of these channels, if the cost of using these channels were to significantly increase or if we are not successful in generating new channels, we may not be able to attract new borrowers and investors in a cost-effective manner or convert prospective borrowers and investors into active borrowers and investors on our platform.
Our efforts to build our brand have caused us to incur significant expenses, and it is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.
Loss of or failure to maintain the relationship with our business partners may materially and adversely affect our business and results of operations.
We currently rely on a range of business partners in various aspects of our business. We work with online and offline channel partners, such as third-party mobile apps, websites and financial service providers for borrower and investor acquisition. We rely on our service center operation partners in operating our partner-operated service centers. Furthermore, we collaborate with a variety of third-party service providers to conduct our business, including data service providers and credit scoring service providers for data aggregation, collection service providers for post-loan collections and payment service providers for the transfer of funds between borrowers and investors.
Pursuing, establishing and maintaining relationships with our business partners requires significant time and resources. If we cannot successfully pursue, establish or maintain relationships with our business partners, our business operations may be adversely affected. In addition, our agreements with our business partners generally do not prohibit them from working with our competitors or offering competing services. Our competitors may be more effective in providing incentives to our business partners, which may cause our business partners to favor business relationship with them over their relationship with us and devote more resources toward our competitors. Moreover, our business partners may devote more resources to support their own competing businesses, which may compete with our business and adversely affect our business relationship with these business partners. Furthermore, if our business partners fail to perform their obligations under our agreements with them, we may have disagreements or disputes with them or suspend or terminate our business relationship, which could adversely affect our business operations and brand image. If our relationship with any of our existing business partners is suspended or terminated, we may not be able to find replacement business partners in a timely and cost-effective manner or at all, which could negatively impact our business, financial condition and results of operations.
Misconduct, errors and failure to comply with applicable laws and regulations by our employees or business partners could harm our business and reputation.
We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and our business partners. Our business depends on our employees and our business partners to interact with borrowers and investors, process large amounts of data and transactions and support the loan collection process. We may not be able to identify and deter misconduct or errors by our employees or our business partners at all times, and the precautions we take to detect and prevent these activities may not be effective. If transactions are redirected, misappropriated or otherwise improperly executed, if personal information are disclosed to unintended recipients or if an operational breakdown or failure during the process of transactions occurs, whether as a result of human error, or purposeful sabotage or fraudulent manipulation of our operations or systems, our business operations and reputation could be materially adversely affected. For example:
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The manner in which we interact with borrowers and investors and store and use their personal information through our platform is governed by various PRC laws. If any of our employees or business partners fails to follow our protocols when interacting with borrowers and investors, or takes, converts or misuses borrowers’ or investors’ funds, documents or personal information, we could be liable for damages suffered by borrowers or investors and become subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or personal information, and therefore be subject to civil or criminal liability. For instance, our third-party data service providers may provide us with personal information of borrowers that is illegally obtained, which may subject us to liabilities;
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We rely on both our in-house collection team and third-party collection service providers for loan collection. Any aggressive practice or misconduct by our employees or third-party service providers during loan collection process could damage our reputation; and
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Although we have formulated policies and procedures aimed at preventing money laundering and terrorism financing, we cannot assure you that these policies and procedures will be effective to prevent our employees from engaging in money laundering or terrorism financing activities. In addition, third-party payment service providers are required to have in place appropriate anti-money laundering policies and procedures under applicable anti-money laundering laws and regulations issued by the PBOC. If any of our third-party service providers fails to comply with the applicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention.
Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and investors, inability to attract borrowers and investors, reputational damage, regulatory intervention and financial harm, which could negatively impact our reputation, business, financial condition and results of operations.
If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.
Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audit of our consolidated financial statements as of December 31, 2016 and 2017 and for the years ended December 31, 2016 and 2017, we and our independent registered public accounting firm identified one “material weakness” in our internal control over financial reporting and other control deficiencies. As defined in standards established by the United States Public Company Accounting Oversight Board, or the PCAOB, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified is the insufficient number of financial reporting personnel with appropriate level of knowledge and experience in application of U.S. GAAP and SEC rules and regulations commensurate with our reporting requirements. Following the identification of the material weakness and other control deficiencies, we have taken measures and plan to continue to take measures to remediate timely these deficiencies. For details about remediation, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Internal Control over Financial Reporting” for more details. However, the implementation of these measures may not fully address the material weakness and deficiencies in our internal control over financial reporting, and we will be unable to conclude that they have been remediated. Our failure to correct the material weakness and control deficiencies or our failure to discover and address any other material weakness or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.
Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such accountant might have identified additional
material weaknesses and deficiencies. Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2019. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue an adverse opinion if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
Any significant service disruptions or outages on our platform, in our computer systems or our business partners’ computer systems could prevent us from facilitating loans through our platform, reduce the attractiveness of our platform or result in a loss of borrowers or investors.
The satisfactory performance, reliability and availability of our platform and computer systems are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and investors. There is no assurance that we will be able to protect our platform and computer systems against, among others, damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, software errors, bugs or defects, configuration errors, computer viruses, security breaches, hacking attempts or criminal acts at all times. Our business partners’ computer systems may also be vulnerable to such errors, bugs, defects or breaches. In the event of any service disruption or outage of the computer systems of our company or those of our business partners, our ability to facilitate loans may be adversely affected. For example, we may experience temporary service disruptions or data losses during data migrations between old and new systems or system upgrades. We may not be able to recover all data and services in the event of a service disruption or outage. Additionally, our insurance policies may not adequately compensate us for any losses that we may incur during service disruptions or outages.
Any interruption or delays in our services, whether as a result of third-party or our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and investors and our reputation, subject us to liabilities and cause borrowers and investors to abandon our platform, any of which could adversely affect our business, financial condition and results of operations.
Cyber-attacks, computer viruses, physical or electronic break-ins or other unauthorized access to our or our business partners’ computer systems could result in misuse of confidential information and misappropriation of funds of our borrowers and investors, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.
Our platform collects, stores and processes certain personal information and other sensitive data from our borrowers and investors. The massive data that we have processed and stored makes us and our server hosting service providers the targets of, and potentially vulnerable to, cyber-attacks, computer viruses, physical or electronic break-ins or other unauthorized access. While we have not experienced any material business or reputational harm as a result of such breach in the past, there can be no assurance that our security measures to protect borrowers and investors’ confidential information and funds will not be breached in the future. Because techniques used to sabotage or obtain unauthorized access into systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our or our server hosting service providers’ systems could cause confidential borrower and investor information to be stolen and used for criminal purposes. As personally identifiable and other confidential information is subject to legislation and regulations in numerous domestic and international jurisdictions, inability to protect confidential information of our borrowers and investors could result in additional cost and liability for us, damage our reputation, inhibit the use of our platform and harm our business. The Administrative Measures for the Security of the International Network of Computer Information Network, issued in December 1997 and amended in January 2011, requires us to report any data or security breaches to the local offices of the PRC Ministry of Public Security within 24 hours of any such breach. The Cyber Security Law of the PRC, issued in June 2017, requires us to take immediate remedial measures when we discover that our products or services are subject to risks, such as security defects or bugs. Such remedial measures include, informing our borrowers and investors of the specific risks and reporting such risks to the relevant competent departments.
We also face indirect technology and cybersecurity risks relating to our business partners, including our third-party payment service providers which manage the transfer of borrower and investor funds and our custodian bank which provides custodian services for our borrowers’ and investors’ funds. As a result of increasing consolidation and interdependence of computer systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on its business partners. Although our agreements with third-party payment service providers and custodian bank provide that each party is responsible for the cybersecurity of its own systems, any cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of such third-party payment service providers and custodian bank could, among other things, adversely affect our ability to serve our borrowers and investors, and could even result in misappropriation of funds of our borrowers and investors. If that were to occur, our third-party payment service providers, custodian bank and us could be held liable to borrowers and investors who suffer losses from the misappropriation.
Our future growth depends on the acceptance of the internet as an effective platform for financial products and content.
The internet, including the mobile internet, has gained increased popularity in China as a platform for financial products and content in recent years. However, certain borrowers and investors have limited experience in handling financial products and content online and may have reservations about using online platforms. For example, borrowers may not find online content to be a reliable source of financial product information and investors may not believe online platforms are secure for risk assessment. If we fail to educate prospective borrowers and investors about the value of our platform and our products and services, our growth will be limited and our business, financial performance and prospects may be materially and adversely affected. The further acceptance of the internet as an effective and efficient platform for financial products and content is also affected by factors beyond our control, including negative publicity around online and mobile lending and restrictive regulatory measures taken by the PRC government. If we do not achieve adequate acceptance in the market, our growth prospects, results of operations and financial condition could be harmed.
We may be held liable for information or content displayed on, retrieved from or linked to our website or mobile apps, which may materially and adversely affect our business and operating results.
The PRC government has adopted regulations governing internet access and distribution of information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting on the internet content that, violates PRC laws and regulations, impairs the national dignity of China, contains terrorism, extremism, content of force or brutality, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, the closure of the concerned websites and criminal liabilities. In the past, failure to comply with these requirements has resulted in the closure of certain websites. The website operator may also be held liable for the censored information displayed on or linked to the website.
In particular, the Ministry of Industry and Information Technology, or the MIIT, has published regulations that place website operators with liability for content displayed on their websites and actions of users of their systems, that are deemed to be socially destabilizing. The Ministry of Public Security has the authority to order any local internet service provider to block any internet website at its sole discretion. From time to time, the Ministry of Public Security has stopped the dissemination over the internet of information which it believes to be socially destabilizing. The State Secrecy Bureau is also authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets. Furthermore, we are required to report any suspicious content to relevant governmental authorities, and to undergo computer security inspections. If we fail to implement the relevant safeguards against security breaches, our websites may be shut down and our business and ICP licenses may be revoked.
In addition to our website, we also facilitate loans through our mobile apps, which are regulated by the Regulations for Administration on Mobile Internet Applications Information Services, or the MIAIS Regulations, promulgated by the Cyberspace Administration of China, or the CAC, in June 2016 and became effective on in August 2016. According to the MIAIS Regulations, the providers of mobile apps shall not create, copy, publish or distribute information and content that is prohibited by laws and regulations. We have implemented internal control procedures screening the information and content on our mobile apps to ensure their compliance with the MIAIS Regulations. However, we cannot assure that all the information or content displayed on, retrieved from or linked to our mobile apps complies with the requirements of the MIAIS Regulations at all times. If our mobile apps were found to be violating the MIAIS Regulations, we may be subject to administrative penalties, including warning, service suspension or removal of our mobile apps from the relevant app stores, which may materially and adversely affect our business and operating results.
We may from time to time be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our financial condition, results of operations, cash flows and reputation.
We have been, and may from time to time in the future, become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against us could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgments made against us may damage our reputation and may result in material adverse impact on us.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, domain names, know how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. See also “Business — Intellectual Property.” Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented, preempted or misappropriated, or such intellectual property may not be sufficient to provide
us with competitive advantages. As of the date of this prospectus, we have entered into exclusive trademark licensing agreements with our affiliate Hangzhou Ruituo Technology Co., Ltd., or Hangzhou Ruituo, our affiliate controlled by Mr. Hong Yao, our founder, chairman and chief executive officer, which grant us the right to use two trademarks in China, including “
” and “
”, which have been vital to our competitiveness and our ability to attract new borrowers and retain existing borrowers. See “— We rely on licensing arrangements with our affiliate, Hangzhou Ruituo to use the trademarks “
” and “
” and any failure to protect these trademark rights could adversely affect our business and financial condition” for more details. We cannot assure you that the measures we have taken will be sufficient to prevent any misappropriation of our intellectual properties.
It is often difficult to maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or business partners use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
We rely on licensing arrangements with our affiliate, Hangzhou Ruituo, to use the trademarks “
” and “
” and any failure to protect these trademark rights could adversely affect our business and financial condition.
Our rights to our trade names and trademarks are among the most important factor in marketing our services and operating our business. The trademarks “
” and “
”, are owned by our affiliate, Hangzhou Ruituo, and we have obtained the exclusive right to use these trademarks under licensing agreements with Hangzhou Ruituo, so long as the trademarks are valid. We have paid nominal fees to Hangzhou Ruituo for these trademark licenses. Hangzhou Ruituo is currently involved in a litigation with the State Administration for Industry and Commerce of the People’s Republic of China’s Trademark Review Adjudication Board regarding the validity of the “
” trademark and any judgement against Hangzhou Ruituo in such litigation could result in the invalidity of such trademark. Our licensing agreements with Hangzhou Ruituo would then be deemed unenforceable and our exclusive right to use such trademark would be deemed invalid.
If we are no longer able to use the “
” or “
” trademarks due to any dispute with Hangzhou Ruituo or for any other reasons, our reputation, business and results of operations could be materially and adversely affected. In addition, Hangzhou Ruituo may be subject to infringement claims with regard to these trademarks and any failure in defending themselves against such claims could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time, in the future, become subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual
property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.
We may not be able to obtain additional capital on favorable terms or at all.
We anticipate that our current cash and cash equivalents and anticipated cash flows from operating activities will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. However, we need to make continued investments in various aspects of our business operations in order to remain competitive. Due to the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able to raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing operating results. If adequate capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders.
From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.
We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our platform and better serve borrowers and investors. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including difficulties in integrating the operations, systems, data, technologies and products and services of the acquired business, difficulties in retaining, training, motivating and integrating key personnel and retaining relationships with customers, employees and suppliers of the acquired business, difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations, assumption of hidden liabilities for activities of the acquired business before the acquisition, diversion of our management’s time and resources and potential disruptions to our business operations. We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits.
Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.
Our business operations depend on the continued services of our senior management, particularly the executive officers named in this prospectus. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected. We may incur additional
expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We believe our success depends on the efforts and talent of our employees, including our operations, risk management, sales and marketing, technology and other personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for skilled and experienced personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of our competitors may have greater resources and may be able to offer more attractive terms of employment.
In addition, we invest significant time and expenses in training our employees, which increases their value to our competitors, who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees, and the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business.
Increases in labor costs in the PRC may adversely affect our business and results of operations.
The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our borrowers and investors by increasing the fees of our services, our financial condition and results of operations may be adversely affected.
We have limited insurance coverage which could expose us to significant costs and business disruption.
The insurance industry in China is still in an early stage of development, and insurance companies in China currently offer limited business-related insurance products. We do not maintain any business interruption insurance or general third-party liability insurance. We consider our insurance coverage to be reasonable in light of the nature of our business and the insurance products that are available in China and in line with the practices of other companies in the same industry of similar size in China, but we cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.
Risks Related to Our Corporate Structure
If the PRC government deems that the contractual arrangements in relation to our variable interest entity do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
Foreign ownership of internet-based businesses, such as distribution of online information and other value-added telecommunication services, are subject to restrictions under current PRC laws and regulations. For example, foreign investors are generally not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in 2007, as amended in 2011, 2015 and 2017, and other applicable laws and regulations.
We are a Cayman Islands company and Weidai Co., Ltd., our PRC subsidiary, is considered a foreign invested enterprise. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into among Weidai Co., Ltd., Weidai Financial Information, and the shareholders of Weidai Financial Information. As a result of these contractual arrangements, we exert control over Weidai Financial Information and consolidate its operating results in our financial statements under U.S. GAAP. Weidai Financial Information has been operating our business, including, among others, operations of our
www.weidai.com.cn
website since its incorporation. See “Corporate History and Structure” for more details. Weidai Financial Information has obtained a value-added telecommunications service license for operations of internet content service from the Zhejiang Administration of Telecommunications in August 2016, which will remain valid until August 2021, and a value-added telecommunications service license for operation of domestic call center service from MIIT in August 2017, which will remain valid until August 2022.
We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, Grandall Law Firm (Shanghai), based on its understanding of the relevant laws and regulations, is of the opinion that each of the contracts among Weidai Co., Ltd., Weidai Financial Information and its shareholders are valid, binding and enforceable in accordance with their terms. However, as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and the Telecommunications Regulations and the relevant regulatory measures concerning the telecommunications industry, there can be no assurance that the PRC government authorities, such as the Ministry of Commerce, or the MOC, the MIIT, or other authorities that regulate the telecommunications industry, would agree that our corporate structure or any of the above contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.
If our corporate structure and contractual arrangements are deemed by the MIIT or the MOC or other regulators having competent authority as illegal, either in whole or in part, we may lose control of our variable interest entity and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:
•
revoking our business and operating licenses;
•
levying fines on us;
•
confiscating any of our income that they deem to be obtained through illegal operations;
•
shutting down our services;
•
discontinuing or restricting our operations in China;
•
imposing conditions or requirements with which we may not be able to comply;
•
requiring us to change our corporate structure and contractual arrangements;
•
restricting or prohibiting our use of the proceeds from overseas offering to finance our variable interest entity’s business and operations; and
•
taking other regulatory or enforcement actions that could be harmful to our business.
It is uncertain whether any new PRC laws, regulations or rules relating to the “variable interest entity” structure will be adopted or if adopted, what they would provide. In particular, in January 2015, the MOC published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interest entities
would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. If the ownership structure, contractual arrangements and business of our company, our PRC subsidiary or our variable interest entity are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income or the income of our PRC subsidiary or Weidai Financial Information, revoking the business licenses or operating licenses of our PRC subsidiary or Weidai Financial Information, shutting down our servers or blocking our online platform, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of Weidai Financial Information, and/or our failure to receive economic benefits from Weidai Financial Information, we may not be able to consolidate their results into our consolidated financial statements in accordance with U.S. GAAP.
We rely on contractual arrangements with our variable interest entity and its shareholders for a significant portion of our business operations, which may not be as effective as direct ownership in providing operational control.
We have relied and expect to continue to rely on contractual arrangements with Weidai Financial Information and its shareholders to operate our website,
www.weidai.com.cn
, as well as certain other complementary businesses. See “Corporate History and Structure” for more details. These contractual arrangements may not be as effective as direct ownership in providing us with control over Weidai Financial Information. For example, Weidai Financial Information and its shareholders may fail to fulfill their contractual obligations with us, such as failure to maintain our website and use the domain names and trademarks in a manner as stipulated in the contractual arrangements, or taking other actions that are detrimental to our interests.
If we had direct ownership of Weidai Financial Information, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Weidai Financial Information, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by Weidai Financial Information and its shareholders of their obligations under these contracts. The shareholders of Weidai Financial Information may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with Weidai Financial Information. Although we have the right to replace any shareholder of Weidai Financial Information under the contractual arrangements, if any shareholder is uncooperative or any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration, litigation and other legal proceedings, the outcome of which will be subject to uncertainties. See “— Any failure by our variable interest entity or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.” Therefore, our contractual arrangements with Weidai Financial Information may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
Any failure by our variable interest entity or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.
If Weidai Financial Information or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking
specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of Weidai Financial Information were to refuse to transfer their equity interest in Weidai Financial Information to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.
All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures, although these disputes do not include claims arising under the United States federal securities laws and thus do not prevent you from pursuing claims under the United States federal securities laws. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over Weidai Financial Information and our ability to conduct our business may be negatively affected. See “— Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”
The shareholders of our variable interest entity may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
The shareholders of Weidai Financial Information may have potential conflicts of interest with us. These shareholders may breach, or cause Weidai Financial Information to breach, the existing contractual arrangements we have with them and Weidai Financial Information, which would have a material adverse effect on our ability to effectively control Weidai Financial Information and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Weidai Financial Information to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive call option agreement with these shareholders to request them to transfer all of their equity interests in Weidai Financial Information to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the shareholders of Weidai Financial Information, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC variable interest entity owe additional taxes, which could negatively affect our financial condition and the value of your investment.
Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC Enterprise Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they
have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between Weidai Co., Ltd., our wholly owned subsidiary in China, Weidai Financial Information, our variable interest entity in China, and the shareholders of Weidai Financial Information were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust Weidai Co., Ltd.’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by Weidai Financial Information for PRC tax purposes, which could in turn increase its tax liabilities without reducing Weidai Co., Ltd.’s tax expenses. In addition, if Weidai Co., Ltd. requests the shareholders of Weidai Financial Information to transfer their equity interests in Weidai Financial Information at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject Weidai Co., Ltd. to PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on Weidai Financial Information for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if our variable interest entity’s tax liabilities increase or if it is required to pay late payment fees and other penalties.
We may lose the ability to use and enjoy assets held by our variable interest entity that are material to the operation of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.
Our variable interest entity, Weidai Financial Information, holds certain assets that are material to the operation of our business, including domain names and an ICP license. Under the contractual arrangements, Weidai Financial Information may not and its shareholders may not cause it to, in any manner, sell, transfer, mortgage or dispose of its assets or its legal or beneficial interests in the business without our prior consent. However, in the event that Weidai Financial Information’s shareholders breach the these contractual arrangements and voluntarily liquidate Weidai Financial Information, or if Weidai Financial Information declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If Weidai Financial Information undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.
Risks Related to Doing Business in China
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.
Substantially all of our operations are located in China and all of our revenue is sourced from China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.
The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has
implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, the Chinese economy has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.
A downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition.
The global financial markets have experienced significant disruptions since 2008 and the United States, Europe and other economies have experienced periods of recession. The recovery from the lows of 2008 and 2009 has been uneven and is facing new challenges, including the escalation of the European sovereign debt crisis from 2011 and the slowdown of the Chinese economy since 2012. It is unclear whether the Chinese economy will resume its high growth rate. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have also been concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in volatility in financial and other markets. There have also been concerns about the economic effect of the tensions in the relationship between China and surrounding Asian countries. Economic conditions in China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may reduce the demand for consumer loans and investments and have a negative impact on our business, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.
The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.
In particular, PRC laws and regulations concerning the marketplace lending industry are developing and evolving. Although we have taken measures to comply with the laws and regulations that are applicable to our business operations, including the regulatory principles raised by the CBRC, and avoid conducting any non-compliant activities under the applicable laws and regulations, such as illegal fund-raising, forming capital pool or providing guarantee to investors, the PRC government authority may promulgate new laws and regulations regulating the marketplace lending industry in the future. We cannot assure you that our practice would not be deemed to violate any new PRC laws or regulations relating to the marketplace lending industry. Moreover, developments in the marketplace lending industry may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict s like us, which could materially and adversely affect our business and operations. Furthermore, we cannot rule out the possibility that the PRC government will institute a licensing regime covering our industry at some point in the future. If such a licensing regime were introduced, we cannot assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result,
we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.
Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
The MOC published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The MOC is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.
Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the MOC, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “foreign investors” refers to the following subjects making investments within the PRC: (i) natural persons without PRC nationality; (ii) enterprises incorporated under the laws of countries or regions other than China; (iii) the governments of countries or regions other than the PRC and the departments or agencies thereunder; and (iv) international organizations. Domestic enterprises under the control of the subjects as mentioned in the preceding sentence are deemed foreign investors, and “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding, directly or indirectly, not less than 50% of shares, equities, share of voting rights or other similar rights of the subject entity; (ii) holding, directly or indirectly, less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a “catalog of special administrative measures,” which is classified into the “catalog of prohibitions” and “the catalog of restrictions,” to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in the catalog of prohibitions. However, unless the underlying business of the FIE falls within the catalog of restrictions, which calls for market entry clearance by the MOC, prior approval from governmental authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE.
The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “— Risks Related to Our Corporate Structure” and “Corporate History and Structure.” Under the draft Foreign Investment Law, VIEs that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “catalog of restrictions,” the VIE structure may be deemed a domestic investment only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the VIEs will be treated as FIEs and any operation in the industry category on the “catalog of restrictions” without market entry clearance may be considered as illegal.
In addition, the draft Foreign Investment Law does not indicate what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties. Moreover, it is uncertain whether the marketplace lending industry, in which Weidai Financial Information operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “catalog of special administrative measures” to be issued. If the enacted version of the Foreign Investment Law and the final “catalog of special administrative measures” mandate further actions, such as the MOC market entry clearance, to be completed by companies with an existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all. If we are not able to obtain such clearance when required, our VIE structure may be regarded as invalid and illegal. As a result, we would not be able to (i) continue our business in China through our contractual arrangements with Weidai Financial Information and shareholders of Weidai Financial Information, (ii) exert control over Weidai Financial Information, (iii) receive the economic benefits of Weidai Financial Information under such contractual arrangements, or (iv) consolidate the financial results of Weidai Financial Information. Were this to occur, our results of operations and financial condition would be materially and adversely affected and the market price of our ADSs may decline.
The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from an investment information report required at each investment, and investment amendment reports, which shall be submitted upon alteration of investment specifics, it is mandatory for entities established by foreign investors to submit an annual report, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.
We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.
The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
We only have contractual control over our website or mobile apps. We do not directly own the website or mobile apps due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including internet information provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.
The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the MIIT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry.
Our online platform, operated by Weidai Financial Information, may be deemed to be providing value-added telecommunication services, which would require Weidai Financial Information to obtain certain value-added telecommunications business licenses. See “Regulation — Regulations on Internet Companies — Regulations on Value-Added Telecommunication Services” for more details. Weidai Financial Information has obtained a value-added telecommunications service license for operations of internet content service from the Zhejiang Administration of Telecommunications in August 2016, which will remain valid until August 2021, and a value-added telecommunications service license for operation of domestic call center service from MIIT in August 2017, which will remain valid until August 2022. However,
given the evolving regulatory environment of the value-added telecommunications business, we cannot assure you that we will not be required in the future by the relevant governmental authorities to obtain any other approval or license to continue our business. If such approval or license were required, we cannot assure you that we will be able to obtain such approval or license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.
We facilitate certain auto-financing loans through our platform under both direct lease and sale-and-lease back models for the purchase of new and used automobiles. According to the Administrative Measures of Supervision on Financing Lease Enterprises, or the Financing Lease Measures promulgated by the Ministry of Commerce on September 18, 2013, entities operating “financing lease business” shall be subject to approval by Ministry of Commerce or its local branches. The Financing Lease Measures has not defined what constitutes operating “financing lease business”. It is uncertain whether our business operations would be deemed as operating “financing lease business” due to the auto-financing loans we facilitate. As of the date of this prospectus, we have not been subject to any fines or other penalties under any PRC laws or regulations related to financing lease business. However, given the evolving regulatory environment of the financing lease business, we cannot assure you that we will not be required in the future by the relevant governmental authorities to obtain approval or license for financing lease business. If we were required to obtain such approval or license, we cannot assure you that we would be able to obtain such approval or license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.
According to the Measures for the Administration of Auctions, a company that conducts auction activities is required to have the word “auction” in its legal name, obtain approval from the local regulatory authorities, and obtain an auction business permit. Any company that engages in commercial auction activities without an auction permit shall terminate its business operations. The business conducted through our mobile app Weichepai, operated by Horgos Weichepai Information Technology Co., Ltd., a wholly owned subsidiary of Weidai Financial Information, may be deemed as engaging in commercial auction business of second-hand automobiles. As of the date of this prospectus, we have not obtained an auction business permit, nor have we been subject to any fines or other penalties with regard to commercial auction business. However, given the evolving regulatory environment of the auction business, we cannot assure you that such practice will not be deemed by the PRC authorities as violating relevant provisions of the Measures for the Administration of Auctions or any other applicable laws and regulations, nor can we assure you that we will not be required by the relevant governmental authorities to obtain license or permit for auction business to continue conducting our business through Weichepai in the future. We may not obtain such approval or license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.
The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers that we were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.
The facilitation of loans on our platform could give rise to liabilities under PRC laws and regulations that prohibit illegal fundraising and unauthorized public offerings.
PRC laws and regulations prohibit persons and companies from raising funds by advertising to the public a promise to repay premium or interest payments over time through payments in cash or in kind except with the prior approval of the applicable government authorities. Failure to comply with these laws and regulations may result in penalties imposed by the PBOC, the State Administration for Market Regulation, formerly known as the State Industry and Commerce, or the SAIC, and other governmental authorities, and can lead to civil or criminal lawsuits.
We have taken measures to avoid conducting any activities that are prohibited under the illegal-funding related laws and regulations. We act as intermediaries for borrowers and online investors. In addition, we do not directly receive any funds from online investors in our own accounts as funds from online investors are deposited into and settled by a third-party custody account managed by Xiamen Bank. To date, our platform has not been subject to any fines or other penalties under any PRC laws and regulations that prohibit illegal fundraising. Nevertheless, considerable uncertainties exist with respect to the PBOC, the SAIC and other governmental authorities’ interpretations of the fundraising-related laws and regulations. Therefore, we cannot guarantee you that our current services provided to investors will not be deemed to violate illegal fundraising laws and regulations in the future.
The PRC Securities Law prohibits the issuance of securities for public offering without obtaining prior approval in accordance with the provisions of the law. The following offerings are deemed to be public offerings under the PRC Securities Law: (i) offering of securities to non-specific targets; (ii) offering of securities to more than 200 specific targets; and (iii) other offerings provided by the laws and administrative regulations. Additionally, private offerings of securities may not be carried out through advertising, open solicitation and disguised publicity campaigns. If any transaction between a borrower and multiple online investors is identified as a public offering by PRC government authorities, we may be subject to sanctions under PRC laws and our business may be adversely affected.
We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business.
We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require our PRC subsidiary to adjust its taxable income under the contractual arrangements it currently has in place with Weidai Financial Information and its shareholders in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us. See “— Risks Related to Our Corporate Structure — Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our variable interest entity owe additional taxes, which could negatively affect our financial condition and the value of your investment.”
Under PRC laws and regulations, our PRC subsidiary, as a wholly foreign-owned enterprise in China, may pay dividends only out of its accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
In response to the persistent capital outflow and RMB’s depreciation against U.S. dollar in the fourth quarter of 2016, the PBOC and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures over recent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance, the PBOC issued the Circular on Further Clarification of Relevant Matters Relating to Offshore RMB Loans Provided by Domestic Enterprises, or the PBOC Circular 306, on November 22, 2016, which provides that offshore RMB loans provided by a domestic enterprise to offshore enterprises that it holds equity interests in shall not exceed 30% of such equity interests. The PBOC Circular 306 may constrain our PRC subsidiary’s ability to provide offshore loans to us. The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends and other distributions may be subjected to tighter scrutiny in the future. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business,
pay dividends, or otherwise fund and conduct our business. See also “— If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiary, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiary are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System, or FICMIS, and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by our PRC subsidiary is required to be registered with SAFE, or its local branches, and (b) our PRC subsidiary may not procure loans which exceed the statutory limitation. Any medium or long term loan to be provided by us to a variable interest entity of our company must be recorded and registered by the National Development and Reform Committee and the SAFE or its local branches. We may not complete such recording or registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiary. If we fail to complete such recording or registration, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
In 2008, the SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, which used to regulate the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting the usage of converted Renminbi. On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular 142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises and allows foreign-invested enterprises to settle their foreign exchange capital at their discretion, but continues to prohibit foreign-invested enterprises from using the Renminbi fund converted from their foreign exchange capitals for expenditures beyond their business scopes. On June 9, 2016, the SAFE promulgated the Circular on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange, or SAFE Circular 16. SAFE Circular 19 and SAFE Circular 16 continue to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, investment and financing (except for security investment or guarantee products issued by bank), providing loans to non-affiliated enterprises or constructing or purchasing real estate not for self-use. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer to and use in China the net proceeds from this offering, which may adversely affect our business, financial condition and results of operations.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and
will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
All of our revenue and substantially all of our costs are denominated in Renminbi. We are a holding company and we rely on dividends paid by our operating subsidiaries in China for our cash needs. Any significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.
Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from the SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
In light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees’ salaries as required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. Companies operating in China are also required to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment.
We have not made adequate employee benefit payments. Neither have we fully withheld the individual income tax in accordance with the relevant PRC laws and regulations. With respect to the underpaid employee benefits, we may be required to make up the contributions for these plans as well as to pay late fees and fines; with respect to the underwithheld individual income tax, we may be required to make up sufficient withholding and pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits and underwithheld individual income tax, our financial condition and results of operations may be adversely affected.
The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, as amended, and, if required, we cannot predict whether we will be able to obtain such approval.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas listings. The application of the M&A Rules remains unclear.
We believe, based on the advice of our PRC legal counsel, Grandall Law Firm (Shanghai), that the CSRC’s approval is not required for the listing and trading of our ADSs on the New York Stock Exchange in the context of this offering, given that:
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we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&A Rules; and
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no explicit provision in the M&A Rules classifies the respective contractual arrangements between Weidai Co., Ltd., Weidai Financial Information and its shareholders as a type of acquisition transaction falling under the M&A Rules.
However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and the CSRC’s opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If the CSRC or any other PRC regulatory agencies subsequently determines that we need to obtain the CSRC’s approval for this offering or if the CSRC or any other PRC government agencies promulgates any interpretation or implements rules before our listing that would require us to obtain CSRC or other governmental approvals for this offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. Sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the ADSs that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ADSs we are offering, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other PRC regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such approval requirement could have a material adverse effect on the trading price of the ADSs.
The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
The M&A Rules discussed in the preceding risk factor and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make
merger and acquisition activities by foreign investors more time consuming and complex. including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. For example, the M&A rules require that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. The approval from the MOC shall be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the MOC when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the Prior Notification Rules, issued by the State Council in August 2008 is triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
The SAFE promulgated the Circular on Relevant Issues Relating to PRC Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC residents or entities, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.
SAFE Circular 37 is issued to replace the Circular on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments through Overseas Special Purpose Vehicles, or SAFE Circular 75.
If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
Our founder, Mr. Hong Yao, and a number of our directors, officers and shareholders who we know are PRC residents, have completed the foreign exchange registrations in 2018 in accordance with SAFE Circular 37.
However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the requirements of SAFE Circular 37 or other applicable laws and regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE Circular 37 or other applicable laws and regulations. Failure by such shareholders or beneficial owners to comply with SAFE
Circular 37, other related regulations or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiary’s ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
Any failure to comply with PRC regulations regarding the registration requirements for employee share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose vehicles. In the meantime, our directors, executive officers and other employees who are PRC citizens, subject to limited exceptions, and who have been granted share incentive awards by us, may follow the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plan of Companies Listed Overseas, promulgated by the SAFE in 2012, or the 2012 SAFE Notice. Pursuant to the 2012 SAFE Notice, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any share incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of share incentive awards and the purchase or sale of shares and interests. When our company becomes an overseas listed company upon the completion of this offering, we and grantees of our share incentive awards who are PRC citizens or who reside in the PRC for a continuous period of no less than one year will be subject to these regulations. Failure to complete the SAFE registrations may subject the grantees of share incentive awards to fines and legal sanctions, and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional share incentive plans for our directors, executive officers and employees under PRC law. See “Regulation — Regulations on Employee Share Incentive Plans of Overseas Publicly Listed Company” for more details.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation (“SAT”) issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Taxation — People’s Republic of China Taxation” for more details. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect
to the interpretation of the term “de facto management body.” As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that Weidai Ltd. or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then Weidai Ltd. or such subsidiary could be subject to PRC tax at a rate of 25% on its worldwide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, as described in the risk factor immediately below, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our ADSs or ordinary shares may be subject to PRC tax, and it is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or ordinary shares.
Dividends payable to our foreign investors and gains on the sale of our ADSs or ordinary shares by our foreign investors may become subject to PRC tax.
Under the PRC Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, subject to any reduction or exemption set forth in applicable tax treaties or under applicable tax arrangements between jurisdictions, to the extent such dividends are derived from sources within the PRC. Similarly, any gain realized on the transfer of ADSs or ordinary shares by such investors is also subject to PRC tax at a current rate of 10%, subject to any reduction or exemption set forth in applicable tax treaties or under applicable tax arrangements between jurisdictions, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our ordinary shares or ADSs, and any gain realized from the transfer of our ordinary shares or ADSs, may be treated as income derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of ADSs or ordinary shares by such investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties or under applicable tax arrangements between jurisdictions, if such dividends or gains are deemed to be from PRC sources. If we or any of our subsidiaries established outside China are considered a PRC resident enterprise, it is unclear whether holders of our ADSs or ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends payable to our non-PRC investors, or gains from the transfer of our ADSs or ordinary shares by such investors, are deemed as income derived from sources within the PRC and thus are subject to PRC tax, the value of your investment in our ADSs or ordinary shares may decline significantly.
We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company, or immovable properties located in China owned by non-Chinese companies.
On February 3, 2015, the SAT issued the Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or Circular 7, which partially replaced and supplemented previous rules under the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the SAT on December 10, 2009. Pursuant to this Circular 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Circular 7, “PRC taxable assets” include assets attributed to an establishment in China, immovable properties located in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes.
When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor is required to declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Circular 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. On October 17, 2017, the SAT promulgated the Bulletin of SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (“Bulletin 37”), which became effective on December 1, 2017, and SAT Circular 698 then was repealed with effect from December 1, 2017. Bulletin 37, among other things, simplified procedures of withholding and payment of income tax levied on non-resident enterprises.
There is uncertainty as to the application of Circular 7 and Bulletin 37. We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions under Circular 7 or Bulletin 37. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under Circular 7 or Bulletin 37. As a result, we may be required to expend valuable resources to comply with Circular 7 or Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with Circular 7 and Bulletin 37, or to establish that our company should not be taxed under Circular 7 and Bulletin 37, which may have a material adverse effect on our financial condition and results of operations.
The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, our investors are deprived of the benefits of such inspection.
Our independent registered public accounting firm that issues the audit report included in our prospectus filed with the U.S. Securities and Exchange Commission, or the SEC, as auditors of companies that are traded publicly in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditors are located in the PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently inspected by the PCAOB.
Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.
The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to
auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.
Proceedings instituted by the SEC against the “big four” PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.
Starting in 2011, the Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting firm, were affected by a conflict between U.S. and PRC law. Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOB sought to obtain from the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that under PRC law, they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to such papers in China had to be channeled through the China Securities Regulatory Commission, or the CSRC.
In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the Chinese accounting firms, including our independent registered public accounting firm. A first instance trial of the proceedings in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the firms including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pending review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firms reached a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm’s performance of certain audit work, commencement of a new proceeding against a firm, or in extreme cases the resumption of the current proceeding against all four firms.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our ADSs may be adversely affected.
If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.
Risks Related to this Offering and our American Depositary Shares
There has been no public market for our ordinary shares or ADSs prior to this offering, and you may not be able to resell our ADSs at or above the price you paid, or at all.
Prior to this initial public offering, there has been no public market for our ordinary shares or ADSs. We intend to list our ADSs on the New York Stock Exchange. Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system. If an active trading market for our ADSs does not develop after this offering, the market price and liquidity of our ADSs will be materially and adversely affected.
Negotiations with the underwriters will determine the initial public offering price for our ADSs which may bear no relationship to their market price after the initial public offering. We cannot assure you that an active trading market for our ADSs will develop or that the market price of our ADSs will not decline below the initial public offering price.
The market price for our ADSs may be volatile.
The trading prices of our ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other listed internet or other companies based in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in their trading prices. The trading performances of other Chinese companies’ securities after their offerings, including internet and e-commerce companies, may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, which may have a material adverse effect on the market price of our ADSs.
In addition to the above factors, the price and trading volume of our ADSs may be highly volatile due to multiple factors, including, among others, (i) regulatory developments affecting us, our borrowers, our investors, or our industry, (ii) market conditions in the marketplace lending industry, (iii) changes in the performance or market valuations of other marketplace lending platforms, (iv) announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments, (v) actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results, changes in financial estimates by securities research analysts, (vi) negative publicity about us, our management or our industry, and (vii) sales or perceived potential sales of additional ordinary shares or ADSs.
Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Immediately prior to the completion of this offering and subject to the approval of our existing shareholders, we expect to create a dual-class share structure such that our ordinary shares will consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to five votes per share based on our proposed dual-class share structure. We will sell Class A ordinary shares represented by our ADSs in this offering. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares.
Immediately prior to the completion of this offering and subject to the approval of our existing shareholders, 701,428 ordinary shares held by YAOH WDAI LTD, a company wholly owned by Mr. Hong Yao, our founder, chairman and chief executive officer, will be redesignated as Class B ordinary shares. Due to the disparate voting powers associated with our two classes of ordinary shares, we anticipate that Mr. Hong Yao will beneficially own % of the aggregate voting power of our company immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option. See “Principal [and Selling] Shareholders.” As a result of the dual-class share structure and the concentration of ownership, Mr. Hong Yao will have considerable influence over matters such as decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. He may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.
We will be a “controlled company” within the meaning of the NYSE Listed Company Manual and, as a result, will rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Hong Yao will beneficially own a majority of the aggregate voting power of our company upon completion of this offering. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and will rely, on certain exemptions from corporate governance rules, including:
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an exemption from the rule that a majority of our board of directors must be independent directors;
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an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
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an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our ADSs or publish inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.
Because our initial public offering price is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.
If you purchase ADSs in this offering, you will pay more for your ADSs than the amount paid by our existing shareholders for their ordinary shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of US$ per ADS, representing the difference between the assumed initial public offering price of US$ per ADS, the midpoint of the estimated range of the initial public offering price, and our net tangible book value per ADS as of December 31, 2017, after giving effect to the net proceeds to us from this offering. In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of any share options. See “Dilution” for a more complete description of how the value of your investment in our ADSs will be diluted upon completion of this offering.
Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of our ADSs for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.
Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts at they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.
Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales of our ADSs in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Immediately after the completion of this offering, we will have ordinary shares outstanding including Class A ordinary shares represented by ADSs, assuming the underwriters do not exercise their over-allotment option. All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act. The remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of the 180-day lock-up period beginning from the date of this prospectus, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. Any or all of these shares may be released prior to the expiration of the lock-up period at the discretion of the representatives of the underwriters of this offering. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of our ADSs could decline.
After completion of this offering, certain holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares, subject to the 180-day lock-up period in connection with this offering. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline.
We adopted a share incentive plan in August 2018, under which we have the discretion to grant a range of equity-based awards to eligible participants. See “Management — Share Incentive Plan.” We intend to register all ordinary shares that we may issue under this share incentive plan. Once we register these ordinary shares, they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus. If a large number of our ordinary shares or securities convertible into our ordinary shares are sold in the public market in the form of ADSs after they become eligible for sale, the sales could reduce the trading price of our ADSs and impede our ability to raise future capital. In addition, any ordinary shares that we issue under our share incentive plan would dilute the percentage ownership held by investors who purchase ADSs in this offering.
The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs.
As a holder of our ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach to the underlying Class A ordinary shares which are represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as the holder of the
underlying Class A ordinary shares which are represented by your ADSs. Upon receipt of your voting instructions, the depositary will endeavor to vote the underlying Class A ordinary shares in accordance with your instructions in the event voting is by poll, and in accordance with instructions received from a majority of holders of ADSs who provide instructions in the event voting is by show of hands. The depositary will not join in demanding a vote by poll. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. Under our amended and restated memorandum and articles of association that will become effective immediately prior to completion of this offering, the minimum notice period required to be given by our company to our registered shareholders for convening a general meeting is seven (7) days. When a general meeting is convened, you may not receive sufficient advance notice to enable you to withdraw the underlying shares which are represented by your ADSs and become the registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting or to vote directly with respect to any specific matter or resolution which is to be considered and voted upon at the general meeting. In addition, under our amended and restated memorandum and articles of association that will become effective immediately prior to completion of this offering, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the underlying shares which are represented by your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will, if we request, and subject to the terms of the deposit agreement, endeavor to provide notice of the upcoming vote and to deliver our voting materials in accordance with the deposit agreement. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying shares which are represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct the voting of the underlying shares which are represented by your ADSs, and you may have no legal remedy if the underlying shares are not voted as you requested.
Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement and the deposit agreement may be amended or terminated without your consent.
We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended. See “Description of American Depositary Shares” for more details.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make such rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings in the future and may experience dilution in your holdings.
You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary
shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. Neither we nor the depositary has any obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. Neither we nor the depositary has any obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and most of the assets of these persons are located within China. As a result, it may be difficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. See “Enforceability of Civil Liabilities” for more details.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law (2016 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors will have discretion under the post-offering memorandum and articles of association we expect to
adopt, to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Law (2016 Revision) of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”
You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase our ADS price.
As of December 31, 2017 and June 30, 2018, our cash and cash equivalents were RMB1,765.6 million (US$266.8 million) and RMB1,823.3 million (US$275.5 million), respectively. Immediately following the completion of this offering, we expect to receive net offering proceeds of approximately US$ , or approximately US$ if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of US$ per ADS, the midpoint of the price range shown on the front cover page of this prospectus. We plan to use the net proceeds of this offering for marketing and borrower engagement activities, strategic investments and acquisitions and general corporate purposes. See “Use of Proceeds.” However, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve or maintain profitability or increase our ADS price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.
The post-offering memorandum and articles of association that we expect to adopt and to become effective immediately prior to the completion of this offering will contain anti-takeover provisions that could discourage a third party from acquiring us and adversely affect the rights of holders of our Class A ordinary shares and ADSs.
We expect to adopt, subject to the approval by our shareholders, an amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering. The post-offering memorandum and articles of association will contain certain provisions that could limit the ability of others to acquire control of our company, including a dual-class share structure that gives greater voting power to the Class B ordinary shares beneficially owned by our founder, a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders and ADS holders of the opportunity to sell their shares or ADSs at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.
We are an emerging growth company and may take advantage of certain reduced reporting requirements.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can
delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
•
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
•
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
•
the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the New York Stock Exchange. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards.
As a Cayman Islands company listed on the New York Stock Exchange, we are subject to the New York Stock Exchange corporate governance listing standards. However, New York Stock Exchange rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance listing standards. Currently, we do not plan to rely on home country practice with respect to our corporate governance after we complete this offering. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under the New York Stock Exchange corporate governance listing standards applicable to U.S. domestic issuers.
We are not able to determine at this time whether we will be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year. PFIC status could subject U.S. investors in our ADSs or ordinary shares to significant adverse U.S. federal income tax consequences.
A non-U.S. corporation will be a “passive foreign investment company,” or “PFIC,” if, in any particular taxable year, either (a) 75% or more of its gross income for such year consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of its assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income (the “asset test”). Based on our current financial statements, as well as uncertainty as to the composition of our income and assets and the value of our assets, we may be a PFIC for the current taxable year, and for future years, but we are not able to make that determination at this time. The PFIC tests must be applied each year, taking into account our income and assets throughout the entire year, with such assets measured at the end of each quarter. Because the value of our assets will be determined by reference to the market value of
our ADS, and the market value of our ADSs at the end of the remaining quarters of this year is uncertain and subject to change, we cannot predict what the value of our assets will be for purposes of the PFIC asset test described above for the current year. Similarly, depending on the market value of our ADSs and the overall composition of our assets and income, we may be a PFIC in future years. There is a substantial risk that we will be treated as a PFIC in the current year or in future years.
If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Taxation — United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules, and such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares unless we cease to be a PFIC and the U.S. Holder makes a special election. See “Taxation — United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules” for more details.
We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”
Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in net revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
•
our mission and strategies;
•
our future business development, financial condition and results of operations;
•
the expected growth of the auto-backed loan market and the marketplace lending industry in China;
•
our expectations regarding demand for and market acceptance of our products and services;
•
our expectations regarding our relationships with borrowers and investors;
•
competition in the auto-backed loan market and the marketplace lending industry in China;
•
general economic and business condition in China and elsewhere; and
•
relevant government policies and regulations relating to the marketplace lending industry in China.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Prospectus Summary — Our Business — Our Challenges,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. You should thoroughly read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our ADSs. In addition, the rapidly changing nature of the marketplace lending industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately US$ , or approximately US$ if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of US$ per ADS, the midpoint of the price range shown on the front cover page of this prospectus. A US$1.00 increase (decrease) in the assumed initial public offering price of US$ per ADS would increase (decrease) the net proceeds to us from this offering by US$ , assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.
The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees and obtain additional capital. We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investment in product development, sales and marketing activities, technology infrastructure, capital expenditures, improvement of corporate facilities and other general and administrative matters. We may also use a portion of these proceeds for the investment in, or acquisition of, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any investments or acquisitions.
The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors — Risks Related to This Offering and Our American Depositary Shares — You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase our ADS price.”
Pending any use described above, we plan to invest the net proceeds in short-term, interest-bearing, debt instruments or demand deposits.
In using the proceeds of this offering, we are permitted under PRC laws and regulations as an offshore holding company to provide funding to our wholly foreign-owned subsidiary in China only through loans or capital contributions and to our variable interest entity only through loans, subject to the approval of government authorities and limit on the amount of capital contributions and loans. Subject to satisfaction of the applicable government registration and approval requirements, we intend to extend loans of up to the Renminbi equivalent of US$80 million to Fuzhou Online Microcredit, a wholly owned subsidiary of our variable interest entity, to increase its registered capital. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”
[We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.]
DIVIDEND POLICY
Our board of directors has discretion on whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
In 2017, we declared and paid dividends of RMB32.2 million (US$4.9 million) to holders of ordinary shares and preferred shares outstanding as of December 31, 2016.
We currently do not have any plan to pay any cash dividends on our ordinary shares in the foreseeable future and intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiary to pay dividends to us. See “Regulation — Regulations on Dividend Distribution” and “Taxation — People’s Republic of China Taxation.”
If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying our ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion to the ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2018:
•
on an actual basis;
•
on a pro forma basis to reflect (i) the redesignation of 701,428 ordinary shares held by YAOH WDAI LTD into Class B ordinary shares on a one-for-one basis immediately prior to the completion of this offering, (ii) the redesignation of all of the remaining ordinary shares into Class A ordinary shares on a one-for-one basis immediately prior to the completion of this offering, and (iii) the automatic conversion and the redesignation of all of our issued and outstanding preferred shares on a one-for-one basis into Class A ordinary shares immediately upon the completion of this offering; and
•
on a pro forma as adjusted basis to reflect (i) the redesignation of 701,428 ordinary shares held by YAOH WDAI LTD into Class B ordinary shares on a one-for-one basis immediately prior to the completion of this offering, (ii) the redesignation of all of the remaining ordinary shares into Class A ordinary shares on a one-for-one basis immediately prior to the completion of this offering, (iii) the automatic conversion and the redesignation of all of our issued and outstanding preferred shares into Class A ordinary shares on a one-for-one basis immediately upon the completion of this offering, and (iv) the sale of Class A ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of US$ per ADS, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option.
You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
|
|
As of June 30, 2018
|
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Pro Forma As
Adjusted
(1)
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands, except for share and per share data)
|
|
Mezzanine equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A+ preferred shares (par value of
US$0.0001 per share; 36,585 shares
authorized, issued and outstanding as of
June 30, 2018)
|
|
|
|
|
3,771
|
|
|
|
|
|
570
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Series B preferred shares (par value of
US$0.0001 per share; 60,976 shares
authorized, issued and outstanding as of
June 30, 2018)
|
|
|
|
|
6,283
|
|
|
|
|
|
950
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Series C preferred shares (par value of
US$0.0001 per share; 61,488 shares
authorized, issued and outstanding as of
June 30, 2018)
|
|
|
|
|
240,000
|
|
|
|
|
|
36,270
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2018
|
|
|
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Pro Forma As
Adjusted
(1)
|
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
(in thousands, except for share and per share data)
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares (par value of US$0.0001
per share; 499,658,026 shares authorized,
967,841 shares issued and outstanding as
of June 30, 2018)
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Series A preferred shares (par value of
US$0.0001 per share; 182,925 shares
authorized, issued and outstanding as of
December 31, 2017 and June 30, 2018)
|
|
|
|
|
18,856
|
|
|
|
|
|
2,850
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
Class A ordinary shares (par value of US$0.0001 per share; 608,387 shares issued and outstanding as of June 30, 2018, pro forma)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Class B ordinary shares (par value of US$0.0001 per share; 701,488 shares issued and outstanding, as of June 30, 2018, pro forma)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
485,962
|
|
|
|
|
|
73,440
|
|
|
|
|
|
754,873
|
|
|
|
|
|
114,080
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
746,920
|
|
|
|
|
|
112,877
|
|
|
|
|
|
746,920
|
|
|
|
|
|
112,877
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
(2)
|
|
|
|
|
1,256,509
|
|
|
|
|
|
189,888
|
|
|
|
|
|
1,506,563
|
|
|
|
|
|
227,678
|
|
|
|
|
|
|
|
|
|
|
Total mezzanine equity and shareholders’ equity
(2)
|
|
|
|
|
1,506,563
|
|
|
|
|
|
227,678
|
|
|
|
|
|
1,506,563
|
|
|
|
|
|
277,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The pro forma as adjusted information discussed above is illustrative only. Our additional paid-in capital, total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.
(2)
Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses payable by us, a US$1.00 change in the assumed initial public offering price of US$ per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease each of additional paid-in capital, total shareholders’ equity/(deficit) and total capitalization by US$ million.
DILUTION
If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.
Our net tangible book value as of June 30, 2018 was approximately US$ , or US$ per ordinary share and US$ per ADS. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from the assumed initial public offering price of US$ per ordinary share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Because the Class A ordinary shares and Class B ordinary shares have the same dividend and other rights, except for voting and conversion rights, the dilution is presented based on all issued and outstanding ordinary shares, including Class A ordinary shares and Class B ordinary shares.
Without taking into account any other changes in net tangible book value after June 30, 2018, other than to give effect to our sale of the ADSs offered in this offering at the assumed initial public offering price of US$ per ADS, the midpoint of the estimated range of the initial public offering price, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of June 30, 2018 would have been US$ , or US$ per ordinary share and US$ per ADS. This represents an immediate increase in net tangible book value of US$ per ordinary share and US$ per ADS to the existing shareholders and an immediate dilution in net tangible book value of US$ per ordinary share and US$ per ADS to investors purchasing ADSs in this offering. The following table illustrates such dilution:
|
|
|
Per Ordinary Share
|
|
|
Per ADS
|
|
Assumed initial public offering price
|
|
|
US$
|
|
|
US$
|
|
Net tangible book value as of June 30, 2018
|
|
|
US$
|
|
|
US$
|
|
Pro forma net tangible book value after giving effect to the conversion of our preferred shares
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value after giving effect to conversion of our preferred shares and this offering
|
|
|
US$
|
|
|
US$
|
|
Amount of dilution in net tangible book per ordinary share value to new investors in this offering
|
|
|
US$
|
|
|
US$
|
|
Amount of dilution in net tangible book value to new investors in this offering
|
|
|
US$
|
|
|
US$
|
|
A US$1.00 increase (decrease) in the assumed initial public offering price of US$ per ADS would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to this offering by US$ , the pro forma as adjusted net tangible book value per ordinary share and per ADS after giving effect to this offering by US$ per ordinary share and US$ per ADS and the dilution in pro forma as adjusted net tangible book value per ordinary share and per ADS to new investors in this offering by US$ per ordinary share and US$ per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and other offering expenses.
The following table summarizes, on a pro forma as adjusted basis as of June 30, 2018, the differences between existing shareholders and the new investors with respect to the number of ordinary shares (in the form of ADSs or shares) purchased from us, the total consideration paid and the average price per ordinary share and per ADS paid before deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The total number of ordinary shares does not include ordinary shares underlying the ADSs issuable upon the exercise of the over-allotment option granted to the underwriters.
|
|
|
Ordinary Shares Purchased
|
|
|
Total Consideration
|
|
|
Average
Price Per
Ordinary
Share
|
|
|
Average
Price Per
ADS
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Existing shareholders
|
|
|
|
|
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
New investors
|
|
|
|
|
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
US$
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pro forma as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.
EXCHANGE RATE INFORMATION
Our reporting currency is the Renminbi because our business is mainly conducted in China and all of our revenues are denominated in Renminbi. This prospectus contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi into U.S. dollars in this prospectus is based on the rate certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus were made at RMB6.6171 to US$1.00, the noon buying rate on June 29, 2018 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On August 3, 2018, the rate was RMB6.8309 to US$1.00.
The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.
|
|
|
Certified Exchange Rate
|
|
|
Period
|
|
|
Period End
|
|
|
Average
(1)
|
|
|
Low
|
|
|
High
|
|
|
|
|
|
(RMB per US$1.00)
|
|
|
2013
|
|
|
|
|
6.0537
|
|
|
|
|
|
6.1478
|
|
|
|
|
|
6.2438
|
|
|
|
|
|
6.0537
|
|
|
|
2014
|
|
|
|
|
6.2046
|
|
|
|
|
|
6.1620
|
|
|
|
|
|
6.2591
|
|
|
|
|
|
6.0402
|
|
|
|
2015
|
|
|
|
|
6.4778
|
|
|
|
|
|
6.2827
|
|
|
|
|
|
6.4896
|
|
|
|
|
|
6.1870
|
|
|
|
2016
|
|
|
|
|
6.9430
|
|
|
|
|
|
6.6400
|
|
|
|
|
|
6.9580
|
|
|
|
|
|
6.4480
|
|
|
|
2017
|
|
|
|
|
6.5063
|
|
|
|
|
|
6.7350
|
|
|
|
|
|
6.9575
|
|
|
|
|
|
6.4773
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
|
|
|
|
|
6.3280
|
|
|
|
|
|
6.3183
|
|
|
|
|
|
6.3471
|
|
|
|
|
|
6.2649
|
|
|
|
March
|
|
|
|
|
6.2726
|
|
|
|
|
|
6.3174
|
|
|
|
|
|
6.3565
|
|
|
|
|
|
6.2685
|
|
|
|
April
|
|
|
|
|
6.3325
|
|
|
|
|
|
6.2966
|
|
|
|
|
|
6.3340
|
|
|
|
|
|
6.2655
|
|
|
|
May
|
|
|
|
|
6.4096
|
|
|
|
|
|
6.3701
|
|
|
|
|
|
6.4175
|
|
|
|
|
|
6.3325
|
|
|
|
June
|
|
|
|
|
6.6171
|
|
|
|
|
|
6.4651
|
|
|
|
|
|
6.6235
|
|
|
|
|
|
6.3850
|
|
|
|
July
|
|
|
|
|
6.8038
|
|
|
|
|
|
6.7164
|
|
|
|
|
|
6.8102
|
|
|
|
|
|
6.6123
|
|
|
|
August (through August 3)
|
|
|
|
|
6.8309
|
|
|
|
|
|
6.8281
|
|
|
|
|
|
6.8380
|
|
|
|
|
|
6.8154
|
|
|
|
Source: Federal Reserve Statistical Release
(1)
Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:
•
political and economic stability;
•
an effective judicial system;
•
a favorable tax system;
•
the absence of exchange control or currency restrictions; and
•
the availability of professional and support services.
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to:
•
the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and
•
Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.
Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. All of our directors and executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States, in the event that you believe that your rights have been infringed under the securities laws of the United States or any state in the United States.
We have appointed Cogency Global Inc., located at 10 East 40
th
Street, 10
th
Floor, New York, N.Y. 10016, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.
Conyers Dill & Pearman, our legal counsel as to Cayman Islands law, and Grandall Law Firm (Shanghai), our legal counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:
•
recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or
•
entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
We have been advised by our Cayman Islands legal counsel, Conyers Dill & Pearman, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as the liabilities imposed by those provisions are penal in nature. The courts of the Cayman Islands would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the United Courts against the Company under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that (a) such courts had proper jurisdiction over the parties subject to such judgment,
(b) such courts did not contravene the rules of natural justice of the Cayman Islands, (c) such judgment was not obtained by fraud, (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands, and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands. A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Grandall Law Firm (Shanghai) has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit. However, it would be difficult for foreign shareholders to establish sufficient nexus to the PRC by virtue only of holding our ADSs or Class A ordinary shares.
CORPORATE HISTORY AND STRUCTURE
We commenced our marketplace lending business in July 2011 through Hangzhou Ruituo. Since March 2012, we have commenced facilitating auto-backed loans. In October 2015, we transferred all of our assets in Hangzhou Ruituo to Weidai (Hangzhou) Financial Information Service Ltd., or Weidai Financial Information, and have since then operated our marketplace lending business through Weidai Financial Information.
In January 2018, Weidai Ltd. was incorporated under the laws of the Cayman Islands as our offshore holding company, to facilitate our initial public offering in the United States. Shortly following its incorporation, Weidai Ltd. established a wholly owned subsidiary in Hong Kong, Weidai HK Limited, or Weidai HK, to be our intermediate holding company in February 2018. In March 2018, Weidai HK established a wholly owned subsidiary in China, Weidai Co., Ltd.
In April 2018, Weidai Co., Ltd. entered into a series of contractual arrangements with Weidai Financial Information and its shareholders, including the share pledge agreements, exclusive business cooperation agreement, exclusive call option agreement and shareholders’ power of attorney. Our contractual arrangements with Weidai Financial Information and its shareholders allow us to exercise effective control over Weidai Financial Information and receive substantially all of its economic benefits, and provide us an exclusive option to purchase all or part of its equity interests when and to the extent permitted by PRC law. See “— Contractual Arrangements with Weidai Financial Information” for more details. As a result of our direct ownership in Weidai Co., Ltd. and the contractual arrangements with Weidai Financial Information and its shareholders, we treat Weidai Financial Information as our variable interest entity and consolidate its financial results in our consolidated financial statements in accordance with U.S. GAAP.
In addition, pursuant to board and shareholder resolutions of Weidai Ltd. passed in April 2018, the board of directors of Weidai Ltd. or an authorized officer of the board shall cause Weidai Co., Ltd. to exercise (i) Weidai Co., Ltd.’s rights under the shareholders’ power of attorney, and (ii) Weidai Co., Ltd.’s rights under the exclusive call option agreement, when the board of directors of Weidai Ltd. or the authorized officer determines that such exercise is in the best interest of Weidai Ltd. and Weidai Co., Ltd. As a result of these resolutions and the provision of unlimited financial support from Weidai Ltd. to Weidai Financial Information pursuant to a financial support undertaking letter, Weidai Ltd. is determined to be most closely associated with Weidai Financial Information within the group of related parties and is considered the primary beneficiary of Weidai Financial Information. See “— Financial Support Undertaking Letter” for more details.
The following diagram illustrates our corporate structure as of the date of this prospectus, including our principal subsidiaries and our variable interest entity.
(1)
Shareholders of Weidai Financial Information include (i) Mr. Hong Yao, our founder, chairman and chief executive officer, who holds 73.3% of equity interest in Weidai Financial Information (60.1% of which is directly held by him and 13.2% of which is held by Deqing Partnership, an entity wholly owned by him and his wife), (ii) Zhejiang Hakim Unique Finance Service Co., Ltd., or Zhejiang Hakim, affiliate of Hakim Unique Technology Limited, who holds 15.5% of equity interest in Weidai Financial Information, and (iii) seven affiliates of our minority shareholders, who in aggregate hold 11.2% of equity interest in Weidai Financial Information.
We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Hong Yao will beneficially own a majority of the aggregate voting power of our company upon completion of this offering.
Contractual Arrangements with Weidai Financial Information
Due to PRC legal restrictions on foreign ownership and investment in value-added telecommunications services, and Internet content provision services in particular, we currently conduct our business through Weidai Financial Information, which we effectively control through a series of contractual arrangements. These contractual arrangements allow us to exercise effective control over Weidai Financial Information and receive substantially all of its economic benefits, and provides us an exclusive option to purchase all or part of its equity interests when and to the extent permitted by PRC law.
The following is a summary of the currently effective contractual arrangements by and among Weidai Co., Ltd., Weidai Financial Information and the shareholders of Weidai Financial Information.
Agreements that Provide Us with Effective Control over Weidai Financial Information
Exclusive Call Option Agreement
Weidai Co., Ltd., Weidai Financial Information and the shareholders of Weidai Financial Information entered into an exclusive call option agreement in April 2018. Pursuant to the exclusive call option agreement, each of the shareholders of Weidai Financial Information irrevocably grants Weidai Co., Ltd. an exclusive option to purchase, or have its designated person to purchase, at its discretion, to the extent permitted under PRC law, all or part of the shareholders’ equity interests in Weidai Financial Information at the lowest price permitted by applicable PRC law. We currently have no plan to exercise this exclusive call option to purchase Weidai Financial Information’s equity interest. We will consider all relevant factors, including our operational needs and the regulatory environment to decide whether and when to exercise this exclusive call option. As PRC laws continue to evolve, the “lowest price as permitted by the PRC laws” can only be determined at the time of such purchase. However, the Exclusive Call Option Agreement provides that once the exclusive call option is exercised, the shareholders of Weidai Financial Information and/or Weidai Financial Information shall return the purchase price they have received to Weidai Co., Ltd. or its designated party. Therefore, the exercise of the exclusive call option is not expected to have any material impact on us. In addition, Weidai Financial Information grants Weidai Co., Ltd. an exclusive option to purchase, or have its designated person to purchase, at its discretion, to the extent permitted under PRC law, all or part of Weidai Financial Information’s assets at the price of the net book value of such assets, or the lowest price permitted by applicable PRC law, whichever is higher. Without the prior written consent of Weidai Co., Ltd., Weidai Financial Information may not increase or decrease the registered capital, dispose of its assets, enter into any material contract with a value exceeding a specific amount except for those executed in the ordinary course of business, appoint or remove any directors, distribute dividends to the shareholders, guarantee its continuance, amend its articles of association and provide any loans to any third parties. The shareholders of Weidai Financial Information agree that, without the prior written consent of Weidai Co., Ltd., they will not transfer or otherwise dispose of their equity interests in Weidai Financial Information or create or allow any encumbrance on the equity interests. The exclusive call option agreement will remain effective until all equity interests in Weidai Financial Information held by its shareholders and all assets owned by Weidai Financial Information are transferred or assigned to Weidai Co., Ltd. or its designated representatives. No consideration was paid for the exclusive call option agreement.
Share Pledge Agreements
Weidai Co., Ltd., Weidai Financial Information and each of the shareholders of Weidai Financial Information has entered into a share pledge agreement in April 2018. Pursuant to the share pledge agreements, the shareholders of Weidai Financial Information has pledged all of their equity interests in Weidai Financial Information to Weidai Co., Ltd. to guarantee their and Weidai Financial Information’s performance of their obligations under the contractual arrangements, including, but not limited to, the exclusive business cooperation agreement, exclusive call option agreement and shareholders’ power of attorney. If Weidai Financial Information or any of its shareholders breaches any obligations under these agreements, Weidai Co., Ltd., as pledgee, will be entitled to dispose of the pledged equity interests. The shareholders of Weidai Financial Information agree that, during the term of the share pledge agreements, they will not dispose of the pledged equity interest, impose any encumbrance on the pledged equity interest without the prior written consent of Weidai Co., Ltd., except for the performance of the exclusive call
option agreement, and Weidai Financial Information will not take any action or allow any action which may adversely impact the pledged equity interest or the pledgee’s rights under the contractual arrangements. During the term of the share pledge agreements, Weidai Co., Ltd. has the right to receive all of the dividends and profits distributed on the pledged equity interest. The share pledge agreements will remain effective until Weidai Financial Information and its shareholders discharge all their obligations under the contractual arrangements. We have completed the registration of the equity interest pledges with the relevant office of the State Administration for Market Regulation, in accordance with the PRC Property Rights Law. No consideration was paid for the share pledge agreements.
Power of Attorney
Through a power of attorney dated April 10, 2018, each of the shareholders of Weidai Financial Information irrevocably authorizes Weidai Co., Ltd. as their attorney-in-fact to exercise all shareholder rights, including, but not limited to, attending shareholders’ meeting, voting on all matters of Weidai Financial Information requiring shareholder approval, appointing directors and senior management members, and disposing of all or part of the shareholder’s equity interests in Weidai Financial Information. The shareholders’ power of attorney will remain in force for an unlimited term, unless Weidai Co., Ltd. issues a contrary instruction in writing otherwise.
Spouse Consent Letter
Pursuant to the spouse consent letter dated April 10, 2018, Mr. Hong Yao’s wife confirmed that Mr. Hong Yao can perform the obligations under the contractual arrangements and has sole discretion to amend and terminate the contractual arrangements. Mr. Hong Yao’s wife agreed that the equity interest in Weidai Financial Information held by and registered in the name of Mr. Hong Yao will be disposed of pursuant to the share pledge agreement, the exclusive call option agreement and the power of attorney. In addition, in the event that Mr. Hong Yao’s wife obtains any equity interest in Weidai Financial Information held by her for any reason, she agreed to be bound by the contractual arrangements.
Agreement that Allows Us to Receive Economic Benefits from Weidai Financial Information
Exclusive Business Cooperation Agreement
Weidai Co., Ltd., and Weidai Financial Information entered into an exclusive business cooperation agreement in April 2018. Under the exclusive business cooperation agreement, Weidai Co., Ltd. has the exclusive right to provide Weidai Financial Information with business support, technical and consulting services. In return, Weidai Co., Ltd. is entitled to receive a service fee from Weidai Financial Information on a monthly basis and at an amount equivalent to all of Weidai Financial Information ‘s net income as confirmed by and adjustable at the sole discretion of Weidai Co., Ltd. Weidai Co., Ltd. owns the exclusive intellectual property rights created as a result of the performance of this agreement. Except with Weidai Co., Ltd.’s prior written consent, Weidai Financial Information may not accept any consultation or services provided by any third party and may not cooperate with any third party regarding the matters contemplated by the exclusive business cooperation agreement, unless it is a third party appointed by Weidai Co., Ltd. This agreement will remain effective unless terminated unilaterally by Weidai Co., Ltd.
In the opinion of Grandall Law Firm (Shanghai), our PRC counsel:
•
the ownership structure of Weidai Financial Information and our wholly foreign owned subsidiary in China, currently and immediately after this offering, does not violate any applicable PRC laws or regulations currently in effect; and
•
the contractual arrangements among our wholly foreign owned subsidiary, Weidai Financial Information and the shareholders of Weidai Financial Information governed by PRC law are valid, binding and enforceable in accordance with their terms and applicable PRC laws or regulations currently in effect and, both currently and immediately after this offering, do not and will not violate any applicable PRC laws or regulations currently in effect.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. See “Risk Factors — Risks Related to Our Corporate Structure — If the PRC government deems that the contractual arrangements in relation to our variable interest entity do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Risk Factors — Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us” for more details.
Financial Support Undertaking Letter
Weidai Ltd. executed a financial support undertaking letter addressed to Weidai Financial Information, pursuant to which Weidai Ltd. irrevocably undertakes to provide unlimited financial support to Weidai Financial Information to the extent permissible under the applicable PRC laws and regulations, regardless of whether Weidai Financial Information has incurred an operational loss. The form of financial support includes but is not limited to cash, entrusted loans and borrowings. Weidai Ltd. will not request repayment of any outstanding loans or borrowings from Weidai Financial Information if it or its shareholders do not have sufficient funds or are unable to repay such loans or borrowings. The letter is effective until the earlier of (i) the date on which all of the equity interests of Weidai Financial Information have been acquired by Weidai Ltd. or its designee, and (ii) the date on which Weidai Ltd. in its sole and absolute discretion unilaterally terminates the applicable financial support undertaking letter.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following selected consolidated statements of comprehensive income data and selected consolidated cash flows data for the years ended December 31, 2016 and 2017, and selected consolidated balance sheets data as of December 31, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following selected consolidated statements of comprehensive income data and summary consolidated cash flow data for the six months ended June 30, 2017 and 2018, and selected consolidated balance sheet data as of June 30, 2018 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future periods. You should read this Selected Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands, except for share and per share data)
|
|
Selected Consolidated Statements of Comprehensive Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,396,102
|
|
|
|
|
|
2,529,980
|
|
|
|
|
|
382,340
|
|
|
|
|
|
1,219,947
|
|
|
|
|
|
1,335,713
|
|
|
|
|
|
201,858
|
|
|
Other secured loans
(1)
|
|
|
|
|
9,791
|
|
|
|
|
|
107,564
|
|
|
|
|
|
16,255
|
|
|
|
|
|
41,235
|
|
|
|
|
|
69,801
|
|
|
|
|
|
10,549
|
|
|
Unsecured loans
(2)
|
|
|
|
|
4,353
|
|
|
|
|
|
54,409
|
|
|
|
|
|
8,223
|
|
|
|
|
|
8,577
|
|
|
|
|
|
61,005
|
|
|
|
|
|
9,219
|
|
|
|
|
|
|
|
1,410,246
|
|
|
|
|
|
2,691,953
|
|
|
|
|
|
406,818
|
|
|
|
|
|
1,269,759
|
|
|
|
|
|
1,466,519
|
|
|
|
|
|
221,626
|
|
|
Post facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
144,524
|
|
|
|
|
|
283,182
|
|
|
|
|
|
42,795
|
|
|
|
|
|
136,685
|
|
|
|
|
|
151,405
|
|
|
|
|
|
22,881
|
|
|
Other secured loan
(1)
|
|
|
|
|
1,044
|
|
|
|
|
|
10,958
|
|
|
|
|
|
1,656
|
|
|
|
|
|
4,069
|
|
|
|
|
|
7,464
|
|
|
|
|
|
1,128
|
|
|
Unsecured loans
(2)
|
|
|
|
|
483
|
|
|
|
|
|
6,045
|
|
|
|
|
|
914
|
|
|
|
|
|
953
|
|
|
|
|
|
6,522
|
|
|
|
|
|
985
|
|
|
|
|
|
|
|
146,051
|
|
|
|
|
|
300,185
|
|
|
|
|
|
45,365
|
|
|
|
|
|
141,707
|
|
|
|
|
|
165,391
|
|
|
|
|
|
24,994
|
|
|
Other revenues
|
|
|
|
|
204,953
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
|
|
152,936
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
Financing income
|
|
|
|
|
9,053
|
|
|
|
|
|
303,292
|
|
|
|
|
|
45,835
|
|
|
|
|
|
15,425
|
|
|
|
|
|
234,607
|
|
|
|
|
|
35,455
|
|
|
Less: Funding costs
|
|
|
|
|
(2,439
)
|
|
|
|
|
|
(39,056
)
|
|
|
|
|
|
(5,903
)
|
|
|
|
|
|
(4,628
)
|
|
|
|
|
|
(78,202
)
|
|
|
|
|
|
(11,818
)
|
|
|
Net financing income
|
|
|
|
|
6,614
|
|
|
|
|
|
264,236
|
|
|
|
|
|
39,932
|
|
|
|
|
|
10,797
|
|
|
|
|
|
156,405
|
|
|
|
|
|
23,637
|
|
|
Total net revenues
|
|
|
|
|
1,761,380
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
|
|
|
1,568,585
|
|
|
|
|
|
1,883,270
|
|
|
|
|
|
284,608
|
|
|
Provision for loans and advances
|
|
|
|
|
(144,617
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
|
|
|
(159,677
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
|
|
Net revenues after provision for loans and advances
|
|
|
|
|
1,616,763
|
|
|
|
|
|
3,061,367
|
|
|
|
|
|
462,645
|
|
|
|
|
|
1,408,908
|
|
|
|
|
|
1,644,412
|
|
|
|
|
|
248,511
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and servicing
|
|
|
|
|
(993,623
)
|
|
|
|
|
|
(1,784,914
)
|
|
|
|
|
|
(269,743
)
|
|
|
|
|
|
(820,784
)
|
|
|
|
|
|
(916,160
)
|
|
|
|
|
|
(138,453
)
|
|
|
Sales and marketing
|
|
|
|
|
(71,139
)
|
|
|
|
|
|
(273,838
)
|
|
|
|
|
|
(41,383
)
|
|
|
|
|
|
(72,111
)
|
|
|
|
|
|
(104,994
)
|
|
|
|
|
|
(15,867
)
|
|
|
General and administrative
|
|
|
|
|
(117,004
)
|
|
|
|
|
|
(316,772
)
|
|
|
|
|
|
(47,872
)
|
|
|
|
|
|
(133,378
)
|
|
|
|
|
|
(165,148
)
|
|
|
|
|
|
(24,959
)
|
|
|
Research and development
|
|
|
|
|
(56,142
)
|
|
|
|
|
|
(100,966
)
|
|
|
|
|
|
(15,258
)
|
|
|
|
|
|
(34,081
)
|
|
|
|
|
|
(67,214
)
|
|
|
|
|
|
(10,158
)
|
|
|
Total operation costs and expenses
|
|
|
|
|
(1,237,908
)
|
|
|
|
|
|
(2,476,490
)
|
|
|
|
|
|
(374,256
)
|
|
|
|
|
|
(1,060,354
)
|
|
|
|
|
|
(1,253,516
)
|
|
|
|
|
|
(189,437
)
|
|
|
Income from operations
|
|
|
|
|
378,855
|
|
|
|
|
|
584,877
|
|
|
|
|
|
88,389
|
|
|
|
|
|
348,554
|
|
|
|
|
|
390,896
|
|
|
|
|
|
59,074
|
|
|
Net income before income taxes
|
|
|
|
|
396,159
|
|
|
|
|
|
668,024
|
|
|
|
|
|
100,954
|
|
|
|
|
|
369,926
|
|
|
|
|
|
409,365
|
|
|
|
|
|
61,865
|
|
|
Income tax expenses
|
|
|
|
|
(105,130
)
|
|
|
|
|
|
(193,203
)
|
|
|
|
|
|
(29,197
)
|
|
|
|
|
|
(101,691
)
|
|
|
|
|
|
(102,014
)
|
|
|
|
|
|
(15,417
)
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
|
|
Net loss attributable to noncontrolling interests
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
745
|
|
|
|
|
|
113
|
|
|
Net income and comprehensive income attributable to Weidai Ltd.’s shareholders
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
268,235
|
|
|
|
|
|
308,096
|
|
|
|
|
|
46,561
|
|
|
Dividends declared to preferred shareholders
|
|
|
|
|
—
|
|
|
|
|
|
(8,604
)
|
|
|
|
|
|
(1,301
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
(861
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Accretion to redemption value of Series C redeemable convertible preferred shares
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Reversal of accretion on Series C preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
120,000
|
|
|
|
|
|
18,135
|
|
|
Net income and comprehensive income attributable to Weidai Ltd.’s ordinary shareholders
|
|
|
|
|
170,168
|
|
|
|
|
|
466,217
|
|
|
|
|
|
70,456
|
|
|
|
|
|
268,235
|
|
|
|
|
|
428,096
|
|
|
|
|
|
64,696
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(in thousands, except for share and per share data)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
|
|
204.79
|
|
|
|
|
|
326.84
|
|
|
|
|
|
49.39
|
Diluted
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
|
|
204.79
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
Shares used in earnings per share computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
Diluted
|
|
|
|
|
967,841
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.0 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
The following table presents our selected consolidated balance sheets data as of December 31, 2016 and 2017 and June 30, 2018:
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Selected Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,314,814
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
266,820
|
|
|
|
|
|
1,823,295
|
|
|
|
|
|
275,543
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
1,092,921
|
|
|
|
|
|
165,166
|
|
|
|
|
|
911,796
|
|
|
|
|
|
137,794
|
|
|
Loans and advances, net (net of allowance of RMB67.5 million, RMB404.9 million (US$61.2 million) and RMB414.4 million (US$62.6 million) as of December 31, 2016 and 2017 and June 30, 2018, respectively)
|
|
|
|
|
293,158
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
292,952
|
|
|
|
|
|
1,725,015
|
|
|
|
|
|
260,690
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
328,853
|
|
|
|
|
|
433,597
|
|
|
|
|
|
65,527
|
|
|
|
|
|
628,063
|
|
|
|
|
|
94,916
|
|
|
Total current assets
|
|
|
|
|
2,011,025
|
|
|
|
|
|
5,248,250
|
|
|
|
|
|
793,135
|
|
|
|
|
|
5,137,421
|
|
|
|
|
|
776,386
|
|
|
Loans and advances, net (net of allowance of nil,
RMB1.4 million (US$212 thousand) RMB1.2 million
(US$183 thousand) as of December 31, 2016 and 2017
and June 30, 2018, respectively)
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
Total non-current assets
|
|
|
|
|
94,465
|
|
|
|
|
|
1,019,551
|
|
|
|
|
|
154,078
|
|
|
|
|
|
808,115
|
|
|
|
|
|
122,125
|
|
|
Total assets
|
|
|
|
|
2,105,490
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
947,213
|
|
|
|
|
|
5,945,536
|
|
|
|
|
|
898,511
|
|
|
Short-term borrowings
|
|
|
|
|
—
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
94,663
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
267,592
|
|
|
|
|
|
1,341,677
|
|
|
|
|
|
202,759
|
|
|
Current account with online investors and borrower
|
|
|
|
|
890,192
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
284,633
|
|
|
|
|
|
1,774,143
|
|
|
|
|
|
268,115
|
|
|
Deferred revenue
|
|
|
|
|
13,196
|
|
|
|
|
|
12,330
|
|
|
|
|
|
1,862
|
|
|
|
|
|
8,299
|
|
|
|
|
|
1,254
|
|
|
Total current liabilities
|
|
|
|
|
1,360,563
|
|
|
|
|
|
4,633,990
|
|
|
|
|
|
700,305
|
|
|
|
|
|
3,829,208
|
|
|
|
|
|
580,195
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
—
|
|
|
|
|
|
416,118
|
|
|
|
|
|
62,885
|
|
|
|
|
|
536,774
|
|
|
|
|
|
81,119
|
|
|
Deferred revenue
|
|
|
|
|
1,100
|
|
|
|
|
|
887
|
|
|
|
|
|
134
|
|
|
|
|
|
2,473
|
|
|
|
|
|
374
|
|
|
Total non-current liabilities
|
|
|
|
|
9,433
|
|
|
|
|
|
457,724
|
|
|
|
|
|
69,173
|
|
|
|
|
|
599,765
|
|
|
|
|
|
90,638
|
|
|
Total liabilities
|
|
|
|
|
1,369,996
|
|
|
|
|
|
5,091,714
|
|
|
|
|
|
769,478
|
|
|
|
|
|
4,438,973
|
|
|
|
|
|
670,833
|
|
|
Total mezzanine equity
|
|
|
|
|
388,910
|
|
|
|
|
|
388,910
|
|
|
|
|
|
58,773
|
|
|
|
|
|
250,054
|
|
|
|
|
|
37,790
|
|
|
Total shareholders’ equity
|
|
|
|
|
346,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
118,962
|
|
|
|
|
|
1,256,509
|
|
|
|
|
|
189,888
|
|
|
|
The following table presents our selected consolidated cash flow data for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2017 and 2018:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Selected Consolidated Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
924,388
|
|
|
|
|
|
2,284,077
|
|
|
|
|
|
345,178
|
|
|
|
|
|
531,733
|
|
|
|
|
|
23,596
|
|
|
|
|
|
3,566
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
(337,051
)
|
|
|
|
|
|
(2,941,921
)
|
|
|
|
|
|
(444,594
)
|
|
|
|
|
|
(707,663
)
|
|
|
|
|
|
216,060
|
|
|
|
|
|
32,651
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
458,614
|
|
|
|
|
|
2,205,523
|
|
|
|
|
|
333,307
|
|
|
|
|
|
163,462
|
|
|
|
|
|
(359,058
)
|
|
|
|
|
|
(54,261
)
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
|
|
1,045,951
|
|
|
|
|
|
1,547,679
|
|
|
|
|
|
233,891
|
|
|
|
|
|
(12,468
)
|
|
|
|
|
|
(119,402
)
|
|
|
|
|
|
(18,044
)
|
|
|
Cash, cash equivalents and restricted cash at beginning of year/period
|
|
|
|
|
268,863
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
198,699
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
Cash, cash equivalents and restricted cash at end of year/period
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
|
|
|
1,302,346
|
|
|
|
|
|
2,743,091
|
|
|
|
|
|
414,546
|
|
|
Selected Operating Data
The table below sets forth our selected operating data as of and for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2017 and 2018:
|
|
|
For the year ended December 31,
|
|
|
For the six months ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
( except for number of users)
|
|
Loan volume by type of loan product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans (in millions)
|
|
|
|
|
45,429
|
|
|
|
|
|
80,201
|
|
|
|
|
|
12,120
|
|
|
|
|
|
38,089
|
|
|
|
|
|
35,600
|
|
|
|
|
|
5,380
|
|
|
Other secured loans
(1)
(in millions)
|
|
|
|
|
2,124
|
|
|
|
|
|
10,934
|
|
|
|
|
|
1,652
|
|
|
|
|
|
5,035
|
|
|
|
|
|
5,634
|
|
|
|
|
|
851
|
|
|
Unsecured loans
(2)
(in millions)
|
|
|
|
|
441
|
|
|
|
|
|
5,801
|
|
|
|
|
|
877
|
|
|
|
|
|
518
|
|
|
|
|
|
3,405
|
|
|
|
|
|
515
|
|
|
Total loan volume (in millions)
|
|
|
|
|
47,993
|
|
|
|
|
|
96,937
|
|
|
|
|
|
14,649
|
|
|
|
|
|
43,643
|
|
|
|
|
|
44,639
|
|
|
|
|
|
6,746
|
|
|
Number of active auto-backed loan borrowers
(in thousands)
|
|
|
|
|
216
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
198
|
|
|
|
|
|
225
|
|
|
|
|
|
|
|
|
Number of active online investors (in thousands)
|
|
|
|
|
300
|
|
|
|
|
|
561
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
521
|
|
|
|
|
|
|
|
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
The table below sets forth our selected operating data as of December 31, 2016 and 2017 and June 30, 2017 and 2018:
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in millions)
|
|
Loan balance by type of loan products:
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
9,582
|
|
|
|
|
|
15,203
|
|
|
|
|
|
2,298
|
|
|
|
|
|
11,966
|
|
|
|
|
|
17,161
|
|
|
|
|
|
2,593
|
|
|
Other secured loans
|
|
|
|
|
1,314
|
|
|
|
|
|
2,885
|
|
|
|
|
|
436
|
|
|
|
|
|
2,698
|
|
|
|
|
|
2,605
|
|
|
|
|
|
394
|
|
|
Unsecured loans
|
|
|
|
|
177
|
|
|
|
|
|
1,928
|
|
|
|
|
|
291
|
|
|
|
|
|
409
|
|
|
|
|
|
2,357
|
|
|
|
|
|
356
|
|
|
Total loan balance
|
|
|
|
|
11,074
|
|
|
|
|
|
20,017
|
|
|
|
|
|
3,025
|
|
|
|
|
|
15,073
|
|
|
|
|
|
22,123
|
|
|
|
|
|
3,343
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Risk Factors” and elsewhere in this prospectus. See “Special Note Regarding Forward-Looking Statements.”
Overview
We are the largest auto-backed financing solution provider in China in terms of loan volume in each of 2015, 2016 and 2017, according to the Oliver Wyman Report. Our platform connects borrowers, the majority of which are small and micro enterprise owners, with both online investors and the institutional funding partners.
We provide borrowers convenient and ready access to credit and a variety of loan products based on their specific financing needs and risk profiles. Since our inception in 2011, we have strategically focused on auto-backed loans with innovative “collateral registration + GPS system” features, which are specifically designed to serve the credit needs of small and micro enterprise owners, and have since become the industry standard. In 2017, we facilitated and originated RMB96.9 billion (US$14.6 billion) loans through our platform, representing an 102.0% increase from 2016. In the six months ended June 30, 2018, we facilitated and originated RMB44.6 billion (US$6.7 billion) loans through our platform, representing a 2.3% increase from the six months ended June 30, 2017. In 2016, 2017 and the six months ended June 30, 2018, 94.7%, 82.7% and 79.8% of the total loan volume facilitated and originated through our platform were auto-backed loans, respectively. We also offer a number of other loans to meet the varied financial needs of our borrowers such as professional credit loans, construction machinery loans and consumption loans.
We provide investors with attractive, risk-adjusted returns. We offer online investors a wide range of investment options, from individual loans of varied amounts, interest rates and payment terms to investment programs, and collaborate with institutional funding partners. The number of active online investors on our platform increased by 86.8% from 300,081 in 2016 to 560,658 in 2017. The number of active online investors on our platform increased by 56.6% from 332,838 in the six months ended June 30, 2017 to 521,363 in the six months ended June 30, 2018.
We generate revenues primarily from fees charged to borrowers for our services in matching them with investors and for other services that we provide over the life of the loans. We also charge fees to online investors for facilitating their investments via our platform, and the transfer of their investments on our secondary loan market.
We have experienced rapid growth in recent years. Our net revenues increased by 101.3% from RMB1,761.4 million in 2016 to RMB3,545.4 million (US$535.8 million) in 2017. Our net revenues increased by 20.1% from RMB1,568.6 million in the six months ended June 30, 2017 to RMB1,883.3 million (US$284.6 million) in the same period in 2018. Our net income increased by 63.2% from RMB291.0 million in 2016 to RMB474.8 million (US$71.7 million) in 2017. Our net income increased by 14.6% from RMB268.2 million in the six months ended June 30, 2017 to RMB307.4 million (US$46.4 million) in the same period in 2018. Our adjusted net income increased by 59.4% from RMB323.4 million in 2016 to RMB515.5 million (US$77.9 million) in 2017. Our adjusted net income increased by 26.4% from RMB287.1 million in the six months ended June 30, 2017 to RMB362.9 million (US$54.9 million) in the six months ended June 30, 2018.
Key Factors Affecting Our Results of Operations
Major factors affecting our results of operations include the following:
•
our ability to maintain and expand our borrower and investor base and attract sufficient investor commitments;
•
the effectiveness of our risk management;
•
our ability to integrate and expand our online and offline operations in a cost-effective manner; and
•
regulatory environments and economic and market conditions in China.
Our Ability to Maintain and Expand Our Borrower and Investor Base and Attract Sufficient Investor Commitments
Our revenues are dependent on our ability to maintain and expand borrower and investor base and attract sufficient investor commitments. Maintaining and expanding our borrower and investor base and attract sufficient investor commitments efficiently will depend, in part, on the effectiveness of our sales and marketing efforts. We intend to enhance the efficiency of our sales and marketing efforts by utilizing our own online channels going forward to acquire more borrowers and investors, including launching a wide range of marketing campaigns and initiatives through these channels to improve borrower and investor conversions. Amount of incentive payments to online investors will similarly affect the growth of our investor base and our results of operations.
Our results of operations are also dependent on our ability to retain and increase the engagement and participation of existing borrowers and investors. In the six months ended June 30, 2018, 55.7% of borrowers of auto-backed loans through our platform were repeat borrowers. In the six months ended June 30, 2018, over 95% of the total loan volume facilitated through our platform was funded by repeat online investors. The extent to which we facilitate borrowings to repeat borrowers and investments to repeat online investors is an important factor in our future growth and results of operations.
Our ability to attract sufficient investor commitments depends on a variety of factors. Changes in market conditions or decrease in investment returns may also result in investors seeking other investment options. If there are insufficient investor commitments, borrowers may not be able to obtain capital through our platform and may turn to other sources for their borrowing needs, and the volume of loans we facilitate may be significantly impacted. As we continue to expand our investor base to include an increasing number of smaller investors, the number of active online investors on our platform increased from 332,838 in the six months ended June 30, 2017 to 521,363 in the six months ended June 30, 2018, while the average investment amount of online investors decreased from RMB125,124 in the six months ended June 30, 2017 to RMB73,236 in the six months ended June 30, 2018. As a result, the total investment amounts of online investors decreased from RMB41.6 billion in the six months ended June 30, 2017 to RMB38.2 billion (US$5.8 billion) in the six months ended June 30, 2018.
Our ability to attract new borrowers and investors and retain existing ones also depends on our efforts to continuously enhance and optimize products and services we offer, our fee rates, as well as user experience on our platform in a changing market environment. Changes in our product mix and the launch of new products with different fee rates will affect our results of operations and profitability.
The Effectiveness of Our Risk Management
Our ability to accurately determine loan applicants’ creditworthiness and appraise the value of automobiles used as loan collaterals affects our ability to facilitate loans to borrowers as well as our ability to offer attractive, risk-adjusted returns to investors, both of which directly relate to the level of user confidence in our platform. As of June 30, 2018, the M3+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.5% and 0.7%.
We have been voluntarily compensating online investors for their default losses by purchasing their delinquent loans. We provide guarantees for certain of our consumption loan products. We have been obligated to compensate a portion of our institutional funding partners and corporate investors for their default losses. We therefore record a provision for the potential losses of these acquired delinquent loans and loans we originate, which is periodically adjusted based on past loan loss history, known and inherent risks in the loan portfolio, adverse situations that may affect the borrowers’ ability to repay, composition of the loan portfolio and other factors. We recognize any increase in this allowance as provision for loans and advances for the relevant period. As such, any increase in the delinquency rates of loans we acquired or originated will adversely affect our results of operations.
Our Ability to Integrate and Expand Our Online and Offline Operations in a Cost-Effective Manner
Our omni-channel operational capability and the seamless integration between our online and offline operations have contributed to the growth of our borrower base and the number of transactions on our platform, effectively differentiating us from our competitors. Such approach has enabled a fast, highly-automated loan application process and enhanced our ability to manage outstanding loans efficiently and prevent delinquency.
Our continued ability to efficiently operate, expand and further integrate our online and offline operations in a cost-efficient manner will affect our borrower base, financial performance and profitability. We plan to continuously improve our online and offline integration to further enable a fast and highly streamlined transaction process and superior user experience. We may selectively expand the geographic coverage of our service center network to cover additional cities or strengthen our positioning in existing markets.
Regulatory Environments and Economic and Market Conditions in China
The regulatory environment for the marketplace lending industry in China is developing and evolving, creating both challenges and opportunities that could affect our financial performance. Since mid-2015, multiple PRC governmental authorities have promulgated various laws, regulations and rules to regulate the marketplace lending industry in China, imposing, among others, restrictions on the facilitation of “cash loans”, the maximum amount of loans that can be extended to each individual and entity borrower, as well as the maximum interest rates and fees permitted to be charged on loans facilitated by marketplace lending platforms, or the upper limits for APRs. The growth in the popularity of the marketplace lending industry increases the likelihood that the PRC government will seek to further regulate this industry, and we may need to invest significant financial and other resources to comply with evolving laws, regulations and rules. However, while new laws and regulations, changes to existing laws and regulations or regulatory uncertainties could impose challenges on our future growth, including the growth of our loan balance and loan volume, they could also provide new market opportunities.
The demand for our platform is dependent upon the overall economic conditions in China. General economic factors, including the interest rate environment and unemployment rates, may affect borrowers’ willingness to seek loans and investors’ ability and desire to invest in loans. As we primarily target small and micro enterprise owners, our future growth also depends on small and micro enterprise owners’ overall demand on financing products and the competitive landscape in China’s small and micro enterprise financing market. Our business may be adversely affected if small and micro enterprise owners’ financing needs fluctuate or if our competitors introduce financing products that more effectively address their financing needs.
Loan Performance Data
Delinquency Rates by Balance
We define delinquency rate as the loan principal and interest that was 1 to 30, 31 to 60, 61 to 90 and over 90 calendar days past due as a percentage of the total outstanding principal balance of loans on our platform as of a specific date. The following table sets forth the delinquency rates for all outstanding loans as of December 31, 2016 and 2017 and June 30, 2018 (excluding (i) loans that were charged off, which totaled RMB96.1 million, RMB164.2 million (US$24.8 million) and RMB241.9 million (US$36.6 million) in 2016, 2017 and the six months ended June 30, 2018, respectively, and (ii) loan products that were discontinued prior to the date of this prospectus, including home equity loans and certain types of consumption loans and auto-financing loans, the balance of which was RMB1.2 billion, RMB2.0 billion (US$309.4 million) and RMB1.1 billion (US$0.2 billion) as of December 31, 2016 and 2017 and June 30, 2018, respectively; in 2017 and the six months ended June 30, 2018, these discontinued loan products contributed 8.1% and 2.4% of our revenues, respectively):
|
|
|
Delinquent for
|
|
|
|
|
1 – 30 days
|
|
|
31 – 60 days
|
|
|
61 – 90 days
|
|
|
Over 90 days
|
|
|
Total
|
|
As of December 31, 2016
|
|
|
|
|
0.71
%
|
|
|
|
|
|
0.53
%
|
|
|
|
|
|
0.42
%
|
|
|
|
|
|
0.96
%
|
|
|
|
|
|
2.62
%
|
|
|
As of December 31, 2017
|
|
|
|
|
0.45
%
|
|
|
|
|
|
0.27
%
|
|
|
|
|
|
0.23
%
|
|
|
|
|
|
1.56
%
|
|
|
|
|
|
2.51
%
|
|
|
As of June 30, 2018
|
|
|
|
|
0.60
%
|
|
|
|
|
|
0.28
%
|
|
|
|
|
|
0.18
%
|
|
|
|
|
|
1.58
%
|
|
|
|
|
|
2.64
%
|
|
|
|
The following table sets forth the delinquency rates for all outstanding loans as of December 31, 2016 and 2017 and June 30, 2018 (including loan products that were discontinued prior to the date of this prospectus):
|
|
|
Delinquent for
|
|
|
|
|
1 – 30 days
|
|
|
31 – 60 days
|
|
|
61 – 90 days
|
|
|
Over 90 days
|
|
|
Total
|
|
As of December 31, 2016
|
|
|
|
|
0.63
%
|
|
|
|
|
|
0.47
%
|
|
|
|
|
|
0.37
%
|
|
|
|
|
|
0.85
%
|
|
|
|
|
|
2.32
%
|
|
|
As of December 31, 2017
|
|
|
|
|
0.83
%
|
|
|
|
|
|
0.49
%
|
|
|
|
|
|
0.28
%
|
|
|
|
|
|
1.49
%
|
|
|
|
|
|
3.09
%
|
|
|
As of June 30, 2018
|
|
|
|
|
0.80
%
|
|
|
|
|
|
0.36
%
|
|
|
|
|
|
0.25
%
|
|
|
|
|
|
1.91
%
|
|
|
|
|
|
3.32
%
|
|
|
|
Delinquency Rates by Vintage
We focus on repayment performance of loans for which any payment of principal or interest was more than 30 calendar days (“M1+”) and 90 calendar days (“M3+”) past due. We closely monitor the credit performance measured by the M1+ and M3+ Delinquency Rates by Vintage, which track the lifetime performance of the loans facilitated or originated in a certain vintage.
M1+ Delinquency Rates by Vintage
We define “M1+ Delinquency Rate by Vintage” as the total balance of outstanding principal of a vintage for which any payment of principal or interest is over 30 calendar days past due as of a particular date (adjusted to reflect total amount of past due payments for principal and interest that have been subsequently collected), divided by the total initial principal in such vintage. Loan products that have been discontinued prior to the date of this prospectus (including home equity loans and certain types of consumption loans and auto-financing loans) are not included in the calculation of M1+ Delinquency Rate by Vintage.
M3+ Delinquency Rates by Vintage
We define “M3+ Delinquency Rate by Vintage” as the total balance of outstanding principal of a vintage for which any payment of principal or interest is over 90 calendar days past due as of a particular date (adjusted to reflect total amount of past due payments for principal and interest that have been subsequently collected), divided by the total initial principal in such vintage. Loan products that have been discontinued prior to the date of this prospectus (including home equity loans and certain types of consumption loans and auto-financing loans) are not included in the calculation of M3+ Delinquency Rate by Vintage.
Critical Accounting Policies, Judgments and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements as of and for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2018, which have been prepared in accordance with U.S. GAAP. Our management is required to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes.
The application of our accounting policies is impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements, and actual results could differ materially from these estimates. For further information on our significant accounting policies, see note 2 to our consolidated financial statements included elsewhere in this prospectus. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on the judgment of our management.
Revenue Recognition
We operate an online platform which matches borrowers with investors. Our platform enables investors to directly invest in individual loans or subscribe to our investment programs which provide them with pre-specified investment returns while minimizing the time needed to manage their investments. For each successful loan facilitation, we earn a loan facilitation fee and a recurring service fee for post facilitation services, including provision of GPS automobile tracking services, collection services and sending payment reminder SMSs to borrowers, throughout the term of the loans. Borrowers make repayments through us, and we will then remit the requisite returns to investors on a periodic basis. Our arrangements with investors can be broadly categorized into three types of arrangements.
In the first type of arrangement, we may advance funds to borrowers while the loan is being listed on our online platform for online investors to subscribe to. However, we do not provide a guarantee to these investors and are not the legal title holder of the underlying collateral. We determined that we are not the legal lender and legal borrower in the loan origination and repayment process, respectively, because when the loan is fully subscribed by investors, investors’ funds will be used to settle the advance made by us to borrowers. Therefore, we do not record loan receivables and payables arising from the loans between borrowers and investors on our consolidated balance sheets.
In the second type of arrangement, we do not advance funds to borrowers prior to a loan subscribed by the institutional funding partners. Furthermore, we may provide a guarantee to the institutional funding partners which guarantees the contractual payments of the loan when borrowers default. We determined that we are not the legal lender and legal borrower in the loan origination and repayment process, respectively. Therefore, we do not record loan receivables and payables arising from the loans between borrowers and the institutional funding partners on our consolidated balance sheets.
In the third type of arrangement, we advance funds to borrowers prior to a loan is subscribed by the investors, and provide a guarantee which guarantees the contractual payments of the loan in the event of borrowers default. As the transaction does not represent a transfer of an entire financial asset or a participating interest and is not legally isolated from us, the arrangement is accounted for as loan origination by us and a secured borrowing in accordance with ASC 860,
Transfers and Servicing
.
We also generate revenue from other contingent fees, such as late payment penalties and loan collection fees.
Multiple Element Revenue Recognition
In accordance with ASC 605,
Revenue recognition
, or ASC 605, for arrangements we do not originate loans to borrowers, we recognize loan facilitation services and post facilitation services when the following four revenue recognition criteria are met:
(i)
Persuasive evidence of an arrangement exists;
(ii)
Services have been provided;
(iii)
The fee is fixed and determinable; and
(iv)
Collectability is reasonably assured.
The two deliverables provided by us are loan facilitation and post-facilitation services. We consider the loan facilitation services and the post-facilitation services as a multiple element revenue arrangement. We do not have vendor specific objective evidence of selling price for the loan facilitation services or post-facilitation services because we do not provide loan facilitation services or post-facilitation services on a standalone basis. There is also no third-party evidence of the prices charged by third-party service providers when such services are sold separately. As a result, we use our best estimate of selling prices of loan facilitation services and post-facilitation services as the basis of revenue allocation.
The fee allocated to loan facilitation is recognized as revenue upon each successful loan facilitation, while the fee allocated to post-facilitation services are deferred and amortized over the period of the loan on a straight line method as the post-facilitation services are performed. In instances where the fee is not collected entirely upfront, the amount allocated to the delivered loan facilitation services is limited to the amount that is not contingent on the delivery of the undelivered post-facilitation services and the borrower’s timely installment repayment in accordance with ASC 605-25. The remaining loan facilitation service income is recorded when the contingency is resolved which is when we receive cash from borrowers. The loan facilitation services and post-facilitation services fees are recorded as revenues in our consolidated statements of comprehensive income.
For certain arrangements, we provide an additional deliverable in the form of guarantee to institutional funding partners, which requires us to make either delinquent installment repayments and/or purchase the loans after a specified period on an individual loan basis. In accordance with ASC 605-25-30-4, we first allocate the consideration to the guarantee equaling to the fair value of the guarantee. The remaining consideration is then allocated to loan facilitation services and post facilitation services.
Customer Incentives
For certain transactions with investors, we, at our sole discretion, may provide various incentives to investors when a loan is successfully matched during the relevant incentive program period. The cash incentive from us is either provided upfront or on a monthly basis over the term of the loan as additional interest.
For arrangements where we do not originate loans to borrowers, these cash incentives are accounted for as reduction of revenue in accordance with ASC 605-50. Cash coupons offered to investors accounted for as reduction of revenue amounted to RMB52.4 million, RMB65.9 million (US$10.0 million) and RMB17.5 million (US$2.6 million) in 2016 and 2017 and the six months ended June 30, 2018, respectively. For arrangements where we originate loans to borrowers and related loan payables to investors are recorded on the balance sheet, cash incentives paid upfront will reduce loan payables to investors and loan payables are effectively issued at a discount. If cash incentives are paid to investors over the loan period, the cash
incentives are included as repayment to investors for the loan and considered in the effective interest rate of the loan payable to investors. Cash incentives accounted for as reduction of loan payables amounted to RMB7 thousand, RMB7.5 million (US$1.1 million) and RMB6.0 million (US$0.9 million) in 2016, 2017 and the six months ended June 30, 2018, respectively.
Net Financing Income
We earn interest income for loans originated by us. We record interest income net of funding costs (i.e., interest paid to investors) over the life of the underlying loan principal using the effective interest method on unpaid principal amounts in accordance with ASC 310,
Receivables.
Customer incentives provided to certain investors are recorded as a reduction in loans receivables using the effective interest method.
Other Revenues
We also receive various fees which are contingent on future events, such as borrower late payment penalties, loan collection fees and net revenues from sale of collateral. These contingent fees are not recognized until the contingencies are resolved and the fees become fixed and determined, which also coincide with when the services are performed and collectability is reasonably assured. These fees are classified within other revenues in our consolidated statements of comprehensive income.
Other revenues consist of:
|
|
|
Year Ended December 31,
|
|
|
Six Months
Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Late payment penalties and loan collection fees
|
|
|
|
|
158,154
|
|
|
|
|
|
218,675
|
|
|
|
|
|
33,047
|
|
|
|
|
|
110,716
|
|
|
|
|
|
71,150
|
|
|
|
|
|
10,752
|
|
|
Others
|
|
|
|
|
46,799
|
|
|
|
|
|
86,362
|
|
|
|
|
|
13,051
|
|
|
|
|
|
42,220
|
|
|
|
|
|
33,898
|
|
|
|
|
|
5,123
|
|
|
Total
|
|
|
|
|
204,953
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
|
|
152,936
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
|
Revenue through Service Center Operation Partners
We collaborate with service center operation partners for the operation of partner-operated service centers under a revenue sharing model. We act as the primary obligor in such arrangement in accordance with ASC 605-45 and recognize revenue on a gross basis when all the revenue recognition criteria set forth in ASC 605 are met. Pursuant to the one-year cooperation agreements with the service center operation partners, we record all of each partner-operated service center’s loan facilitation service fee and post facilitation service fee as revenue, and subsequently pay the service center operation partners an agreed percentage of such amounts as the partner-operated service center’s operating costs and expenses, which are recorded as origination and servicing expenses. If loans facilitated by the partner-operated service centers become delinquent and are subsequently purchased by us, the relevant service center operation partners are obligated to compensate us for an agreed percentage of the purchase price of the delinquent loans.
VAT, Business Related Tax and Surcharges
We are subject to VAT at the rate of 17%, 6% or 3%, depending on whether the entity is a general taxpayer or small-scale taxpayer, and related surcharges on revenue are generated from providing services.
VAT is reported as a deduction to revenue when incurred, and amounted to RMB119.0 million, RMB268.0 million (US$40.5 million) and RMB147.2 million (US$22.2 million) in 2016, 2017 and the six months ended June 30, 2018, respectively. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in accrued expenses and other liabilities on our consolidated balance sheets.
We are also subject to certain government surcharges on the VAT payable in the PRC. In our consolidated statements of comprehensive income, these surcharges are included in business related tax and surcharges, which are deducted from gross revenues to arrive at net revenues.
Deferred Revenue
Deferred revenue mainly consists of deferred post-facilitation service fees which are non-contingent service fees collected at the inception of the loan, and deferred and amortized over the period of the loan.
Loans and Advances, Net
Loans and advances represent payments due from borrowers. Loans and advances are recorded at amortized cost (i.e. unpaid principal net of deferred origination costs), net of allowance for loans and advances. Deferred origination costs are netted off against net financing income and amortized over the financing term using the effective interest method.
We do not accrue interest income on loan principals that are considered impaired or past due. A corresponding allowance is determined under ASC 450-20 and allocated accordingly. After an impaired loan has been placed on nonaccrual status, interest receivable will be recognized when cash is received by applying first to reduce loan principal and then to interest income thereafter. Interest income accrued but not received is generally reversed against interest income. Interest receivables may be returned to accrual status after all of the borrower’s delinquent balances of loan principal and interest have been settled and the borrower remains current for an appropriate period.
Allowance for Loans and Advances
We divide loans we facilitate into secured and unsecured, and then into various portfolios, such as automobile and home equity. We then apply our credit risk management framework to the various portfolio of loans in accordance with ASC 450-20,
Loss Contingencies.
The allowance for loans and advances losses is calculated based on historical loss experience using a roll rate-based model. The roll rate-based model stratifies the loan principal and interest receivables by delinquency stages (i.e., current, 1 – 30 days past due, and 31 – 60 days past due etc.) and projected forward in one-month increments using historical roll rates. In each month of the simulation, losses on the loans and advances types are captured, and the ending delinquency stratification serves as the beginning point of the next iteration. This process is repeated on a monthly rolling basis. The loss rate calculated for each delinquency stage is then applied to the respective loans and advances balance. We adjust the allowance that is determined by the roll rate-based model for various Chinese macroeconomic factors, including gross-domestic product rates, per capita disposable income, interest rates and consumer price indexes. Each of these macroeconomic factors are equally weighted, and a score is applied to each factor based on year-on-year increases and decreases in that respective factor.
Loans will be charged off when a settlement is reached for an amount that is less than the outstanding balance or when we have determined the balance is uncollectable. In general, an unsecured loan is charged off when outstanding loans are 180 days past due. Secured loans may be charged off upon the death of the borrower, significant damage to the collateral, and when we consider the balance to be uncollectable. In 2016 and 2017, the volume of loans that were charged off totaled RMB96.1 million and RMB164.2 million (US$24.8 million), respectively, primarily consisting of auto-backed loans. In the six months ended June 30, 2018, the volume of loans that were charged off totaled RMB241.9 million (US$36.6 million), primarily consisting of the consumption loans involving smaller loan amounts and shorter tenures, which we have ceased to offer since the fourth quarter of 2017, and to a lesser extent, auto-backed loans. As the respective loans in 2016, 2017 and the six months ended June 30, 2018 were fully offset by the provision for loans and advances before charge off, the subsequent charge-offs only resulted in a net off of the balance of loans and advances and provision for loans and advances.
The following table sets forth the movement of our allowance for loans and advances for the periods indicated:
|
|
|
Year ended December 31, 2016
|
|
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
(in thousands)
|
|
Beginning balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,705
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,705
)
|
|
|
Current year provision
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(142,715
)
|
|
|
|
|
|
(1,530
)
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(144,617
)
|
|
|
Recoveries of loans previously written
off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,268
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,268
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
94,532
|
|
|
|
|
|
1,530
|
|
|
|
|
|
—
|
|
|
|
|
|
96,062
|
|
|
Ending balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(67,156
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(67,528
)
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Beginning balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(67,156
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(67,528
)
|
|
|
|
|
|
(10,205
)
|
|
|
Current year provision
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(327,453
)
|
|
|
|
|
|
(4,832
)
|
|
|
|
|
|
(81,201
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
Recoveries of loans previously written
off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(18,943
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(18,943
)
|
|
|
|
|
|
(2,863
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
161,378
|
|
|
|
|
|
1,077
|
|
|
|
|
|
1,789
|
|
|
|
|
|
164,244
|
|
|
|
|
|
24,821
|
|
|
Ending balance
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(252,174
)
|
|
|
|
|
|
(3,755
)
|
|
|
|
|
|
(79,784
)
|
|
|
|
|
|
(406,290
)
|
|
|
|
|
|
(61,400
)
|
|
|
|
|
|
|
Six months ended June 30, 2018
|
|
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Beginning balance...
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(252,174
)
|
|
|
|
|
|
(3,755
)
|
|
|
|
|
|
(79,784
)
|
|
|
|
|
|
(406,290
)
|
|
|
|
|
|
(61,400
)
|
|
|
Current year provision
|
|
|
|
|
2,330
|
|
|
|
|
|
(92
)
|
|
|
|
|
|
22,375
|
|
|
|
|
|
(123,551
)
|
|
|
|
|
|
(9,934
)
|
|
|
|
|
|
(129,986
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36.097
)
|
|
|
Recoveries of loans previously written
off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(12,338
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(12,338
)
|
|
|
|
|
|
(1,866
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
93,246
|
|
|
|
|
|
1,413
|
|
|
|
|
|
147,242
|
|
|
|
|
|
241,901
|
|
|
|
|
|
36,558
|
|
|
Ending balance
|
|
|
|
|
(2,819
)
|
|
|
|
|
|
(1,005
)
|
|
|
|
|
|
(42,140
)
|
|
|
|
|
|
(294,817
)
|
|
|
|
|
|
(12,276
)
|
|
|
|
|
|
(62,528
)
|
|
|
|
|
|
(415,585
)
|
|
|
|
|
|
(62,805
)
|
|
|
|
Acquired Non-Performing Loans
We record acquired non-performing loans in accordance with ASC 310-30,
Loan and Debt Securities Acquired with Deteriorated Credit Quality
, when we voluntarily purchase a delinquent loan. Such acquired non-performing loans are expected to be recovered either through the sale of the loan collateral upon foreclosure or from the subsequent payments made by the borrowers and are initially recorded at their purchase price. As the cash flows expected to be collected cannot be estimated because the timing of the collection and the condition of the collateral are indeterminable, the acquired non-performing loans are placed on non-accrual status and impairment is measured based on the fair value of the collateral less the estimated selling costs.
We derecognize the acquired non-performing loans when the non-performing loans are settled through foreclosure or repayment by borrowers. Any difference between the proceeds from sale of the collateral or subsequent payments made by the borrowers, and the acquired non-performing loan balance is recognized in other revenues in our consolidated statements of comprehensive income.
Borrowings
For certain transactions with borrowers, we may provide a loan to borrowers and then transfer the loan to investors at varying rates and tenures. Although the loan is transferred to the investors, the loan is not derecognized upon transfer, as the transaction does not represent a transfer of an entire financial asset or a participating interest and the loan is not legally isolated from us. In addition, the terms of the transfer require us to guarantee the principal and interest in case of borrower defaults. As a result, the arrangement is accounted for as a secured borrowing in accordance with ASC 860,
Transfers and Servicing.
The loan remains on our consolidated balance sheets and the funds received from investors are recorded as payable to institutional funding partners in our consolidated balance sheets. Borrowings are initially recognized at fair value, which is cash received from investors, and measured subsequently at amortized cost using the effective interest method.
Guarantee Liabilities
We provide guarantee to various institutional funding partners. The guarantee requires us to either make delinquent installment repayments or purchase the loans after a specified period on an individual loan basis. The guarantee liability is exempted from being accounted for as a derivative in accordance with ASC 815-10-15-58.
The guarantee liability consists of two components. Our obligation to stand ready to make delinquent payments or to purchase the loan over the term of the arrangement (the non-contingent aspect) is accounted for in accordance with ASC 460,
Guarantees
(“ASC 460”). The contingent obligation relating to the contingent loss arising from the arrangement is accounted for in accordance with ASC 450,
Contingencies
(“ASC 450”). At inception, we recognize the non-contingent aspect of the guarantee liability at fair value, which considers the premium required by a third-party market participant to issue the same risk assurance in a standalone transaction.
Subsequent to the initial recognition, the non-contingent aspect of the risk assurance liability is reduced over the term of the arrangement as we are released from our stand ready obligation on a loan-by-loan basis based on the borrower’s repayment of the loan principal. The contingent loss arising from the obligation to make future payments is recognized when borrower default is probable and the amount of loss is estimable. We consider the underlying risk profile including delinquency status, overdue period, and historical loss experience when assessing the probability of contingent loss. Borrowers are grouped based on common risk characteristics, such as product type. We measure contingent loss based on the future payout of the arrangement estimated using the historical default rates of a portfolio of similar loans less the fair value of the recoverable collateral. The amount of contingent loss was not material in 2016, 2017 and the six months ended June 30, 2018. The maximum potential undiscounted future payment which we would be required to make under our guarantee obligation was nil, RMB551.2 million (US$83.3 million) and RMB1,164.2 million (US$175.9 million) as of December 31, 2017 and 2018 and June 30, 2018, respectively.
Restricted Cash
Our restricted cash mainly represents (i) cash received but has not yet been disbursed, including idle funds due to investors whom recharge to the accounts on our platform but have not yet invested or fully funded the loans and funds due to borrowers that investors lend to borrowers but borrowers have not yet withdrawn. Such funds were processed through a designated bank account, and (ii) cash held by certain institutional funding partners, all of which are licensed financial institutions, as guaranteed deposits paid on contracts and other restrictions. As of December 31, 2017 and June 30, 2018, the restricted cash related to cash not yet disbursed amounted to RMB1.1 billion (US$163.7 million) and RMB892.5 million (US$134.9 million), respectively. The restricted cash balance as of December 31, 2017 related to cash not yet disbursed was related to our custody account arrangement with our custodian bank. Starting in early 2017, the
transfer and settlement of funds between borrowers and investors are handled by our custodian bank. As a result, investors’ idle funds and funds due to borrowers that have not yet been withdrawn, which were recorded as cash as of December 31, 2016, were recorded as restricted cash as of December 31, 2017 and June 30, 2018. Restricted cash related to cash held by institutional funding partners amounted to nil, RMB13.5 million (US$2.0 million) and RMB27.3 million (US$4.1 million) as of December 31, 2016 and 2017 and June 30, 2018, respectively. Such cash balance was related to our collaboration with institutional funding partners. We started to collaborate with institutional funding partners in 2017 and some of our institutional funding partners require refundable deposits from us to ensure that their default losses can be timely compensated. Such refundable deposits were recorded as guarantee deposits on our balance sheet.
In November 2016, the Financial Accounting Standard Board, or the FASB, issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, which requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, the statement of cash flows will be required to present restricted cash and restricted cash equivalents as a part of the beginning and ending balances of cash and cash equivalents. We early adopted the updated guidance retrospectively and presented restricted cash within the ending cash, cash equivalents, and restricted cash balance on our consolidated statement of cash flows for the years ended December 31, 2016 and 2017 and the six months ended June 30, 2017 and 2018.
Income Taxes
We account for income taxes using the liability method in accordance with ASC 740,
Income Taxes
, or ASC 740. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in earnings. Deferred tax assets are reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. We early adopted ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
, on January 1, 2016 and classify the components of the deferred tax assets and liabilities as non-current.
We evaluate our uncertain tax positions using the provisions of ASC 740, which prescribes a recognition threshold that a tax position is required to meet before being recognized in the consolidated financial statements. We recognize in the consolidated financial statements the benefit of a tax position which is “more likely than not” to be sustained under examination based solely on the technical merits of the position assuming a review by tax authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. It is our policy to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
Share-based Compensation
We apply ASC 718,
Compensation — Stock Compensation
, or ASC 718, to account for restricted shares and stock appreciation right granted to certain directors, executives and employees. In accordance with ASC 718, we determine whether the ordinary shares and the stock appreciation rights should be classified and accounted for as an equity award or liability award. Grants of restricted shares to directors and executives are classified as equity awards and are measured at the grant date based on the fair value of the awards and are recognized as an expense, net of forfeitures, over the requisite service period. The cash-settled stock appreciation rights granted to employees are classified as liability awards and are remeasured to fair value at the end of each reporting period until the date of settlement with an adjustment for fair value recorded to the current period expenses. We have elected to recognize share-based compensation for all awards with graded vesting using the accelerated method. We early adopted ASU 2016-09,
Compensation Stock Compensation (Topic 718): Improvement to Employee Share Based Payment Accounting
, on January 1, 2016 using full retrospective method, and account for forfeitures in the period they occur as a reduction to expense.
A change in any of the terms or conditions of share-based payment awards is accounted for as a modification of awards. We measure the incremental compensation cost of a modification as the excess of
the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified, based on the share price and other pertinent factors at the modification date. For vested awards, we recognize incremental compensation cost in the period the modification occurred. For unvested awards, we recognize, over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.
Key Components of Results of Operations
Our revenues are primarily derived from loan facilitation service fees and post facilitation service fees. To a lesser extent, we generate revenues from other contingent fees, such as late payment penalties and loan collection fees for the collection of overdue payments.
Net Revenues
Our primary sources of revenues consist of loan facilitation service fees and post facilitation service fees charged to borrowers and investors for the services our platform provides over the life of loans we facilitate.
The following table sets forth the breakdown of our net revenues, both in absolute amount and as a percentage of our net revenues, for the periods indicated:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
|
(in thousands, except for percentages)
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,396,102
|
|
|
|
|
|
79.3
|
|
|
|
|
|
2,529,980
|
|
|
|
|
|
382,340
|
|
|
|
|
|
71.4
|
|
|
|
|
|
1,219,947
|
|
|
|
|
|
77.8
|
|
|
|
|
|
1,335,713
|
|
|
|
|
|
201,858
|
|
|
|
|
|
70.9
|
|
|
Other secured loans
(1)
|
|
|
|
|
9,791
|
|
|
|
|
|
0.6
|
|
|
|
|
|
107,564
|
|
|
|
|
|
16,255
|
|
|
|
|
|
3.0
|
|
|
|
|
|
41,235
|
|
|
|
|
|
2.6
|
|
|
|
|
|
69,801
|
|
|
|
|
|
10,549
|
|
|
|
|
|
3.7
|
|
|
Unsecured loans
(2)
|
|
|
|
|
4,353
|
|
|
|
|
|
0.2
|
|
|
|
|
|
54,409
|
|
|
|
|
|
8,223
|
|
|
|
|
|
1.5
|
|
|
|
|
|
8,577
|
|
|
|
|
|
0.5
|
|
|
|
|
|
61,005
|
|
|
|
|
|
9,219
|
|
|
|
|
|
3.3
|
|
|
|
|
|
|
|
1,410,246
|
|
|
|
|
|
80.1
|
|
|
|
|
|
2,691,953
|
|
|
|
|
|
406,818
|
|
|
|
|
|
75.9
|
|
|
|
|
|
1,269,759
|
|
|
|
|
|
80.9
|
|
|
|
|
|
1,466,519
|
|
|
|
|
|
221,626
|
|
|
|
|
|
77.9
|
|
|
Post facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
144,524
|
|
|
|
|
|
8.2
|
|
|
|
|
|
283,182
|
|
|
|
|
|
42,795
|
|
|
|
|
|
8.0
|
|
|
|
|
|
136,685
|
|
|
|
|
|
8.7
|
|
|
|
|
|
151,405
|
|
|
|
|
|
22,881
|
|
|
|
|
|
8.0
|
|
|
Other secured loan
(1)
|
|
|
|
|
1,044
|
|
|
|
|
|
0.1
|
|
|
|
|
|
10,958
|
|
|
|
|
|
1,656
|
|
|
|
|
|
0.3
|
|
|
|
|
|
4,069
|
|
|
|
|
|
0.2
|
|
|
|
|
|
7,464
|
|
|
|
|
|
1,128
|
|
|
|
|
|
0.4
|
|
|
Unsecured loans
(2)
|
|
|
|
|
483
|
|
|
|
|
|
0.0
|
|
|
|
|
|
6,045
|
|
|
|
|
|
914
|
|
|
|
|
|
0.2
|
|
|
|
|
|
953
|
|
|
|
|
|
0.1
|
|
|
|
|
|
6,522
|
|
|
|
|
|
985
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
146,051
|
|
|
|
|
|
8.3
|
|
|
|
|
|
300,185
|
|
|
|
|
|
45,365
|
|
|
|
|
|
8.5
|
|
|
|
|
|
141,707
|
|
|
|
|
|
9.0
|
|
|
|
|
|
165,391
|
|
|
|
|
|
24,994
|
|
|
|
|
|
8.8
|
|
|
Other revenues
|
|
|
|
|
204,953
|
|
|
|
|
|
11.6
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
|
|
8.6
|
|
|
|
|
|
152,936
|
|
|
|
|
|
9.7
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
|
|
|
5.6
|
|
|
Financing income
|
|
|
|
|
9,053
|
|
|
|
|
|
0.5
|
|
|
|
|
|
303,292
|
|
|
|
|
|
45,835
|
|
|
|
|
|
8.6
|
|
|
|
|
|
15,425
|
|
|
|
|
|
1.0
|
|
|
|
|
|
234,607
|
|
|
|
|
|
35,455
|
|
|
|
|
|
12.5
|
|
|
Less: Funding costs
|
|
|
|
|
(2,439
)
|
|
|
|
|
|
(0.1
)
|
|
|
|
|
|
(39,056
)
|
|
|
|
|
|
(5,903
)
|
|
|
|
|
|
(1.1
)
|
|
|
|
|
|
(4,628
)
|
|
|
|
|
|
(0.3
)
|
|
|
|
|
|
(78,202
)
|
|
|
|
|
|
(11,818
)
|
|
|
|
|
|
(4.2
)
|
|
|
Net financing income
|
|
|
|
|
6,614
|
|
|
|
|
|
0.4
|
|
|
|
|
|
264,236
|
|
|
|
|
|
39,932
|
|
|
|
|
|
7.5
|
|
|
|
|
|
10,797
|
|
|
|
|
|
0.7
|
|
|
|
|
|
156,405
|
|
|
|
|
|
23,637
|
|
|
|
|
|
8.3
|
|
|
Business related taxes and surcharges
|
|
|
|
|
(6,484
)
|
|
|
|
|
|
(0.4
)
|
|
|
|
|
|
(15,981
)
|
|
|
|
|
|
(2,415
)
|
|
|
|
|
|
(0.5
)
|
|
|
|
|
|
(6,614
)
|
|
|
|
|
|
(0.4
)
|
|
|
|
|
|
(10,093
)
|
|
|
|
|
|
(1,524
)
|
|
|
|
|
|
(0.5
)
|
|
|
Total net revenues
|
|
|
|
|
1,761,380
|
|
|
|
|
|
100.0
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
|
|
|
100.0
|
|
|
|
|
|
1,568,585
|
|
|
|
|
|
100.0
|
|
|
|
|
|
1,883,270
|
|
|
|
|
|
284,608
|
|
|
|
|
|
100.0
|
|
|
Provision for loans and advances
|
|
|
|
|
(144,617
)
|
|
|
|
|
|
(8.2
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
|
|
|
(13.7
)
|
|
|
|
|
|
(159,677
)
|
|
|
|
|
|
(10.2
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
|
|
|
|
|
(12.7
)
|
|
|
Net revenues after provision for loans and advances
|
|
|
|
|
1,616,763
|
|
|
|
|
|
91.8
|
|
|
|
|
|
3,061,367
|
|
|
|
|
|
462,645
|
|
|
|
|
|
86.3
|
|
|
|
|
|
1,408,908
|
|
|
|
|
|
89.8
|
|
|
|
|
|
1,644,412
|
|
|
|
|
|
248,511
|
|
|
|
|
|
87.3
|
|
|
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
Loan Facilitation Service Fees and Post Facilitation Service Fees
For each loan we facilitate, we charge fees for the services our platform provides over the life of the loans and allocate such fees between loan facilitation service and post facilitation service.
Loan facilitation service fees primarily comprise fees charged to borrowers in relation to the work we perform in connecting them with investors and facilitating the origination of loans. The amount of loan facilitation service fees charged to borrowers is based upon the amount, tenure and other terms of the loans. We also charge loan facilitation service fees to online investors for our facilitation of their investments, which equal to a fixed percentage of the interest they receive from borrowers.
Post facilitation service fees are the portion of non-contingent service fees charged to borrowers and online investors in relation to services we provide after loan origination, such as repayment facilitation.
Other Revenues
Other revenues mainly include (i) late payment penalties, (ii) loan collection fees, and (iii) net revenue from sale of collateral.
Net Financing Income
We earn interest income from loans originated by us. Interest income, net of the funding costs of such loans, is recorded as net financing income. See “— Critical Accounting Policies, Judgements and Estimates — Net Financing Income” for more details.
Business Related Taxes and Surcharges
Business related taxes and surcharges include income tax and VAT related surcharges.
Provision for Loans and Advances
We record an allowance for the potential losses of loans and advances recorded on our balance sheet. This allowance is calculated using a roll-rate based model based on past loan loss history, known and inherent risks in the loan portfolio, adverse situations that may affect borrowers’ ability to repay, composition of the loan portfolio and other factors. See “— Critical Accounting Policies, Judgements and Estimates — Allowance for Loans and Advances” for more details. We recognize any increase in this allowance as provision for loans and advances for the relevant period.
Operating Costs and Expenses
Our operating costs and expenses consist of origination and servicing expenses, sales and marketing expenses, general and administrative expenses and research and development expenses. We expect our operating expenses to increase in absolute amount in the foreseeable future as our business grows. The following table sets forth our operating costs and expenses, both in absolute amount and as a percentage of our net revenues, for the periods presented:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
|
(in thousands, except for percentages)
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and servicing
|
|
|
|
|
993,623
|
|
|
|
|
|
56.4
|
|
|
|
|
|
1,784,914
|
|
|
|
|
|
269,743
|
|
|
|
|
|
50.3
|
|
|
|
|
|
820,784
|
|
|
|
|
|
52.3
|
|
|
|
|
|
916,160
|
|
|
|
|
|
138,453
|
|
|
|
|
|
48.6
|
|
|
Sales and marketing
|
|
|
|
|
71,139
|
|
|
|
|
|
4.0
|
|
|
|
|
|
273,838
|
|
|
|
|
|
41,383
|
|
|
|
|
|
7.7
|
|
|
|
|
|
72,111
|
|
|
|
|
|
4.6
|
|
|
|
|
|
104,994
|
|
|
|
|
|
15,867
|
|
|
|
|
|
5.6
|
|
|
General and administrative
|
|
|
|
|
117,004
|
|
|
|
|
|
6.6
|
|
|
|
|
|
316,772
|
|
|
|
|
|
47,872
|
|
|
|
|
|
8.9
|
|
|
|
|
|
133,378
|
|
|
|
|
|
8.5
|
|
|
|
|
|
165,148
|
|
|
|
|
|
24,959
|
|
|
|
|
|
8.8
|
|
|
Research and development
|
|
|
|
|
56,142
|
|
|
|
|
|
3.2
|
|
|
|
|
|
100,966
|
|
|
|
|
|
15,258
|
|
|
|
|
|
2.8
|
|
|
|
|
|
34,081
|
|
|
|
|
|
2.2
|
|
|
|
|
|
67,214
|
|
|
|
|
|
10,158
|
|
|
|
|
|
3.6
|
|
|
Total operating costs and expenses
|
|
|
|
|
1,237,908
|
|
|
|
|
|
70.3
|
|
|
|
|
|
2,476,490
|
|
|
|
|
|
374,256
|
|
|
|
|
|
69.9
|
|
|
|
|
|
1,060,354
|
|
|
|
|
|
67.6
|
|
|
|
|
|
1,253,516
|
|
|
|
|
|
189,437
|
|
|
|
|
|
66.6
|
|
|
|
Origination and Servicing Expenses
Origination and servicing expenses consist primarily of (i) salaries and benefits for our directly-operated service centers and provincial branch offices’ employees, who are responsible for pre-loan customer service and risk management and post-loan management and servicing, among others, (ii) partner-operated service centers’ operating costs and expenses paid to our service center operation
partners, including related parties. See “Related Party Transactions” for more details, (iii) costs related to operation of our GPS tracking system and purchase of GPS tracking devices, and (iv) others, primarily including rental costs for our directly-operated service centers.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of advertising expenses, primarily online marketing and promotion expenses and advertising expenses for building brand awareness.
General and Administrative Expenses
General and administrative expenses consist primarily of (i) salaries and benefits for our management, finance and administrative personnel, and (ii) other expenses, primarily related to travel expenses and professional service fees.
Research and Development Expenses
Research and development expenses consist primarily of (i) salaries and benefits for our technology personnel, and (ii) costs related to the development and upgrade of our technology infrastructure and data analytics capabilities, including costs related to servers, other research and development equipment and data centers. We expense all research and development expenses as incurred.
Taxation
Cayman Islands
We are incorporated in the Cayman Islands. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
Weidai HK, our subsidiary incorporated in Hong Kong, is subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been levied as we did not have assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong does not impose a withholding tax on dividends. Under the Hong Kong tax law, Weidai HK is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
China
Generally, our PRC subsidiary, variable interest entity and subsidiaries of our variable interest entity, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%.
In addition, under the PRC Enterprise Income Tax Law, qualified enterprises can enjoy a 150% super deduction for eligible research and development expenses. In 2016 and 2017, RMB40.3 million and RMB95.3 million (US$14.4 million) of our research and development expenses were eligible for the super deduction, which account for an RMB5.0 million and RMB11.9 million (US$1.8 million) decrease in tax expense, respectively.
We are subject to value added tax, or VAT, at a rate of 6% on the services we provide to borrowers and investors, less any deductible VAT we have already paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law. VAT has been phased in since May 2012 to replace the business tax that was previously applicable to the services we provide. During the periods presented, we were not subject to business tax on the services we provide.
Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with respect to Taxes on Income and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. See “Risk Factors — Risks Related to Doing Business in China — We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business.”
If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Risk Factors — Risks Related to Doing Business in China — If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non PRC shareholders or ADS holders.” Despite the present uncertainties resulting from limited PRC tax guidance on the issue, we do not believe that the legal entities organized outside the PRC should be characterized as PRC residents for enterprise income tax purposes.
Internal Control Over Financial Reporting
Prior to this offering, we were a private company with limited accounting personnel and other resources to address our internal controls and procedures. Our independent registered public accounting firm, or our independent accountant, has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2016 and 2017, we and our independent accountant identified one “material weakness” in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, and other control deficiencies. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified is the insufficient number of financial reporting personnel with appropriate level of knowledge and experience in application of U.S. GAAP and SEC rules and regulations commensurate with the Company’s reporting requirements.
We are in the process of implementing a number of measures to address the material weakness that has been identified, including: hiring additional accounting staff with an appropriate understanding of the U.S. GAAP and SEC reporting requirements, training the existing financial reporting personnel and engaging in an independent third-party consultant to assist in establishing processes and oversight measures to comply with the requirements of Sarbanes-Oxley Act.
However, we cannot assure you that we will remediate our material weakness in a timely manner. See “Risk Factors — Risks Related to Our Business and Our Industry — If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.”
As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company’s internal control over financial reporting.
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our net revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
|
(in thousands, except for percentages)
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,396,102
|
|
|
|
|
|
79.3
|
|
|
|
|
|
2,529,980
|
|
|
|
|
|
382,340
|
|
|
|
|
|
71.4
|
|
|
|
|
|
1,219,947
|
|
|
|
|
|
77.8
|
|
|
|
|
|
1,335,713
|
|
|
|
|
|
201,858
|
|
|
|
|
|
70.9
|
|
|
Other secured loans
(1)
|
|
|
|
|
9,791
|
|
|
|
|
|
0.6
|
|
|
|
|
|
107,564
|
|
|
|
|
|
16,255
|
|
|
|
|
|
3.0
|
|
|
|
|
|
41,235
|
|
|
|
|
|
2.6
|
|
|
|
|
|
69,801
|
|
|
|
|
|
10,549
|
|
|
|
|
|
3.7
|
|
|
Unsecured loans
(2)
|
|
|
|
|
4,353
|
|
|
|
|
|
0.2
|
|
|
|
|
|
54,409
|
|
|
|
|
|
8,223
|
|
|
|
|
|
1.5
|
|
|
|
|
|
8,577
|
|
|
|
|
|
0.5
|
|
|
|
|
|
61,005
|
|
|
|
|
|
9,219
|
|
|
|
|
|
3.3
|
|
|
|
|
|
|
|
1,410,246
|
|
|
|
|
|
80.1
|
|
|
|
|
|
2,691,953
|
|
|
|
|
|
406,818
|
|
|
|
|
|
75.9
|
|
|
|
|
|
1,269,759
|
|
|
|
|
|
80.9
|
|
|
|
|
|
1,466,519
|
|
|
|
|
|
221,626
|
|
|
|
|
|
77.9
|
|
|
Post facilitation services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
144,524
|
|
|
|
|
|
8.2
|
|
|
|
|
|
283,182
|
|
|
|
|
|
42,795
|
|
|
|
|
|
8.0
|
|
|
|
|
|
136,685
|
|
|
|
|
|
8.7
|
|
|
|
|
|
151,405
|
|
|
|
|
|
22,881
|
|
|
|
|
|
8.0
|
|
|
Other secured loans
(1)
|
|
|
|
|
1,044
|
|
|
|
|
|
0.1
|
|
|
|
|
|
10,958
|
|
|
|
|
|
1,656
|
|
|
|
|
|
0.3
|
|
|
|
|
|
4,069
|
|
|
|
|
|
0.2
|
|
|
|
|
|
7,464
|
|
|
|
|
|
1,128
|
|
|
|
|
|
0.4
|
|
|
Unsecured loans
(2)
|
|
|
|
|
483
|
|
|
|
|
|
0.0
|
|
|
|
|
|
6,045
|
|
|
|
|
|
914
|
|
|
|
|
|
0.2
|
|
|
|
|
|
953
|
|
|
|
|
|
0.1
|
|
|
|
|
|
6,522
|
|
|
|
|
|
985
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
146,051
|
|
|
|
|
|
8.3
|
|
|
|
|
|
300,185
|
|
|
|
|
|
45,365
|
|
|
|
|
|
8.5
|
|
|
|
|
|
141,707
|
|
|
|
|
|
9.0
|
|
|
|
|
|
165,391
|
|
|
|
|
|
24,994
|
|
|
|
|
|
8.8
|
|
|
Other revenues
|
|
|
|
|
204,953
|
|
|
|
|
|
11.6
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
|
|
8.6
|
|
|
|
|
|
152,936
|
|
|
|
|
|
9.7
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
|
|
|
5.6
|
|
|
Financing income
|
|
|
|
|
9,053
|
|
|
|
|
|
0.5
|
|
|
|
|
|
303,292
|
|
|
|
|
|
45,835
|
|
|
|
|
|
8.6
|
|
|
|
|
|
15,425
|
|
|
|
|
|
1.0
|
|
|
|
|
|
234,607
|
|
|
|
|
|
35,455
|
|
|
|
|
|
12.5
|
|
|
Less: Funding costs
|
|
|
|
|
(2,439
)
|
|
|
|
|
|
(0.1
)
|
|
|
|
|
|
(39,056
)
|
|
|
|
|
|
(5,903
)
|
|
|
|
|
|
(1.1
)
|
|
|
|
|
|
(4,628
)
|
|
|
|
|
|
(0.3
)
|
|
|
|
|
|
(78,202
)
|
|
|
|
|
|
(11,818
)
|
|
|
|
|
|
(4.2
)
|
|
|
Net financing income
|
|
|
|
|
6,614
|
|
|
|
|
|
0.4
|
|
|
|
|
|
264,236
|
|
|
|
|
|
39,932
|
|
|
|
|
|
7.5
|
|
|
|
|
|
10,797
|
|
|
|
|
|
0.7
|
|
|
|
|
|
156,405
|
|
|
|
|
|
23,637
|
|
|
|
|
|
8.3
|
|
|
Business related taxes and surcharges
|
|
|
|
|
(6,484
)
|
|
|
|
|
|
(0.4
)
|
|
|
|
|
|
(15,981
)
|
|
|
|
|
|
(2,415
)
|
|
|
|
|
|
(0.5
)
|
|
|
|
|
|
(6,614
)
|
|
|
|
|
|
(0.4
)
|
|
|
|
|
|
(10,093
)
|
|
|
|
|
|
(1,524
)
|
|
|
|
|
|
(0.5
)
|
|
|
Total net revenues
|
|
|
|
|
1,761,380
|
|
|
|
|
|
100.0
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
|
|
|
100.0
|
|
|
|
|
|
1,568,585
|
|
|
|
|
|
100.0
|
|
|
|
|
|
1,883,270
|
|
|
|
|
|
284,608
|
|
|
|
|
|
100.0
|
|
|
Provision for loans and advances
|
|
|
|
|
(144,617
)
|
|
|
|
|
|
(8.2
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
|
|
|
(13.7
)
|
|
|
|
|
|
(159,677
)
|
|
|
|
|
|
(10.2
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
|
|
|
|
|
(12.7
)
|
|
|
Net revenues after provision
for loans and advances
|
|
|
|
|
1,616,763
|
|
|
|
|
|
91.8
|
|
|
|
|
|
3,061,367
|
|
|
|
|
|
462,645
|
|
|
|
|
|
86.3
|
|
|
|
|
|
1,408,908
|
|
|
|
|
|
89.8
|
|
|
|
|
|
1,644,412
|
|
|
|
|
|
248,511
|
|
|
|
|
|
87.3
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and
servicing
|
|
|
|
|
(993,623
)
|
|
|
|
|
|
(56.4
)
|
|
|
|
|
|
(1,784,914
)
|
|
|
|
|
|
(269,743
)
|
|
|
|
|
|
(50.3
)
|
|
|
|
|
|
(820,784
)
|
|
|
|
|
|
(52.3
)
|
|
|
|
|
|
(916,160
)
|
|
|
|
|
|
(138,453
)
|
|
|
|
|
|
(48.6
)
|
|
|
Sales and marketing
|
|
|
|
|
(71,139
)
|
|
|
|
|
|
(4.0
)
|
|
|
|
|
|
(273,838
)
|
|
|
|
|
|
(41,383
)
|
|
|
|
|
|
(7.7
)
|
|
|
|
|
|
(72,111
)
|
|
|
|
|
|
(4.6
)
|
|
|
|
|
|
(104,994
)
|
|
|
|
|
|
(15,867
)
|
|
|
|
|
|
(5.6
)
|
|
|
General and
administrative
|
|
|
|
|
(117,004
)
|
|
|
|
|
|
(6.6
)
|
|
|
|
|
|
(316,772
)
|
|
|
|
|
|
(47,872
)
|
|
|
|
|
|
(8.9
)
|
|
|
|
|
|
(133,378
)
|
|
|
|
|
|
(8.5
)
|
|
|
|
|
|
(165,148
)
|
|
|
|
|
|
(24,959
)
|
|
|
|
|
|
(8.8
)
|
|
|
Research and
development
|
|
|
|
|
(56,142
)
|
|
|
|
|
|
(3.2
)
|
|
|
|
|
|
(100,966
)
|
|
|
|
|
|
(15,258
)
|
|
|
|
|
|
(2.8
)
|
|
|
|
|
|
(34,081
)
|
|
|
|
|
|
(2.2
)
|
|
|
|
|
|
(67,214
)
|
|
|
|
|
|
(10,158
)
|
|
|
|
|
|
(3.6
)
|
|
|
Total operation costs and expenses
|
|
|
|
|
(1,237,908
)
|
|
|
|
|
|
(70.3
)
|
|
|
|
|
|
(2,476,490
)
|
|
|
|
|
|
(374,256
)
|
|
|
|
|
|
(69.9
)
|
|
|
|
|
|
(1,060,354
)
|
|
|
|
|
|
(67.6
)
|
|
|
|
|
|
(1,253,516
)
|
|
|
|
|
|
(189,437
)
|
|
|
|
|
|
(66.6
)
|
|
|
Income from operations
|
|
|
|
|
378,855
|
|
|
|
|
|
21.5
|
|
|
|
|
|
584,877
|
|
|
|
|
|
88,389
|
|
|
|
|
|
16.5
|
|
|
|
|
|
348,554
|
|
|
|
|
|
22.2
|
|
|
|
|
|
390,896
|
|
|
|
|
|
59,074
|
|
|
|
|
|
20.8
|
|
|
Interest income, net
|
|
|
|
|
13,648
|
|
|
|
|
|
0.8
|
|
|
|
|
|
30,303
|
|
|
|
|
|
4,579
|
|
|
|
|
|
0.9
|
|
|
|
|
|
18,590
|
|
|
|
|
|
1.2
|
|
|
|
|
|
26,888
|
|
|
|
|
|
4,063
|
|
|
|
|
|
1.4
|
|
|
Government subsidies
|
|
|
|
|
4,653
|
|
|
|
|
|
0.3
|
|
|
|
|
|
53,616
|
|
|
|
|
|
8,103
|
|
|
|
|
|
1.5
|
|
|
|
|
|
2,849
|
|
|
|
|
|
0.2
|
|
|
|
|
|
905
|
|
|
|
|
|
137
|
|
|
|
|
|
0.0
|
|
|
Other expense, net
|
|
|
|
|
(997
)
|
|
|
|
|
|
(0.1
)
|
|
|
|
|
|
(772
)
|
|
|
|
|
|
(117
)
|
|
|
|
|
|
0.0
|
|
|
|
|
|
(67
)
|
|
|
|
|
|
0.0
|
|
|
|
|
|
(9,324
)
|
|
|
|
|
|
(1,409
)
|
|
|
|
|
|
(0.5
)
|
|
|
Net income before income taxes
|
|
|
|
|
396,159
|
|
|
|
|
|
22.5
|
|
|
|
|
|
668,024
|
|
|
|
|
|
100,954
|
|
|
|
|
|
18.8
|
|
|
|
|
|
369,926
|
|
|
|
|
|
23.6
|
|
|
|
|
|
409,365
|
|
|
|
|
|
61,865
|
|
|
|
|
|
21.7
|
|
|
Income tax expenses
|
|
|
|
|
(105,130
)
|
|
|
|
|
|
(6.0
)
|
|
|
|
|
|
(193,203
)
|
|
|
|
|
|
(29,197
)
|
|
|
|
|
|
(5.4
)
|
|
|
|
|
|
(101,691
)
|
|
|
|
|
|
(6.5
)
|
|
|
|
|
|
(102,014
)
|
|
|
|
|
|
(15,417
)
|
|
|
|
|
|
(5.4
)
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
16.5
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
13.4
|
|
|
|
|
|
268,235
|
|
|
|
|
|
17.1
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
|
|
|
|
|
16.3
|
|
|
|
(1)
Primarily including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017
Net Revenues
Our net revenues increased by 20.1% from RMB1,568.6 million in the six months ended June 30, 2017 to RMB1,883.3 million (US$284.6 million) in the same period in 2018. This increase was primarily due to increases in loan facilitation service fees and post facilitation service fees.
Loan Facilitation Service Fees and Post Facilitation Service Fees
Loan facilitation service fees increased by 15.5% from RMB1,269.8 million in the six months ended June 30, 2017 to RMB1,466.5 million (US$221.6 million) in the same period in 2018; post facilitation service fees increased by 16.7% from RMB141.7 million in the six months ended June 30, 2017 to RMB165.4 million (US$25.0 million) in the same period in 2018.
The increases in loan facilitation service fees and post facilitation service fees were in line with the continued growth of our business. The total outstanding balance of loans we facilitated and originated increased by 46.8% from RMB15.1 billion as of June 30, 2017 to RMB22.1 billion (US$3.3 billion) as of June 30, 2018, among which, the outstanding balance of auto-backed loans we facilitated and originated increased from RMB12.0 billion as of June 30, 2017 to RMB17.2 billion (US$2.6 billion) as of June 30, 2018. The increases in loan facilitation service fees and post facilitation service fees were partially offset by a decrease in auto-backed loans’ fee rates. We adjusted the fee rates of auto-backed loans downward in the first half of 2018 to increase the competitiveness of our loan products.
Other Revenues
Other revenues decreased by 31.3% from RMB152.9 million in the six months ended June 30, 2017 to RMB105.0 million (US$15.9 million) in the same period in 2018, as we reduced over-due fee charges, so that aggregate fees, including overdue fees, do not exceed the statutory limit.
Net Financing Income
Net financing income increased significantly from RMB10.8 million in the six months ended June 30, 2017 to RMB156.4 million (US$23.6 million) in the same period in 2018, mainly attributable to an increase in the volume of loans we originated.
Provision for Loans and Advances
Provision for loans and advances increased by 49.6% from RMB159.7 million in the six months ended June 30, 2017 to RMB238.9 million (US$36.1 million) in the same period in 2018, primarily due to an increase in provision for acquired non-performing loans and loans we originated, which was in line with the continued growth of our business.
Operating Costs and Expenses
Operating costs and expenses increased by 18.2% from RMB1,060.4 million in the six months ended June 30, 2017 to RMB1,253.5 million (US$189.4 million) in the same period in 2018. Operating costs and expenses as a percentage of our net revenues decreased from 67.6% in the six months ended June 30, 2017 to 66.6% in the same period in 2018.
Origination and Servicing Expenses
Origination and servicing expenses as a percentage of net revenues decreased from 52.3% in the six months ended June 30, 2017 to 48.6% in the same period in 2018, primarily due to our improved operating efficiency and greater economies of scale. Origination and servicing expenses increased by 11.6% from RMB820.8 million in the six months ended June 30, 2017 to RMB916.2 million (US$138.5 million) in the same period in 2018, which was primarily attributable to: (i) a 25.9% increase in salaries and benefits for our directly-operated service centers’ employees from RMB366.5 million in the six months ended June 30, 2017 to RMB461.4 million (US$69.7 million) in the same period in 2018, primarily due to increased
headcounts as we continued to expand our service center network; and (ii) a 163.5% increase in debt-collection cost from RMB28.9 million in the six months ended June 30, 2017 to RMB76.1 million (US$11.5 million) in the same period in 2018, which was in line with our business growth.
Sales and Marketing Expenses
Sales and marketing expenses increased by 45.6% from RMB72.1 million in the six months ended June 30, 2017 to RMB105.0 million (US$15.9 million) in the same period in 2018, which was primarily due to a 55.4% increase in advertising expenses from RMB44.9 million in the six months ended June 30, 2017 to RMB69.8 million (US$10.5 million) in the same period in 2018, as we collaborated with an increasing number of online channel partners by placing performance-based advertisements on their mobile apps and websites, launched additional marketing projects, and placed more advertisements in subway stations and airports to enhance brand awareness. Sales and marketing expenses as a percentage of net revenues increased from 4.6% in the six months ended June 30, 2017 to 5.6% in the same period in 2018.
General and Administrative Expenses
General and administrative expenses increased by 23.8% from RMB133.4 million in the six months ended June 30, 2017 to RMB165.1 million (US$25.0 million) in the same period in 2018, which was primarily attributable to a 31.6% increase in staff cost from RMB83.5 million in the six months ended June 30, 2017 to RMB109.8 million (US$16.6 million) in the same period in 2018, which was attributable to (i) increases in salaries and benefits for our headquarters’ management, finance and administrative personnel primarily due to increased headcounts, including an RMB12.5 million (US$1.9 million) increase in share-based compensation expenses, (ii) expenses related to our newly-established call center, and (iii) listing expense of RMB7.4 million (US$1.1 million). General and administrative expenses as a percentage of net revenues increased from 8.5% in the six months ended June 30, 2017 to 8.8% in the same period in 2018.
Research and Development Expenses
Research and development expenses increased by 97.2% from RMB34.1 million in the six months ended June 30, 2017 to RMB67.2 million (US$10.2 million) in the same period in 2018, which was primarily attributable to an increase in the number of our technology personnel to upgrade our technology infrastructure and enhance our data analytics capabilities.
Interest Income, Net
Interest income, net increased by 44.6% from RMB18.6 million in the six months ended June 30, 2017 to RMB26.9 million (US$4.1 million) in the same period in 2018, primarily due to an increase in loans we originated.
Government Subsidies
Government subsidies decreased by 68.2% from RMB2.8 million in the six months ended June 30, 2017 to RMB0.9 million (US$0.1 million) in the same period in 2018.
Other Expense, Net
Other expense, net increased significantly from RMB67 thousand in the six months ended June 30, 2017 to RMB9.3 million (US$1.4 million) in the same period in 2018, as we made certain charitable donations in the six months ended June 30, 2018.
Income Tax Expenses
Our income tax expenses increased by 0.3% from RMB101.7 million in the six months ended June 30, 2017 to RMB102.0 million (US$15.4 million) in the same period in 2018, which was primarily due to the increase in our taxable income.
Net Income
As a result of the foregoing, our net income increased by 14.6% from RMB268.2 million in the six months ended June 30, 2017 to RMB307.4 million (US$46.4 million) in the same period in 2018.
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net Revenues
Our net revenues increased by 101.3% from RMB1,761.4 million in 2016 to RMB3,545.4 million (US$535.8 million) in 2017. This increase was primarily due to increases in loan facilitation service fees and post facilitation service fees.
Loan Facilitation Service Fees and Post Facilitation Service Fees
Loan facilitation service fees increased by 90.9% from RMB1,410.2 million in 2016 to RMB2,692.0 million (US$406.8 million) in 2017; post facilitation service fees increased by 105.5% from RMB146.1 million in 2016 to RMB300.2 million (US$45.4 million) in 2017.
The increases in loan facilitation service fees and post facilitation service fees were in line with the continued growth of our business. The volume of loans we facilitated and originated increased from RMB48.0 billion in 2016 to RMB96.9 billion (US$14.6 billion) in 2017, among which, (i) the volume of auto-backed loans facilitated and originated through our platform increased from RMB45.4 billion in 2016 to RMB80.2 billion (US$12.1 billion) in 2017, which was mainly driven by a 45.6% increase in the number of active borrowers of auto-backed loans from 216,423 in 2016 to 315,211 in 2017; and (ii) the volume of other loans facilitated and originated through our platform increased from RMB2.6 billion in 2016 to RMB16.7 billion (US$2.5 billion) in 2017, primarily attributable to the increased volume of consumption loans we facilitated. The total outstanding balance of loans we facilitated and originated increased from RMB11.1 billion as of December 31, 2016 to RMB20.0 billion (US$3.0 billion) as of December 31, 2017, among which, the outstanding balance of auto-backed loans we facilitated and originated increased from RMB9.6 billion as of December 31, 2016 to RMB15.2 billion (US$2.3 billion) as of December 31, 2017.
Other Revenues
Other revenues increased by 48.8% from RMB205.0 million in 2016 to RMB305.0 million (US$46.1 million) in 2017, primarily attributable to an increase in loan collection fees and late payment penalties. The increase in loan collection fees and late payment penalties was due to increased volume of delinquent loans, which was the result of the substantial increase in the volume of loans we facilitated. The increase in other revenues was partially offset by a decrease in the average rates of late payment penalties and loan collection fees we charge as we continued to optimize our collection policies.
Net Financing Income
Net financing income increased significantly from RMB6.6 million in 2016 to RMB264.2 million (US$39.9 million) in 2017, mainly attributable to an increase in the volume of loans we originated.
Provision for Loans and Advances
Provision for loans and advances increased significantly from RMB144.6 million in 2016 to RMB484.1 million (US$73.2 million) in 2017, primarily due to (i) provision for certain consumption loans we originated, and (ii) an increase in provision for acquired non-performing loans, which was primarily due to a significant increase in the volume of auto-backed loans we facilitated in 2017, which resulted in an increase in the volume of loans that were charged off.
Operating Costs and Expenses
Operating costs and expenses increased by 100.1% from RMB1,237.9 million in 2016 to RMB2,476.5 million (US$374.3 million) in 2017. Operating costs and expenses as a percentage of our net revenues decreased from 70.3% in 2016 to 69.9% in 2017.
Origination and Servicing Expenses
Origination and servicing expenses as a percentage of net revenues decreased from 56.4% in 2016 to 50.3% in 2017, primarily due to our improved operating efficiency and greater economies of scale. Origination and servicing expenses increased by 79.6% from RMB993.6 million in 2016 to RMB1,784.9 million (US$269.7 million) in 2017, which was primarily attributable to (i) a 139.2% increase in salaries and benefits for our directly-operated service centers’ employees from RMB341.0 million in 2016 to RMB815.6 million (US$123.3 million) in 2017, primarily due to increased headcounts as we continued to expand our service center network; (ii) a 20.8% increase in partner-operated service centers’ operating costs and expenses from RMB418.3 million in 2016 to RMB505.4 million (US$76.4 million) in 2017, primarily due to an increase in loan volume generated by partner-operated service centers; and (iii) a 44.6% increase in GPS related costs from RMB102.7 million to RMB148.5 million (US$22.4 million), primarily due to a larger number of auto-backed loan transactions facilitated through our platform in 2017.
Sales and Marketing Expenses
Sales and marketing expenses increased significantly from RMB71.1 million in 2016 to RMB273.8 million (US$41.4 million) in 2017, which was primarily due to a significant increase in advertising expenses from RMB38.0 million in 2016 to RMB204.0 million (US$30.8 million) in 2017, as we collaborated with an increasing number of online channel partners by placing performance-based advertisements on their mobile apps and websites, launched additional marketing projects, and placed more advertisements in subway stations and airports to enhance brand awareness. Sales and marketing expenses as a percentage of net revenues increased from 4.0% in 2016 to 7.7% in 2017.
General and Administrative Expenses
General and administrative expenses increased significantly from RMB117.0 million in 2016 to RMB316.8 million (US$47.9 million) in 2017, which was primarily attributable to: (i) a significant increase from RMB60.6 million in 2016 to RMB213.9 million (US$32.3 million) in 2017, attributable to increases in salaries and benefits for our headquarters’ management, finance and administrative personnel primarily due to increased headcounts as our business continued to grow, and expenses related to our newly-established call center, and (ii) a 35.3% increase in office rental expenses from RMB18.4 million in 2016 to RMB24.8 million (US$3.7 million) in 2017, as we rented more office space for our headquarters and provincial branch offices as our business continued to grow. General and administrative expenses as a percentage of net revenues increased from 6.6% in 2016 to 8.9% in 2017.
Research and Development Expenses
Research and development expenses increased by 79.8% from RMB56.1 million in 2016 to RMB101.0 million (US$15.3 million) in 2017, which was primarily attributable to increase in the number of our technology personnel as we continue to focus on upgrading our technology infrastructure and enhancing our data analytics capabilities.
Interest Income, Net
Interest income, net increased by 122.8% from RMB13.6 million in 2016 to RMB30.3 million (US$4.6 million) in 2017, primarily due to increased interest income from bank deposits and increased investment income from available-for-sale debt securities. The increase was partially offset by increased interest expenses in relation to an RMB200 million (US$30.2 million) bank loan we borrowed in 2017.
Government Subsidies
Government subsidies increased significantly from RMB4.7 million in 2016 to RMB53.6 million (US$8.1 million) in 2017. We received a higher amount of government grants awarded by local government authorities in 2017 in relation to our tax contributions.
Other Expense, Net
Other expense, net decreased by 22.6% from RMB1.0 million in 2016 to RMB0.8 million (US$0.1 million) in 2017.
Income Tax Expenses
Our income tax expenses increased by 83.8% from RMB105.1 million in 2016 to RMB193.2 million (US$29.2 million) in 2017, which was primarily due to the increase in our taxable income.
Net Income
As a result of the foregoing, our net income increased by 63.2% from RMB291.0 million in 2016 to RMB474.8 million (US$71.8 million) in 2017.
Share-based Compensation
Restricted Shares
On June 1, 2016 and September 1, 2016, Weidai Financial Information granted 916,800 restricted shares for nil consideration to certain of its directors and executives. On January 16, 2018, Weidai Financial Information granted 2,620 restricted shares for nil consideration to certain of its directors and executives. The restricted shares granted were immediately vested. We calculated the estimated fair value of the shares on the respective grant dates using the income approach with assistance from an independent valuation firm. The fair value of the granted shares was RMB35.20 per share on both June 1, 2016 and September 1, 2016, and was RMB6,721 per share on January 16, 2018. Share-based compensation of RMB32.3 million and RMB17.6 million (US$2.7 million), respectively, was charged to our consolidated statement of comprehensive income in 2016 and the six months ended June 30, 2018, respectively.
Stock Appreciation Rights
On December 18, 2015, Weidai Financial Information approved a plan to issue options for virtual shares, or the Virtual Share Plan, for the purpose of providing incentives and rewards to certain employees and executives. In 2017 and the six months ended June 30, 2018, Weidai Financial Information issued a total of 2,714,452 and 2,002,660 options in virtual shares under the Virtual Share Plan, representing 2.72% and 2.00% of its equity interest, respectively. These virtual share options have no exercise price and will be settled in cash at the amount equal to the differences between the fair value on the exercise date and the fair value on the grant date. 33%, 33% and 34% of these options are vested on the second, third and fourth anniversary of the grant date, respectively. The vested virtual share options are exercisable within five years from the grant date. These virtual share options are in substance stock appreciation rights, which are classified as liability awards. At our discretion, each grantee may receive certain percentage of annual attributable net profit as annual dividend, which is also settled in cash. In addition, each grantee has an option to purchase Weidai Financial Information’s shares when the grantee’s accumulated number of virtual shares granted exceeds 0.1% of Weidai Financial Information’s total paid-in-capital. The purchase price will be determined by us.
As of June 30, 2018, no dividend was declared to the grantees and none of the grantees’ accumulated number of virtual shares granted exceeded 0.1% of Weidai Financial Information’s total paid-in-capital. Share-based compensation of RMB40.7 million (US$6.2 million) and RMB38.0 million (US$5.7 million) was recorded in our consolidated statement of comprehensive income in 2017 and the six months ended June 30, 2018, respectively.
The Virtual Share Plan and all outstanding vested virtual share options will terminate upon completion of this offering.
We calculated the estimated fair value of the stock appreciation rights on the balance sheet date using the Black-Scholes option pricing model with assistance from independent valuation firm. Assumptions used to determine the fair value of virtual share options granted as of December 31, 2017 and June 30, 2018 are summarized as follows:
|
|
|
As of December 31, 2017
|
|
|
As of June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
Fair value per ordinary share
|
|
|
6,721
|
|
|
7,127
|
|
Risk-free interest rate
|
|
|
4.35%
|
|
|
4.35%
|
|
Dividend yield
|
|
|
nil
|
|
|
nil
|
|
Expected volatility
|
|
|
61.00%
|
|
|
61.00%
|
|
Weighted average expected life range (years)
|
|
|
2.92 – 3.75
|
|
|
2.67 – 3.67
|
|
The estimated fair value of Weidai Financial Information’s equity interest at balance sheet date was determined with the assistance of an independent third party valuation firm using the income approach. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with the contractual term of the awards. Expected volatility is estimated based on the historical volatility ordinary shares of serval comparable companies in the same industry. The dividend yield is estimated based on our expected dividend policy over the expected term of the options. The weighted average expected life was estimated using simplified method for “plain-vanilla” options as we consider the options granted to have “plain-vanilla” characteristics.
The following table sets forth the allocation of our share-based compensation expenses in 2016 and 2017 and the six months ended June 30, 2017 and 2018:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
General and administrative
|
|
|
|
|
—
|
|
|
|
|
|
35,223
|
|
|
|
|
|
5,323
|
|
|
|
|
|
17,145
|
|
|
|
|
|
29,637
|
|
|
|
|
|
4,479
|
|
|
|
Origination and servicing
|
|
|
|
|
18,473
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
20,592
|
|
|
|
|
|
3,112
|
|
|
|
Research and development
|
|
|
|
|
13,853
|
|
|
|
|
|
5,496
|
|
|
|
|
|
831
|
|
|
|
|
|
1,691
|
|
|
|
|
|
5,366
|
|
|
|
|
|
811
|
|
|
|
Total share-based compensation
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
|
|
|
18,836
|
|
|
|
|
|
55,595
|
|
|
|
|
|
8,402
|
|
|
|
|
In determining the fair value of Weidai Financial Information’s equity interest, we applied the income approach / discounted cash flow analysis based on our projected cash flow using management’s best estimate as of the valuation date. The determination of the fair value of Weidai Financial Information’s equity interest requires complex and subjective judgments to be made regarding our projected financial and operating results, our unique business risks, the liquidity of our equity interest and our operating history and prospects at the time of valuation.
The major assumptions used in calculating the fair value of Weidai Financial Information’s equity interest include:
Valuation dates
|
|
|
Discount rates
|
|
September 30, 2015
|
|
|
|
|
16.46
%
|
|
|
May 31, 2016
|
|
|
|
|
15.42
%
|
|
|
September 30, 2016
|
|
|
|
|
15.45
%
|
|
|
December 31, 2017
|
|
|
|
|
14.97
%
|
|
|
June 30, 2018
|
|
|
|
|
14.00
%
|
|
|
•
Weighted average cost of capital, or WACC: The discount rates we listed in the table above were based on the WACCs determined based on a consideration of various factors, including risk-free rate, comparative industry risk, equity risk premium, company size and non-systematic risk factors.
•
Comparable companies: In deriving the WACCs, which are used as the discount rates under the income approach, three publicly traded companies were selected for reference as our guideline companies. The guideline companies were selected based on the following criteria: (i) online retail and mobile commerce companies or companies that provide financial lending services and (ii) China-based companies that are publicly listed in the United States, publicly listed companies in China and United States-based publicly listed companies.
•
Discount for lack of marketability, or DLOM: DLOM was quantified by the Finnerty Model. Under this option-pricing model, which assumed that the put option is struck at the average price of the share before the privately held shares can be sold, the cost of the put option was considered as a basis to determine the DLOM. This option pricing model is one of the methods commonly used in estimating DLOM as it can take into consideration factors like timing of a liquidity event, such as an initial public offering, and estimated volatility of equity interest. The farther the valuation date is from an expected liquidity event, the higher the put option value and thus the higher the implied DLOM. The lower the DLOM is used for the valuation, the higher is the determined fair value of Weidai Financial Information’s equity interest.
Valuation dates
|
|
|
DLOM
|
|
September 30, 2015
|
|
|
|
|
25
%
|
|
|
May 31, 2016
|
|
|
|
|
23
%
|
|
|
September 30, 2016
|
|
|
|
|
23
%
|
|
|
December 31, 2017
|
|
|
|
|
22
%
|
|
|
June 30, 2018
|
|
|
|
|
22
%
|
|
|
The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. The growth rates of our total revenues, as well as major milestones that we have achieved, contributed to the increase in the fair value of Weidai Financial Information’s equity interest from US$474.8 million to US$1,410.8 million. However, these fair values are inherently uncertain and highly subjective. The assumptions used in deriving the fair values are consistent with our business plan. These assumptions include: no material changes in the existing political, legal and economic conditions in China; our ability to retain competent management, key personnel and staff to support our ongoing operations; and no material deviation in market conditions from economic forecasts. These assumptions are inherently uncertain. The risks associated with achieving our forecasts were assessed in selecting the appropriate discount rates. The below table sets forth the fair value of Weidai Financial Information as of the specified valuation dates:
Valuation dates
|
|
|
Fair Value per
ordinary share
after DLOM
(in RMB)
|
|
September 30, 2015
|
|
|
|
|
2,304
|
|
|
May 31, 2016
|
|
|
|
|
3,277
|
|
|
September 30, 2016
|
|
|
|
|
3,622
|
|
|
December 31, 2017
|
|
|
|
|
6,721
|
|
|
June 30, 2018
|
|
|
|
|
7,127
|
|
|
Non-GAAP Financial Measure
In evaluating our business, we consider and use adjusted net income, a non-GAAP measure, as supplemental measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define adjusted net income as net income excluding share-based compensation expenses.
We present this non-GAAP financial measure because it is used by our management to evaluate our operating performance and formulate business plans. Adjusted net income enables our management to assess our operating results without considering the impact of share-based compensation expenses. We also believe that the use of this non-GAAP financial measure facilitates investors’ assessment of our operating performance.
This non-GAAP financial measure is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as an analytical tool. One of the key limitations of using adjusted net income is that they do not reflect all items of income and expense that affect our operations. Share-based compensation expenses have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income. Further, this non-GAAP financial measure may differ from the non-GAAP financial information used by other companies, including peer companies, and therefore their comparability may be limited.
We compensate for these limitations by reconciling the non-GAAP financial measure to the most directly comparable U.S. GAAP financial measure, which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.
The following tables reconcile our adjusted net income, respectively, in 2016 and 2017 and for the six months ended June 30, 2017 and 2018 to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Reconciliation of Net Income to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expenses
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
|
|
|
18,836
|
|
|
|
|
|
55,595
|
|
|
|
|
|
8,402
|
|
|
Adjusted net income
|
|
|
|
|
323,355
|
|
|
|
|
|
515,540
|
|
|
|
|
|
77,911
|
|
|
|
|
|
287,071
|
|
|
|
|
|
362,946
|
|
|
|
|
|
54,850
|
|
|
|
Discussion of Certain Balance Sheet Items
Loans and Advances, Net
Loans and advances, net decreased from RMB2,328.7 million (US$351.9 million) as of December 31, 2017 to RMB2,219.5 million (US$335.4 million) as of June 30, 2018. The decrease was primarily due to a decrease in loans receivable from RMB2,113.6 million (US$319.4 million) as of December 31, 2017 to RMB1,894.3 million (US$286.3 million) as of June 30, 2018. The decrease in loans receivable was primarily due to change in the way we collaborated with one of our institutional funding partners in 2018, as a result of which loans it funded in 2018 were no longer recorded on our balance sheet as of June 30, 2018. The decrease in loans and advances, net was partially offset by an increase in acquired non-performing loans from RMB618.9 million (US$93.5 million) as of December 31, 2017 to RMB735.1 million (US$111.1 million) as of June 30, 2018, which was in line with the growth in the volume of loans we facilitated.
Loans and advances, net is comprised of loans receivable, acquired non-performing loans and advances to borrowers, partially offsets by allowance for loans and advances. Loans and advances, net increased significantly from RMB293.2 million as of December 31, 2016 to RMB2,328.7 million (US$351.9 million) as of December 31, 2017. The increase was primarily due to a significant increase in loans receivable from RMB94.7 million in 2016 to RMB2,113.6 million (US$319.4 million) in 2017, primarily because of an increase in the volume of loans we originated. The increase in net loans and advances was also attributable to an increase in acquired non-performing loans, from RMB257.3 million as
of December 31, 2016 to RMB618.9 million (US$93.5 million) as of December 31, 2017, which was in line with the significant growth in the volume of loans we facilitated. The increase in net loans and advances was partially offset by a significant increase in allowance for loans and advances from RMB67.5 million as of December 31, 2016 to RMB406.3 million (US$61.4 million) as of December 31, 2017, which was primarily due to the substantial increase in the volume of loans we originated and acquired non-performing loans as of December 31, 2017.
Payable to Institutional Funding Partners and Online Investors
Payable to institutional funding partners increased from nil as of December 31, 2016 to RMB939.4 million (US$142.0 million) as of December 31, 2017 and further to RMB1,016.6 million (US$153.6 million) as of June 30, 2018, as we started to collaborate with institutional funding partners in 2017. Payable to online investors increased from RMB94.7 million as of December 31, 2016 to RMB1,247.4 million (US$188.5 million) as of December 31, 2017, due to an increase in the volume of loans we originated. Payable to online investors decreased from RMB1,247.4 million (US$188.5 million) as of December 31, 2017 to RMB861.8 million (US$130.2 million) as of June 30, 2018, as we ceased to facilitate any new investment made by corporate investors to whom we provided guarantees since the fourth quarter of 2017.
Current Account with Online Investors and Borrowers
Current account with online investors represents idle funds in online investors’ accounts that have not yet been invested, withdrawn or funded to borrowers; current account with online borrowers on our platform represents loan proceeds in borrowers’ accounts that have not yet been withdrawn and deposits we receive from borrowers. Current account with online investors and borrowers increased significantly from RMB890.2 million as of December 31, 2016 to RMB1,883.4 million (US$284.6 million) as of December 31, 2017. The increase was primarily due to the increase in the number of our online investors and borrowers and their increased investment and borrowing, respectively, through our platform. Current account with online investors and borrowers decreased from RMB1,883.4 million (US$284.6 million) as of December 31, 2017 to RMB1,774.1 million (US$268.1 million) as of June 30, 2018. The decrease was primarily as a result of the implementation of our new fee structure in the first half of 2018, under which we no longer require any deposits from borrowers.
Liquidity and Capital Resources
Cash Flows and Working Capital
To date, we have financed our operations primarily through cash generated by our operating activities. As of December 31, 2016 and 2017 and the six months ended June 30, 2018, we had RMB1,314.8 million, RMB1,765.6 million (US$266.8 million) and RMB1,823.3 million (US$275.5 million), respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash and bank deposits. We believe that our current cash and cash equivalents and anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures for the 12 months following this offering. We may, however, need additional capital in the future to fund our continued operations. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Although we consolidate the results of Weidai Financial Information, we only have access to the assets or earnings of Weidai Financial Information through our contractual arrangements with Weidai Financial Information and its shareholders. See “Corporate History and Structure.” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “— Holding Company Structure.”
Substantially all of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in
foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiary is allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Our PRC subsidiary is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends. Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with SAFE and its local branches. See “Risk Factors — Risks Relating to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.”
The following table sets forth a summary of our cash flows for the periods presented:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Summary Consolidated Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
924,388
|
|
|
|
|
|
2,284,077
|
|
|
|
|
|
345,178
|
|
|
|
|
|
531,733
|
|
|
|
|
|
23,596
|
|
|
|
|
|
3,566
|
|
|
Net cash (used in)/provided by investing activities
|
|
|
|
|
(337,051
)
|
|
|
|
|
|
(2,941,921
)
|
|
|
|
|
|
(444,594
)
|
|
|
|
|
|
(707,663
)
|
|
|
|
|
|
216,060
|
|
|
|
|
|
32,651
|
|
|
Net cash provided by/(used in) financing activities
|
|
|
|
|
458,614
|
|
|
|
|
|
2,205,523
|
|
|
|
|
|
333,307
|
|
|
|
|
|
163,462
|
|
|
|
|
|
(359,058
)
|
|
|
|
|
|
(54,261
)
|
|
|
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
|
|
|
|
1,045,951
|
|
|
|
|
|
1,547,679
|
|
|
|
|
|
233,891
|
|
|
|
|
|
(12,468
)
|
|
|
|
|
|
(119,402
)
|
|
|
|
|
|
(18,044
)
|
|
|
Cash, cash equivalents and restricted cash at
beginning of year/period
|
|
|
|
|
268,863
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
198,699
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,826,493
|
|
|
|
|
|
432,590
|
|
|
Cash, cash equivalents and restricted cash at
end of year/period
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
|
|
|
1,302,346
|
|
|
|
|
|
2,743,091
|
|
|
|
|
|
414,546
|
|
|
Operating Activities
Net cash provided by operating activities was RMB23.6 million (US$3.6 million) in the six months ended June 30, 2018, which was primarily due to net income of RMB307.4 million (US$46.4 million), adjusted for (i) provision for loans and advances of RMB238.9 million (US$36.1 million), (ii) share-based compensation expenses of RMB55.6 million (US$8.4 million), and (iii) depreciation and amortization of RMB12.5 million (US$1.9 million), partially offset by changes in working capital. Changes in working capital primarily consisted of (i) a decrease in income tax payable of RMB182.0 million (US$27.5 million), (ii) an increase in prepaid expenses and other assets of RMB137.8 million (US$20.8 million), and (iii) a decrease in current account with online investors and borrowers of RMB109.3 million (US$16.5 million).
Net cash provided by operating activities was RMB2,284.1 million (US$345.2 million) in 2017, which was primarily due to net income of RMB474.8 million (US$71.8 million), adjusted for (i) provision for loans and advances of RMB484.1 million (US$73.2 million), (ii) share-based compensation expenses of RMB40.7 million (US$6.2 million), (iii) depreciation and amortization of RMB12.7 million (US$1.9 million), and (iv) changes in working capital. Adjustments for changes in working capital primarily consisted of (i) an increase in current account with online investors and borrowers of RMB993.3 million (US$150.1 million), (ii) an increase in accrued expenses and other liabilities of RMB231.1 million (US$34.9 million), and (iii) an increase in income tax payable of RMB131.9 million (US$19.9 million). These increases were partially offset by an increase in deferred tax assets of RMB124.9 million (US$18.9 million).
Net cash provided by operating activities was RMB924.4 million in 2016, which was primarily due to net income of RMB291.0 million, adjusted for (i) provision for loans and advances of RMB144.6 million, (ii) share-based compensation expenses of RMB32.3 million, (iii) depreciation and amortization of
RMB3.3 million, and (iii) changes in working capital. Adjustments for changes in working capital primarily consisted of (i) an increase in current account with online investors and borrowers of RMB635.9 million, (ii) an increase in accrued expenses and other liabilities of RMB148.2 million, and (iii) an increase in income tax payable of RMB94.5 million. These increases were partially offset by (i) an increase in prepaid expenses and other assets of RMB311.1 million, and (ii) an increase in amounts due from related parties of RMB73.7 million.
Investing Activities
Net cash provided by investing activities was RMB216.1 million (US$32.7 million) in the six months ended June 30, 2018, which was primarily attributable to (i) RMB4.0 billion (US$607.9 million) in proceeds from collection of loans and advances, (ii) RMB2.7 billion (US$405.0 million) in redemption of short-term investments, and (iii) RMB1.1 billion (US$172.7 million) in redemption of long-term investments, which was partially offset by (i) RMB4.2 billion (US$0.6 billion) in payments to originate loans and advances, (ii) RMB2.7 billion (US$0.4 billion) in purchase of short-term investments, and (iii) RMB1.1 billion (US$0.2 billion) in addition of long-term investments.
Net cash used in investing activities was RMB2,941.9 million (US$444.6 million) in 2017, which was primarily attributable to (i) RMB11,423.8 million (US$1,726.4 million) in purchase of short-term investments, and (ii) RMB6,885.3 million (US$1,040.5 million) in payments to originate loans and advances, which was partially offset by (i) RMB11,415.3 million (US$1,725.1 million) in redemption of short-term investments, and (ii) RMB4,360.3 million (US$658.9 million) in proceeds from collection of loans and advances.
Net cash used in investing activities was RMB337.1 million in 2016, which was primarily attributable to (i) RMB5,658.2 million in purchase of short-term investments, and (ii) RMB1,268.6 million in payments to originate loans and advances, which was partially offset by (i) RMB5,742.2 million in redemption of short-term investments, and (ii) RMB913.2 million in proceeds from collection of loans and advances.
Financing Activities
Net cash used in financing activities was RMB359.1 million (US$54.3 million) in the six months ended June 30, 2018, which was primarily attributable to RMB2.4 billion (US$359.9 million) in payments to institutional funding partners and online investors, which was partially offset by RMB2.0 billion (US$304.9 million) in proceeds from institutional funding partners and online investors.
Net cash provided by financing activities was RMB2,205.5 million (US$333.3 million) in 2017, which was primarily attributable to (i) RMB4,627.1 million (US$699.3 million) in proceeds from institutional funding partners and online investors and (ii) RMB200.0 million (US$30.2 million) in proceeds from short-term borrowings, which was partially offset by (i) RMB2,587.3 million (US$391.0 million) in payments to institutional funding partners and online investors, and (ii) RMB32.2 million (US$4.9 million) in payments of dividends to our shareholders.
Net cash provided by financing activities was RMB458.6 million in 2016, which was attributable to (i) RMB362.0 million in proceeds from issuance of ordinary shares and preferred shares and (ii) RMB165.2 million in proceeds from institutional funding partners and online investors, which was partially offset by RMB70.5 million in payments to institutional funding partners and online investors.
Capital Expenditures
We made capital expenditures of RMB52.3 million, RMB62.4 million (US$9.4 million) and RMB12.3 million (US$1.9 million) in 2016, 2017 and the six months ended June 30, 2018, respectively. In these periods, our capital expenditures were mainly used for the purchase of equipment, automobiles and software. We will continue to make capital expenditures to meet the expected growth of our business.
Contractual Obligations
The following table sets forth our contractual obligations as of December 31, 2017:
|
|
|
Total
|
|
|
Less than
one year
|
|
|
1 – 3 years
|
|
|
3 – 5 years
|
|
|
More than
five years
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Operating Lease Obligations
|
|
|
|
|
200,045
|
|
|
|
|
|
30,232
|
|
|
|
|
|
91,347
|
|
|
|
|
|
13,805
|
|
|
|
|
|
98,997
|
|
|
|
|
|
14,961
|
|
|
|
|
|
9,701
|
|
|
|
|
|
1,466
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
The following table sets forth our contractual obligations as of June 30, 2018:
|
|
|
Total
|
|
|
Less than
one year
|
|
|
1 – 3 years
|
|
|
3 – 5 years
|
|
|
More than
five years
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Operating Lease Obligations
|
|
|
|
|
138,920
|
|
|
|
|
|
20,995
|
|
|
|
|
|
35,868
|
|
|
|
|
|
5,421
|
|
|
|
|
|
86,390
|
|
|
|
|
|
13,056
|
|
|
|
|
|
16,662
|
|
|
|
|
|
2,518
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Our operating lease obligations relate to our leases of office premises. We lease certain office premises under non-cancelable operating lease arrangements. Rental expenses under operating leases for 2016, 2017 and the six months ended June 30, 2018 were RMB23.4 million, RMB107.9 million (US$16.3 million) and RMB69.4 million (US$10.5 million), respectively.
Other than those shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of June 30, 2018.
Off-Balance Sheet Commitments and Arrangements
We have not entered into any material financial guarantees or other commitments to guarantee the payment obligations of any third parties and do not assume credit risk in loans facilitated through our platform. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Holding Company Structure
Weidai Ltd. is a holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiary, variable interest entity and variable interest entity’s subsidiaries in China. As a result, Weidai Ltd.’s ability to pay dividends depends upon dividends paid by our PRC subsidiary. If our existing PRC subsidiary or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our PRC subsidiary is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our PRC subsidiary and variable interest entity is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our PRC subsidiary may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and our variable interest entity may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiary has not paid any dividends and will not be able to pay dividends until it generates accumulated profits and meet the requirements for statutory reserve funds.
Inflation
Since our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2016 and 2017 were increases of 2.1% and 1.8%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future.
Quantitative and Qualitative Disclosures about Market Risks
Foreign Exchange Risk
Our exposure to foreign exchange risk primarily relates to cash and cash equivalent denominated in U.S. dollars. As substantially all of our revenues and expenses are denominated in Renminbi, we do not believe that we currently have any significant direct foreign exchange risk, and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in our ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business is effectively denominated in Renminbi, while our ADSs will be traded in U.S. dollars.
The value of the Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. For Renminbi against U.S. dollar, there was depreciation of approximately 6.4% in 2016 and appreciation 5.8% in 2017. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amounts available to us.
As of June 30, 2018, we had Renminbi-denominated cash balance of RMB1,823.3 million. Assuming we had converted RMB1,823.3 million into U.S. dollars at the exchange rate of RMB6.6171 for US$1.00 as of June 29, 2018, our U.S. dollar cash balance would have been US$275.5 million. If the Renminbi had depreciated by 10% against the U.S. dollar, our U.S. dollar cash balance would have been US$248.0 million instead.
Interest Rate Risk
We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.
The fluctuation of interest rates may affect the demand for loan products and services on our platform. For example, a decrease in interest rates may cause potential borrowers to seek lower-priced loans from other channels. A high interest rate environment may lead to an increase in competing investment options and dampen investors’ desire to invest on our platform. We do not expect that the fluctuation of interest rates will have a material impact on our financial condition. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future. See “Risk Factors — Risks Related to Our Business and Our Industry — Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs.”
After completion of this offering, we may invest net proceeds we receive from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Recent Accounting Pronouncements
As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include a provision that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We will take advantage of the extended transition period.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance substantially converges final standards on revenue recognition between the FASB and the International Accounting Standards Board providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. GAAP.
The core principle of the guidance is that an entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
In August 2015, the FASB issued its final standard formally amending the effective date of the new revenue recognition guidance. As an “emerging growth company,” or EGC, the Company has elected to take advantage of the extended transition period provided in the Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards applicable to private companies. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, including interim periods beginning after December 15, 2019. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10). The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instruments-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this ASU eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, including interim periods after December 15, 2019. We are in the process of evaluating the impact of the adoption of this guidance on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU modifies existing guidance for off-balance sheet treatment of a lessees’ operating leases by requiring lessees to recognize lease assets and lease liabilities, whilst, lessor accounting is largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU is intended to improve financial
reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of the Company’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, including interim periods within fiscal years beginning after December 15, 2021. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows (“ASC 230”), including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. We have early adopted this guidance.
In February 2017, the FASB issued ASU No. 2017-05, Other income — Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments in this update also clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments provide targeted improvements to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Specifically, the amendments include clarifications related to: measurement elections, transition requirements, and adjustments associated with equity securities without readily determinable fair values; fair value measurement requirements for forward contracts and purchased options on equity securities; presentation requirements for hybrid financial liabilities for which the fair value option has been elected; and measurement requirements for liabilities denominated in a foreign currency for which the fair value option has been elected. The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is not permitted unless the entity has early adopted the amendments in ASU 2016-01. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.
INDUSTRY
All information and data presented in this section have been derived from the Oliver Wyman Report, unless otherwise noted. Oliver Wyman has advised us that the statistical and graphical information contained herein is drawn from its database and other sources. The following discussion includes projections for future growth, which may not occur at the rates that are projected or at all.
China’s Small and Micro Enterprise Finance Market
Small and micro enterprises, which refer to businesses with annual revenues of less than RMB20 million, are vital to China’s economic growth. Driven by China’s continued economic growth and favorable government policies, the number of China’s small and micro enterprises grew rapidly at a CAGR of 13% from 50 million as of December 31, 2012 to 93 million as of December 31, 2017, and is expected to grow at a CAGR of 9% to 140 million as of December 31, 2022. Small and micro enterprises were estimated to have contributed 32% of China’s GDP and 48% of the country’s employment in 2017, compared to 24% and 25% in 2012.
Despite the pivotal role small and micro enterprises have played in China’s economic growth, their financing needs remain underserved. The fast-evolving businesses and lack of credit histories of small and micro enterprises have made it much more challenging for traditional financing channels (banks, alternative lending channels and private lending channels) to assess credit risks of these enterprises, as compared to those of larger, more established businesses. In 2017, RMB34 trillion, or 49% of small and micro enterprises’ financing needs was not met, and such shortage is expected to grow at a CAGR of 14% by 2022, reaching RMB66 trillion in 2022. The following diagram sets forth the gap between small and micro enterprises’ financing demand and supply in China for the periods indicated:
Financing Channels and Products for Small and Micro Enterprise Owners
The total amount of financing provided to small and micro enterprises in China reached RMB36 trillion in 2017. The main channels that provide financing to small and micro enterprises owners in China include traditional financing channels, which are comprised of banks, alternative lending channels (factoring, lease and micro-lending companies), and private lending channels (pawn shops, usuries and loans from family and friends); as well as marketplace lending platforms.
The following table compares financing products provided by different financing channels to small and micro business enterprises in China:
Financing channel
|
|
|
Product
|
|
|
Collateral
|
|
|
Tenure
|
|
|
Average credit
limit (in RMB)
|
|
|
Average APR
|
|
|
Approval
time
|
|
|
Approval
rate
|
|
Banks
(1)
|
|
|
Secured loan
|
|
|
Property
|
|
|
Up to 3 years
|
|
|
1 – 5 million
|
|
|
Around 10%
|
|
|
Around 30 days
|
|
|
Low
|
|
|
|
|
Unsecured loan
|
|
|
n/a
|
|
|
Up to 2 years
|
|
|
50,000 – 100,000
|
|
|
Around 20%
|
|
|
Around 30 days
|
|
|
Low
|
|
|
|
|
Personal credit card
|
|
|
n/a
|
|
|
Rolling basis
|
|
|
10,000 – 30,000
(2)
|
|
|
Around 20%
|
|
|
Around 30 days
(3)
|
|
|
Medium
|
|
Alternative lending channels
|
|
|
Secured loan
|
|
|
Property
|
|
|
Up to 5 years
|
|
|
1 – 3 million
|
|
|
20 – 25%
|
|
|
Around 7 days
|
|
|
Medium
|
|
|
|
|
Unsecured loan
|
|
|
n/a
|
|
|
Up to 1 year
|
|
|
30,000 – 50,000
|
|
|
25 – 50%
|
|
|
Around 2 days
|
|
|
Medium
|
|
Private lending channels
|
|
|
Secured loan
|
|
|
Property, Automobile/ Others
|
|
|
Up to 6 months
|
|
|
20,000 – 50,000
|
|
|
45 – 80%
|
|
|
Within 24 hours
|
|
|
Medium
|
|
Marketplace lending platforms
|
|
|
Secured loan
|
|
|
Property
|
|
|
Up to 30 years
|
|
|
600,000 – 1 million
|
|
|
20 – 30%
|
|
|
Around 10 days
|
|
|
Low
|
|
|
|
|
Secured loan
|
|
|
Automobile
|
|
|
Up to 3 years
|
|
|
60,000 – 120,000
|
|
|
20 – 35%
|
|
|
Within 24 hours
|
|
|
High
|
|
|
|
|
Unsecured loan
|
|
|
n/a
|
|
|
Up to 1 year
|
|
|
15,000 – 25,000
|
|
|
25 – 50%
(4)
|
|
|
Within 24 hours
|
|
|
High
|
|
(1)
Detailed loan terms will depend on the applicants’ relationship with banks (such as credit rating and account balance).
(2)
In 2017, the average credit card balance was approximately RMB10,900 (excluding VIP credit cards with credit limits higher than RMB100,000).
(3)
Refers to credit card approval time.
(4)
Refers to average APR before Circular 141 came into effect.
Banks and alternative lending channels.
Banks and alternative lending channels are the main funding sources for small and micro enterprises in China in terms of outstanding loan balance. However, they have traditionally been focused on large and medium enterprises with less experienced in dealing with small and micro enterprises. In 2017, 33% of the outstanding business loans from banks were extended to small and micro enterprises, compared to 67% to large and medium enterprises. It is challenging for banks and alternative lending channels to effectively address the financing needs of small and micro enterprises due to the following reasons:
•
Smaller business size.
Banks and alternative lending channels generally require loan applicants to have sizable businesses such that they are able to provide sufficient collateral, such as equipment or account receivables, to secure the loans.
•
Lack of proper documentation.
Banks and alternative lending channels generally require extensive documentation, including operating data and financial statements for the past three years, as part of their loan application process. Small and micro enterprises may not be able to provide such documentation due to their relatively short operating history and unsophisticated record-keeping practice.
•
Lengthy approval process.
The loan approval process of banks and alternative lending channels is generally time-consuming and cannot fulfill small and micro enterprises’ often imminent financing needs. It usually takes over 30 days for banks to disburse loans after receiving loan applications.
•
Inadequate credit risk assessment
. Banks usually lack the expertise to analyze credit risks of small and micro enterprises and price loans accordingly, resulting in high default rates. This in turn discourage banks from lending to small and micro enterprises as banks are highly regulated in China in terms of risk management and various other aspects of their operations.
Private lending channels.
Private lending channels are not considered as reliable financing options and are often used as the last resort for small and micro enterprise owners to fulfill imminent financing needs.
Marketplace lending platforms.
Powered by advanced technologies, marketplace lending platforms have emerged as a new form of financing channel for small and micro enterprises owners in recent years. However, most marketplace lending platforms offer unsecured loans and lack the expertise to accurately assess small and micro enterprises’ credit risks and thus are unable to provide these enterprises with sufficient credit limits. The credit limit for small and micro enterprise owners borrowing for the first time through a marketplace lending platform is generally below RMB10,000.
Due to their fast-evolving businesses and limited planning abilities, small and micro enterprises often have financing needs that are unpredictable, time-sensitive and frequent. As a result, credit limit, approval rate and speed of loan approval and disbursement are key considerations when they select financing channels. Secured financing solutions are good borrowing alternatives because collaterals lessen risks to investors and enable borrowers to obtain higher credit limits and more flexible loan terms, such as flexible tenure and repayment options. Among different types of collaterals, automobiles and residential properties are especially favored by financing solution providers and investors because they are commonly traded in second-hand markets and are relatively easier to appraise.
The following diagram sets forth a breakdown of small and micro enterprises’ financing supply by financing channels in China for the periods indicated:
(1)
Including pawn shops, usuries and loans from family and friends.
(2)
Including factoring, leasing and micro-lending companies.
(3)
MSE refers to small and micro enterprises, which refer to businesses with annual revenues of less than RMB20 million.
China’s Auto-backed Loan Market
Auto-backed loan is one of the most common types of asset-based lending. In the United States, auto-backed loans are generally short-term loans with high APRs extended to lower-income borrowers who have very limited sources of funds. Unlike in the United States or other developed countries where automobile ownership levels are high, only households with middle-income or above own automobiles in China, and therefore auto-backed loan borrowers in China are primarily higher-income borrowers. The majority of auto-backed loan borrowers in China are small and micro enterprise owners who, due to the limited financing options available to them, are willing to use their automobiles as collaterals to meet short-term working capital requirements. As such, auto-backed loans in China feature more flexible terms generally ranging from three to 12 months, and their APRs are significantly lower than those offered in the United States.
The following table compares auto-backed loans in China and the United States:
|
|
|
China
|
|
|
United States
|
|
Borrower type
|
|
|
Primarily borrowers with relatively high income
|
|
|
Primarily borrowers with relatively low income
|
|
Loan purpose
|
|
|
To meet their businesses’ short-term working capital requirements
|
|
|
To pay for living expenses (such as electricity bills)
|
|
LTV ratio (%)
|
|
|
60 – 70%
|
|
|
20 – 35%
|
|
Average loan size
|
|
|
RMB40,000 – 75,000
|
|
|
US$1,000
|
|
Average loan tenure
|
|
|
3 – 12 months
|
|
|
Around 30 days
|
|
APR (%)
|
|
|
20 – 30%
(1)
|
|
|
Around 300%
|
|
Penetration rate in 2017
(2)
|
|
|
1.1%
|
|
|
3.0%
|
|
Delinquency rate
|
|
|
Low
|
|
|
High
|
|
(1)
Refers to APRs of auto-backed loans facilitated by leading marketplace lending platforms in China. The APRs of auto-backed loans in China were higher than 50% before 2012.
(2)
Penetration rate is calculated by dividing the number of automobiles used as auto-backed loan collaterals by the number of automobiles without any auto-financing.
China’s auto-backed loan market is expected to continue its rapid growth in the next few years. The loan volume of auto-backed loans in China was RMB223 billion in 2017, and is expected to reach RMB1,617 billion in 2022, representing a CAGR of 48.6%. The following diagram sets forth the loan volume of auto-backed loans in China for the periods indicated:
The penetration rate of auto-backed loans in China, which is calculated by dividing the number of automobiles used as auto-backed loan collaterals by the number of automobiles without any auto-financing, is significantly lower than those of the United States and other developed countries, and is projected to increase rapidly from 0.7% in 2016 to 3.4% in 2022. The following diagram sets forth the penetration rate of auto-backed loans in China for the periods indicated:
Key Growth Drivers
The key growth drivers for China’s auto-backed loan market include:
•
Increasing financing needs of small and micro enterprises.
The gap between the financing needs of small and micro enterprises and the supply is expected to increase from RMB34 trillion in 2017 to RMB66 trillion in 2022, representing a CAGR of 14%. This represents a significant market opportunity for innovative finance products tailored to small and micro enterprises’ financing demands, such as auto-backed loans.
•
Increasing automobile ownership of small and micro enterprise owners.
The total number of automobiles in China is expected to grow at a CAGR of 15% from 109 million in 2012 to 216 million in 2017. The percentage of small and micro enterprise owners having at least one automobile is expected to increase from 56% in 2017 to 80% in 2022.
•
Enhanced User Experience.
Historically, auto-backed loans required lenders to keep the automobiles in custody over the life of the loans in order to lessen their risk exposure, which caused inconvenience for borrowers and additional costs for lenders. With the introduction of innovative business models, such as auto-backed loans in the form of title loans with “collateral registration + GPS system” features, borrowers can continue to use their automobiles over the life of the loan. As a result, it is expected that an increasing number of automobile owners will consider auto-backed loans.
•
Emergence of marketplace lending platforms.
With the emergence of marketplace lending platforms, the borrowing cost of auto-backed loans has declined significantly over the past few years. In addition, leading marketplace lending platforms have developed advanced automobile appraisal capabilities and are able to offer higher LTV ratios. The strong offline presence of some of the leading marketplace lending platforms further enables them to improve borrower conversion and provide more personalized services.
Key Success Factors and Barriers to Entry
The key success factors and barriers to entry for China’s auto-backed loan market include:
•
Extensive offline service center network.
Extensive offline service center networks enable auto-backed loan providers to complete the transaction processes rapidly and provide comprehensive personalized services over the lifetime of the loans while better detecting fraud and delinquency. For example, automobiles used as collateral for auto-backed loans are required to be registered at local automobile administrative offices. An extensive service center network enables fast collateral registration and significantly shortens the transaction process. Registering non-local automobiles as collateral is also made possible through close collaboration among different regions’ service centers. Offline service centers are also essential for completing automobile re-appraisal and
inspection, which are often required in order to detect damages and other conditions not identified by analyzing online data, and GPS tracking device installation, which enables the tracking of real-time location and movement of the automobiles. Offline service centers are also involved in post-loan management by sending payment reminders and promptly contacting borrowers or locating automobiles in the event of borrower defaults.
•
Robust risk management system.
◦
Data and data analytics.
It is imperative for auto-backed loan providers to aggregate a wide range of data from various proprietary and third-party data sources to verify the loan applicants’ creditworthiness and the collateralized automobiles’ condition and value. This requires establishment of databases and development of strong data analytics capabilities to analyze a large volume of data through both in-house development and collaboration with third-party data service providers.
◦
Post-loan management
. Leading auto-backed loan providers have generally developed detailed post-loan management processes, ranging from monitoring the real-time movement of automobiles through GPS systems to collecting delinquent loans.
◦
Technology
. GPS tracking technology is critical for auto-backed loan providers to monitor the real-time movement of borrowers’ automobiles and minimize default risks.
•
Deep Industry Know-how.
Extensive industry knowledge and experience, such as thorough understanding of the local business and regulatory environment and deep know-how in automobile appraisal, repossession and disposal are key competitive advantages in China’s auto-back loan market. Experienced management and skilled workforce are also valuable assets for those operating in this industry. The local business and regulatory environment vary across different regions in China, and it takes significant time and resources for new entrants to build local expertise and relationships in different regions.
•
Well-established Brand.
Brand building takes significant time and effort and requires dedicated customer services. Auto-backed loan providers with well-established brands are preferred by borrowers. Auto-backed loan providers with well-established brands also have higher investor retention rates, which leads to lower funding costs.
Competitive Landscape
The auto-backed loan market in China is dominated by marketplace lending platforms. Banks and other traditional financing channels are generally not willing to accept used automobiles as collateral, as they are a type of “non-standard” collateral as compared to “standard” collaterals such as houses and new automobiles. As the China’s auto-backed loan market continues its rapid growth, auto-financing platforms and banks may become marketplace lending platforms’ future competitors.
The following table compares existing and potential providers of auto-backed loans:
Auto-financing platforms.
Auto-financing platforms generally have limited offline presence and weak risk management systems. These platforms are more focused on funding the purchase of new automobiles, and have limited experience in pricing loan products based on the value of used automobiles. In addition, these platforms have limited post-loan GPS tracking and automobile repossession capabilities and typically rely on third parties to provide these services.
Banks.
Banks have historically focused on auto-financing loans for the purchase of new automobiles. Banks may face difficulties in developing new risk management systems tailored for auto-backed loans, which are vastly different from those used for their traditional lending business, as well as building extensive industry know-how teams. Banks may also face difficulties in disposing automobiles in the event of default.
Marketplace lending platforms.
Marketplace lending platforms offering auto-backed loans have achieved significant first-mover advantages and established significant barriers to entry. New entrants are expected to invest significant time and resources to build up competitive strengths in this market.
We are the largest auto-backed loan marketplace lending platform in China in terms of loan volume in each of 2015, 2016 and 2017. The following table sets forth the ranking of auto-backed loan marketplace lending platforms based on loan volume of auto-backed loans in 2017:
China’s Marketplace Lending Market
China’s marketplace lending market is expected to grow at a CAGR of 35.7% from 2017 to 2022. The following diagram sets forth the outstanding loan balance of China’s marketplace lending market for the periods indicated:
Among all marketplace lending platforms in China, we were ranked No.2 in terms of loan volume in both 2016 and 2017. The following table sets forth the ranking of leading marketplace lending platforms in China in terms of loan volume for the periods indicated:
Ranking
|
|
|
2017
|
|
|
2016
|
|
1
|
|
|
Lufax
|
|
|
Lufax
|
|
2
|
|
|
|
|
|
|
|
3
|
|
|
PPDai
|
|
|
Tuandaiwang
|
|
4
|
|
|
Iqianjin
|
|
|
Ppmoney
|
|
5
|
|
|
Tuandaiwang
|
|
|
Xinhehui
|
|
6
|
|
|
X Financial
|
|
|
eloan
|
|
7
|
|
|
9Fbank
|
|
|
Iqianjin
|
|
8
|
|
|
Yirendai
|
|
|
Xiaoniuzaixian
|
|
9
|
|
|
Xiaoniuzaixian
|
|
|
Pengjinsuo
|
|
10
|
|
|
51Renpin
|
|
|
Yirendai
|
|
Platforms with stronger brand name and more robust risk management capabilities normally can attract investors while offering lower investment returns. This is because safety is the top priority for investors when selecting marketplace lending platforms. Investors typically evaluate the safety of marketplace lending platforms based on types of underlying assets and collaterals they provide.
The following table sets forth the investor yield and delinquency ratio as of October 31, November 30 and December 31, 2017 of China’s top five marketplace lending platforms in terms of loan volume in 2017:
|
Marketplace lending platform
|
|
|
Investor yield
|
|
|
Delinquency ratio
(1)
|
|
|
Lufax
|
|
|
7.5 – 8.5%
|
|
|
0.5 – 1%
|
|
|
|
|
|
7 – 8%
|
|
|
0.3 – 0.5%
|
|
|
Tuandaiwang
|
|
|
9 – 10%
|
|
|
3 – 4%
|
|
|
Iqianjin
|
|
|
10 – 11%
|
|
|
2 – 2.5%
|
|
|
PPDai
|
|
|
7 – 9%
|
|
|
2.5 – 3%
|
|
(1)
refers to the remaining loan principal and interest, after deducting the residual value of collateral if any, that were overdue as of a specific date as a percentage of the total outstanding principal balance of loans as of such date.
BUSINESS
OUR MISSION
Provide accessible credit for China’s small and micro enterprises.
OVERVIEW
We are the largest auto-backed financing solution provider in China in terms of loan volume in each of 2015, 2016 and 2017, with a market share of approximately 35% in 2017, according to the Oliver Wyman Report. Our platform connects borrowers, the majority of which are small and micro enterprise owners, with both online investors and institutional funding partners. Established in 2011 by a group of entrepreneurs with backgrounds in small and micro enterprises, we are dedicated to providing small and micro enterprise owners with accessible credit. We pioneered auto-backed financing in China in the form of title loans. We believe our products and services create exceptional value for both borrowers and investors.
Small and micro enterprises are vital to China’s economic growth, contributing 32% of the country’s GDP in 2017 and creating significant job opportunities. However, they have substantial and growing unmet financing needs for daily operation and business expansion. Small and micro enterprises often have financing needs that are frequent, unpredictable and time-sensitive. Due to fast-evolving business nature, limited planning abilities and the lack of a nationwide credit rating system in China, small and micro enterprises face difficulties including limited access to banks and other traditional financing channels, high costs of alternative lending channels, and the uncertainty of funding from families and friends. Auto-backed financing represents an attractive solution for small and micro enterprise owners, as automobiles are their most commonly held valuable assets and proper collaterals which enhance their credit profiles and enable them to obtain higher credit limit at lower cost. In addition, auto-backed loans currently have a low penetration rate of 1.1% in 2017 in China and the loan volume is expected to grow at a CAGR of 48.6% from 2017 to 2022, according to the Oliver Wyman Report.
We were the first in China to introduce auto-backed financing product in the form of title loan with “collateral registration + GPS system” features in 2011, which has replaced the traditional model of lenders keeping automobiles in custody and has since become the industry standard, according to the Oliver Wyman Report. Our auto-backed loans generally have principal amounts between RMB30,000 and RMB200,000, tenures from one to 36 months and APRs from 20% to 36%. In the six months ended June 30, 2018, the auto-backed loans we facilitated had an average amount of RMB61,779 and an average tenure of three months. In the six months ended June 30, 2018, 55.7% of borrowers who took out auto-backed loans through our platform were repeat borrowers.
The following chart sets forth the outstanding loan balance of auto-backed loans we facilitated as of the dates indicated:
We have built a nationwide network of 517 service centers across more than 300 cities over the past seven years, which we believe presents significant barriers to entry. This extensive offline network, seamlessly integrated with our centralized technology platform and risk management system, has enabled a fast and highly automated transaction process. Our lending decisions are generally made within 30 minutes of application after information collection and automobile appraisal, and loans are generally disbursed within
the same day, including weekends, delivering superior user experience. In addition, through this geographically dispersed network, we have gained a large and increasing volume of transaction data and local know-how. The breadth and depth of these transaction data have enabled us to make accurate credit assessments, effectively preventing fraud and enhancing collection efforts.
We believe our auto-backed loan products, which transform used automobiles, a type of “non-standard” collateral, into investable assets, represent a high-quality and low-risk asset class that is hard for investors to access elsewhere. We primarily serve online investors who can choose to invest in individual loans using our smart investing tools or a portfolio of loans through our investment programs. In 2017 and the six months ended June 30, 2018, the average net annualized rate of return for our online investors was 8.0% and 7.6%, respectively. We also collaborate with institutional funding partners.
We maintain a sophisticated and effective risk management system spanning across our entire transaction process, from borrower acquisition to loan collection. With a team of over 760 dedicated automobile appraisers, we adopt a multi-dimensional risk management approach from both “borrower” and “automobile” perspectives, and gain further insights from our proprietary data and a broad spectrum of third-party data sources, resulting in our best-in-class automobile appraisal capabilities. Our advanced GPS tracking system and dedicated post-loan management mobile app serve as powerful tools for detecting fraud and taking automobiles into custody. As a result, we have achieved robust credit performance, with the lowest delinquency ratio as of December 31, 2017 among the top five marketplace lending platforms in terms of loan volume in 2017, according to the Oliver Wyman Report. As of June 30, 2018, the M3+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.5% and 0.7%.
We have achieved significant growth in the past few years. We generate revenues primarily from service fees charged to borrowers for our facilitation and management of loans. We also charge fees to online investors for facilitating their investments via our platform, and the transfer of their investments on our secondary loan market. Our net revenues increased by 101.3% from RMB1,761.4 million in 2016 to RMB3,545.4 million (US$535.8 million) in 2017. Our net revenues increased by 20.1% from RMB1,568.6 million in the six months ended June 30, 2017 to RMB1,883.3 million (US$284.6 million) in the same period in 2018. Our net income increased by 63.2% from RMB291.0 million in 2016 to RMB474.8 million (US$71.7 million) in 2017. Our net income increased by 14.6% from RMB268.2 million in the six months ended June 30, 2017 to RMB307.4 million (US$46.4 million) in the same period in 2018. Our adjusted net income increased by 59.4% from RMB323.4 million in 2016 to RMB515.5 million (US$77.9 million) in 2017. Our adjusted net income increased by 26.4% from RMB287.1 million in the six months ended June 30, 2017 to RMB362.9 million (US$54.9 million) in the six months ended June 30, 2018.
OUR VALUE PROPOSITION TO BORROWERS
•
Accessible
: make credit available for China’s small and micro enterprise owners who have limited or no access to traditional financing channels; we provide 24/7 accessibility through mobile app, website and call center
•
Timely
: fast, highly-automated process; loans are typically approved within 30 minutes and funded within the same day, including weekends
•
Affordable
: significantly higher credit limit at a reasonable cost compared with alternative lending channels
•
Flexible
: various duration and repayment options to choose from
•
Superior experience
: seamlessly integrated online + offline and one-stop experience supported by 517 service centers across more than 300 cities and centralized online operations
OUR VALUE PROPOSITION TO INVESTORS
We provide our investors access to a unique asset class with attractive risk-adjusted returns.
OUR COMPETITIVE STRENGTHS
We believe the following strengths have been the foundation of our strong performance and continued growth and differentiated us from our competitors:
Largest Auto-backed Financing Solution Provider in China
We are the largest auto-backed financing solution provider in China in each of 2015, 2016 and 2017, according to the Oliver Wyman Report, connecting borrowers, the majority of which are small and micro enterprise owners, with both online investors and institutional funding partners.
We launched the first marketplace lending platform focusing on auto-backed loans in China in July 2011. With significant first mover advantages, we have become the leader of China’s auto-backed loan market. According to the Oliver Wyman Report, we were ranked No. 1 in China’s auto-backed loan market in terms of loan volume in each of 2015, 2016 and 2017, with a market share of approximately 35% in 2017, which was higher than the rest of the top ten providers’ combined market share.
We have accumulated extensive borrower behavior data and credit assessment capabilities and expanded service center network nationwide, creating high barriers to entry. We believe our market leadership position and the breadth and depth of transaction data we have accumulated, coupled with our robust data analytics and risk management capabilities, will continue to set us apart from our competitors, driving sustainable growth.
Superior Products Addressing Unfulfilled Financing Needs of Small and Micro Enterprise Owners
We were the first in China to develop auto-backed loans with innovative “collateral registration + GPS system” features, which were designed to address the unfulfilled financing needs of small and micro enterprise owners by using automobiles, their most commonly held valuable assets, as collateral. This innovative product has replaced the traditional model of lenders keeping automobiles in custody and has since become the industry standard.
Our lending decisions for auto-backed loans are generally made within 30 minutes of application and funds are generally disbursed within the same day, compared to banks’ loan approval process of around 30 days, and our services are available during weekends. The convenience and speediness of our services effectively address the financing difficulties of small and micro enterprise owners, which are characterized by frequent, unpredictable short-term working capital needs and lack of credit history.
We are able to provide higher credit limits compared to providers of unsecured loans. This is due to our strong capabilities in accurately appraising the value of used automobiles and our nationwide post-loan monitoring and servicing coverage. The credit limits we extend to our auto-backed loan borrowers generally range between RMB30,000 and RMB200,000, up to an LTV ratio of 120%. The average amount of auto-backed loans we facilitated was RMB64,126, RMB63,888 and RMB61,779 in 2016, 2017 and the six months ended June 30, 2018, respectively. The weighted average LTV ratio for our auto-backed loan borrowers was 63.6%, 63.4% and 61.2% in 2016, 2017 and the six months ended June 30, 2018, respectively. In 2016, 2017 and the six months ended June 30, 2018, 82.7%, 84.3% and 80.3% of our auto-backed loan borrowers were granted LTV ratio below 80%, respectively.
We believe these compelling value propositions to China’s small and micro enterprise owners provides us with significant competitive advantages and will continue to solidify our market leadership position in China’s auto-backed loan market and accelerate our growth.
Robust, Proprietary Risk Management System Powered by Data, Technology and Know-How
We were the pioneer in China to transform used automobiles, a type of “non-standard” collateral, according to the Oliver Wyman Report, into investable assets through the development of a robust risk management system that spans across the entire transaction process, from credit assessment, automobile appraisal to GPS tracking.
We adopt a multi-dimensional risk management approach from both “borrower” and “automobile” perspectives, and currently use over 1,300 variables in determining a prospective borrower’s creditworthiness and 80 variables in appraising the automobile’s value and condition for each transaction. We have built a
proprietary database containing information of over 943,000 automobiles accumulated over seven years of our operations, and have gained access to a broad spectrum of online data from third-party databases service providers specializing in facial recognition, identity verification and automobile data solutions. Analyzing these data using big data technologies, our proprietary credit assessment system, Weidai Credit, creates a 360-degree credit profile of the prospective borrower and assigns him a credit score and a corresponding LTV ratio within minutes. To accurately appraise the value of an automobile, we rely on our proprietary automobile appraisal system and over 760 automobile appraisers, supported by third-party appraisal systems and appraisers on a need basis.
We closely monitor borrowers’ behaviors to minimize default risks. Our advanced, rule-based GPS tracking system monitors in real-time the location, speed and movement of all automobiles used as collateral for our auto-backed loans and triggers notification alarms if there is strong indication of abnormal activities. For delinquent loans, we adhere to a standardized, gradual collection process, from phone calls to in-person visits and taking automobile into custody. We enhance collection efficiency by aiding our collection personnel with a proprietary mobile app which contains information on the latest status of each delinquent loan.
The effectiveness of our risk management system is evidenced by our robust credit performance. According to the Oliver Wyman Report, we had the lowest delinquency ratio as of December 31, 2017 among the top five marketplace lending platforms in terms of loan volume in 2017. As of June 30, 2018, the M3+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.5% and 0.7%.
Nationwide Service Center Network Presenting Significant Barriers to Entry
We operate the largest auto-backed loan service center network in China, according to the Oliver Wyman Report, which we believe presents significant barriers to entry. As of the date of this prospectus, we have 517 service centers strategically located in major first- to third-tier cities across 30 of the 32 provinces, municipalities and autonomous regions, each staffed with a dedicated team of customer service, automobile appraisal and risk management personnel.
We have benefited tremendously from the large-scale and wide-disbursement of our service center network. Our nationwide service center network enables us to complete auto-backed loan transaction processes rapidly and provide comprehensive, personalized services over the lifetime of auto-backed loans while better detecting fraud and preventing delinquency. Through these service centers, we are able to efficiently authenticate loan application materials, conduct face-to-face borrower interviews, appraise and inspect automobiles and install GPS tracking devices, all of which are essential to completing auto-backed loan transactions. Our service centers also form an integral part of our risk management process. If we suspect that a loan application may involve fraud but there are insufficient online data for us to reach a conclusion, we can deploy our service centers’ personnel to conduct in-person visits and other due diligence.
In addition, our service centers effectively collaborate with local auto administrative authorities to offer fast track collateral registration process across China, which significantly shortens the auto-backed loan transaction process. Through close cooperation among different regions’ service centers, we have also become one of the few companies in China that are able to register non-local automobiles as collateral wherever the borrower is, delivering superior borrower experience. In addition, this well-disbursed service center network has allowed us to accumulate unparalleled insights on borrower statistics and local knowledge and know-how, enabling us to continuously optimize our product offering, transaction process and refine our risk management system.
We believe our nationwide service center network has served, and will continue to serve as a key competitive advantage and keep us at the forefront of the industry.
Seamlessly Integrated Omni-channel Operational Capabilities Enabling Fast, Efficient and Highly-Automated Transaction Process
Our mobile app, WeChat account, website, call center and nationwide service center network are seamlessly integrated and supported by our centralized technology platform and risk management system. This seamless integration has enabled effective borrower engagement, fast, highly-automated transaction
process and effective post-loan management, contributing to the rapid growth of our borrower base and the number of transactions on our platform, and effectively differentiating us from our competitors.
We are able to quickly aggregate a wide range of data from various sources through our technology platform. These data include online data from proprietary and third-party databases as well as offline data from face-to-face interviews, information collection and authentication, and automobile inspection performed at our service centers. These data will be analyzed by our risk management system using advanced machine learning algorithms to assess the creditworthiness of prospective borrowers and appraise the values of automobiles, enabling us to make lending decisions within 30 minutes of application. Once our system approves a loan and our service center completes GPS tracking device installation and collateral registration, our platform is generally able to match borrowers and online investors within the same day.
After a loan is disbursed, our omni-channel approach enables us to manage the outstanding loan effectively and cost-efficiently and prevent delinquency. Our advanced GPS tracking system tracks the real-time movement of all automobiles used as loan collateral 24/7, and alerts abnormal activities. A borrower’s loan performance status in our system is updated whenever he makes or misses a payment. In the event of any abnormal automobile activities or overdue payments, we can deploy post-loan management personnel located in any of our 517 service centers nationwide to follow up with borrowers with phone calls, in-person visits and taking automobiles into custody.
Diversified Investor Base and Trusted Investor Relationship
We believe the auto-backed loans we offer to investors represent a high-quality and low-risk asset class that is hard to access elsewhere. Current annualized rate of return of our investment products to online investors generally ranges from 4.5% to 11.5% of the principal amount of the loans, which are higher than those offered by traditional investment channels such as bank deposits, bonds and wealth management products. In 2017 and the six months ended June 30, 2018, the average net annualized rate of return to our online investors was 8.0% and 7.6%, respectively.
Our strong value propositions to investors and the trust we have built overtime have enabled us to rapidly grow our investor base and increase the average investment amount of online investors on our platform. The number of active online investors on our platform increased by 86.8% from 300,081 in 2016 to 560,658 in 2017, and from 332,838 in the six months ended June 30, 2017 to 521,363 in the six months ended June 30, 2018. In 2016 and 2017, the average investment amount of online investors on our platform were RMB153,404 and RMB157,728, respectively. In the six months ended June 30, 2017 and 2018, the average investment amount of online investors were RMB125,124 and RMB73,236, respectively. We have managed to build a loyal and well-engaged investor base: in each of 2016, 2017 and the six months ended June 30, 2018, over 95% of the total loan volume facilitated through our platform was funded by repeat online investors.
To diversify our funding sources, we also collaborate with a number of institutional funding partners, including banks and other licensed financial institutions. Working with institutional funding partners enables us to secure a large amount of funding efficiently to support our growth.
The scale and stickiness of our investor base and the diversity of our funding sources have enabled us to better serve our borrowers’ financing needs and continue to expand our business.
OUR STRATEGIES
Our mission is to provide accessible credit for China’s small and micro enterprises. We plan to pursue the following strategies to achieve this mission:
Grow Borrower Base
We seek to continue to grow the number of our borrowers by acquiring more borrowers through our own online channels, including our mobile app, WeChat account, website and call center. To this end, we plan to continuously enhance the scope and quality of services our online channels provide and launch a
variety of marketing campaigns and initiatives to attract new borrowers. We also intend to leverage the extensive know-how and expertise in serving small and micro enterprise owners we have accumulated to selectively expand our target borrower base when suitable opportunities arise.
Enhance and Expand Product Offerings
We endeavor to enhance and expand our product offering to fulfill borrowers’ evolving financing needs by leveraging extensive borrower behavior data accumulated through daily operations and continuously enhanced credit assessment capabilities. For instance, we expect repeat borrowers to become an increasingly important source of our borrower base and will design specific products and services to cater to this customer group. To capture more growth opportunities, we also intend to promote new products that are in strong demand to expand our target borrower groups beyond small and micro enterprise owners.
Improve Omni-Channel Operational Capabilities
We believe the efficient operation of our omni-channel platform is essential for our future growth, and strive to optimize our operational capabilities by implementing the following initiatives:
•
continuously improve our online and offline integration to enable a fast and highly streamlined transaction process and superior user experience. For instance, we will continue to enhance our technology platform so that prospective borrowers can be assigned to the most suitable customer service representatives based on their location, financial sophistication and urgency of financing needs, and receive more personalized initial consultation services, which we believe will improve borrower conversions;
•
encourage repeat purchases and sell additional loan products tailored to borrowers’ evolving needs through our service centers; and
•
selectively expand the geographic coverage of our service center network to cover additional cities and strengthen our positioning in existing markets by leveraging our highly-scalable technology platform and risk management system.
Invest in Technology
We plan to continue to invest in improving the speed and scale at which our platform facilitates loans. In particular, we plan to invest significantly in strengthening our data analytics capabilities and the sophistication and reliability of our risk management system through both in-house research and development and strategic collaborations. For example, in order to more effectively analyze borrower and automobile related data, assess risks and enhance our product and service offerings, we are conducting joint research projects with leading universities, including Peking University and Zhejiang University, in China, in the areas of artificial intelligence, machine learning and Internet of Things. In addition, we plan to recruit more talents with big data and modeling expertise to enhance our overall research and development capabilities.
Expand and Diversify Investor Base
We strive to increase the number and stickiness of online investors on our platform by offering differentiated investment products to meet their varied investment needs. We plan to develop additional investing tools with innovative features and functionalities that enable our investors to manage their investment on our platform more efficiently. In addition, we intend to offer a broader range of privileges to VIP online investors to enhance their engagement and participation. We will continue to improve the efficiency of investor acquisition through our own online channels as well as our online channel partners’ mobile apps and websites.
We will also continue to explore opportunities to further diversify our funding sources through cooperation with additional institutional funding partners. We will continue to optimize our investor base and funding sources to support our business expansion.
Selectively Pursue Strategic Investments and Acquisitions
We intend to pursue strategic investments and acquisitions that are complementary to our business and operations when suitable opportunities arise. This may include opportunities to expand our loan product offerings and strengthen our technology infrastructure and data analytics capabilities.
OUR BORROWERS AND LOAN PRODUCTS
Our Borrowers
Borrower Profile and Demographics
We primarily facilitate auto-backed loans targeting small and micro enterprise owners. According to the Oliver Wyman Report, small and micro enterprise owners in China have a large and expanding demand for loans with higher credit limit and fast approval process, which creates substantial growth opportunity for auto-backed loans.
According to a borrower survey we conducted in the first quarter of 2018, among the over 3,400 borrowers who took out auto-backed loans during the survey period:
•
95.5% were small and micro enterprise owners,
•
59.4% owned businesses with fewer than 30 employees,
•
54.5% had annual revenue of less than RMB5 million,
•
89.5% took out loans to cover short-term working capital requirements,
•
89.7% had overdue receivables from their customers, and
•
automobiles is the most commonly held valuable asset for the small and micro enterprise owners surveyed.
Our borrower base has experienced fast growth since our inception in 2011. The number of active borrowers of auto-backed loans on our platform increased by 45.6% from 216,423 in 2016 to 315,211 in 2017. The number of active borrowers of auto-backed loans on our platform increased by 13.2% from 198,394 in the six months ended June 30, 2017 to 224,662 in the six months ended June 30, 2018. As of December 31, 2017 and June 30, 2018, we facilitated RMB148.1 billion and RMB183.7 billion auto-backed loans cumulatively, respectively.
We believe we have a well-engaged and loyal borrower base. In 2016, 2017 and the six months ended June 30, 2018, 53.4%, 66.6% and 55.7% of borrowers who took out auto-backed loans through our platform were repeat borrowers, respectively.
Borrower Acquisition
We attract borrowers through (i) word-of-mouth referrals, (ii) our online channels, including our mobile app, WeChat account, website and call center, (iii) performance-based advertisements placed on websites of our online channel partners, including autohome.com.cn, toutiao.com and other web portals where our target borrowers frequently visit, which direct traffic to our call center and (iv) referrals from our offline channel partners, such as financial leasing companies, used automobile dealers and other financial service providers.
We plan to increasingly acquire borrowers through our online channels by enhancing the scope and quality of services provided through these channels and launching a variety of marketing campaigns and initiatives through these channels.
Loan Products and Services Offered to Borrowers
We provide borrowers convenient and quick access to credit with a number of loan products based on their specific financing needs and risk profiles. The following table sets forth a breakdown of loan volume facilitated and originated through our platform by type of products for the periods indicated:
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
|
(in thousands, except for percentages)
|
|
Auto-backed loans
|
|
|
|
|
45,428,526
|
|
|
|
|
|
94.7
|
|
|
|
|
|
80,201,041
|
|
|
|
|
|
12,120,270
|
|
|
|
|
|
82.7
|
|
|
|
|
|
38,089,354
|
|
|
|
|
|
87.3
|
|
|
|
|
|
35,600,375
|
|
|
|
|
|
5,380,057
|
|
|
|
|
|
79.8
|
|
|
Other secured loans
(1)
|
|
|
|
|
2,124,032
|
|
|
|
|
|
4.4
|
|
|
|
|
|
10,934,115
|
|
|
|
|
|
1,652,403
|
|
|
|
|
|
11.3
|
|
|
|
|
|
5,034,962
|
|
|
|
|
|
11.5
|
|
|
|
|
|
5,634,017
|
|
|
|
|
|
851,433
|
|
|
|
|
|
12.6
|
|
|
Unsecured loans
(2)
|
|
|
|
|
440,554
|
|
|
|
|
|
0.9
|
|
|
|
|
|
5,801,381
|
|
|
|
|
|
876,726
|
|
|
|
|
|
6.0
|
|
|
|
|
|
518,346
|
|
|
|
|
|
1.2
|
|
|
|
|
|
3,404,658
|
|
|
|
|
|
514,524
|
|
|
|
|
|
7.6
|
|
|
Total loan volume
|
|
|
|
|
47,993,112
|
|
|
|
|
|
100.0
|
|
|
|
|
|
96,936,537
|
|
|
|
|
|
14,649,399
|
|
|
|
|
|
100.0
|
|
|
|
|
|
43,642,662
|
|
|
|
|
|
100.0
|
|
|
|
|
|
44,639,050
|
|
|
|
|
|
6,746,014
|
|
|
|
|
|
100.0
|
|
|
|
(1)
Primarily, including home equity loans and construction machinery loans. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB2.0 billion, RMB8.8 billion (US$1.3 billion) and RMB2.2 billion (US$0.3 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
(2)
Primarily including professional credit loans and consumption loans. We ceased to offer certain types of consumption loans and auto-financing loans to new borrowers in the fourth quarter of 2017, the loan volume of which totaled RMB20.4 million, RMB3.8 billion (US$0.6 billion) and RMB1.3 billion (US$0.2 billion) in 2016, 2017 and the six months ended June 30, 2018, respectively.
Borrowers repay principal and interest to investors, and pay service fees to us. The rate of return to investors is generally determined based on the type and tenure of the loan and market conditions.
•
Principal and interest
. Loans with tenures ranging from one to six months are repaid with monthly payments of interest over the life of the loan, followed by a repayment of principal at maturity. Loans longer than six months are repaid in fixed monthly installments (consisting of both principal and interest) over the life of the loan; and
•
Service fees
. Borrowers pay us service fees for our platform’s facilitation and management of their loans on a monthly basis.
We allow borrowers to hold multiple loans at the same time on our platform, and a borrower’s total credit limit for all such loans on our platform is determined based on his respective Weidai Credit score on our platform. See “— Technology and Risk Management — Risk Management — Credit Assessment System” for more details.
Auto-backed Loans
Auto-backed loans refer to loans secured by an automobile registered in the borrower’s name. A borrower who owns an automobile that is less than ten years old is eligible to apply for auto-backed loans on our platform.
We generally facilitate auto-backed loans with principal amounts between RMB30,000 and RMB200,000 and tenures ranging from one to 36 months. In 2016, 2017 and the six months ended June 30, 2018, the total volume of auto-backed loans facilitated and originated through our platform totaled RMB45.4 billion, RMB80.2 billion (US$12.1 billion) and RMB35.6 billion (US$5.4 billion), respectively, representing 94.7%, 82.7% and 79.8% of the total loan volume facilitated and originated through our platform for the same periods, respectively. In 2016, 2017 and the six months ended June 30, 2018, the average amount of auto-backed loans facilitated and originated through our platform was RMB64,126, RMB63,888 and RMB 61,779, respectively. In 2017 and the six months ended June 30, 2018, the APR for our auto-backed loans typically ranged from 20% to 36%.
A borrower’s loan-to-value ratio, or LTV ratio, for our auto-backed loan products generally ranges between 40% to 120% based on his Weidai Credit score. We maintain a whitelist of existing auto-backed loan borrowers based on their post-loan performance, such as repayment status and behavior data collected by our GPS tracking system. The whitelisted borrowers are offered the option to go through another credit
review to increase their LTV ratio by 10% to 30% (provided that the increased LTV ratio does not exceed 120%) and receive another loan disbursement according to the increased LTV ratio and the latest appraised value of their automobiles. The weighted average LTV ratio for our auto-backed loan borrowers was 63.6%, 63.4% and 61.2% in 2016, 2017 and the six months ended June 30, 2018, respectively. In 2016, 2017 and the six months ended June 30, 2018, 82.7%, 84.3% and 80.3% of our auto-backed loan borrowers were granted LTV ratio below 80%, respectively.
The following diagram illustrates the loan volume breakdown of auto-backed loans facilitated through our platform in 2016, 2017 and the six months ended June 30, 2018 by LTV ratio:
Auto-backed loan borrowers typically provide investors the title of their automobiles as collaterals by registering such automobile collaterals at local automobile administrative offices, and are not required to hand over their automobiles. For borrowers with higher credit risks or under certain other limited circumstances, we require the automobiles to be pledged and kept at our leased parking lots or parking spaces over the life of the loan. In 2016, 2017 and the six months ended June 30, 2018, the volume of auto-backed loans with automobiles pledged to us and the relevant automobiles kept at our leased parking lots or parking spaces totaled RMB5.9 billion, RMB9.8 billion (US$1.5 billion) and RMB3.6 billion (US$0.5 billion), and accounted for 12.2%, 10.1% and 8.1% of our total loan volume, respectively.
We believe that our platform enables a fast auto-backed loan application process, a credit assessment that accurately determines an auto-backed loan applicant’s creditworthiness and his automobile’s value, and a superior overall user experience. After a prospective borrower of auto-backed loans submits all required information and materials, he will typically receive a credit decision within 30 minutes. See “— Our Transaction Process” for more details.
Other Loans
We offer a number of other loans to meet the varied financial needs of our borrowers. In 2016, 2017 and the six months ended June 30, 2018, the volume of other loans facilitated and originated through our platform totaled RMB2.6 billion, RMB16.7 billion (US$2.5 billion) and RMB9.0 billion (US$1.4 billion), respectively, representing 5.3%, 17.3% and 20.2% of the total loan volume facilitated through our platform for the same periods, respectively.
•
Professional credit loans.
Professional credit loans are unsecured loans offered to professionals in selected industries with good credit and mid- to high-income. We require these borrowers to demonstrate, among others, job stability and a continuous record of pension fund contributions. These loans generally have principal amounts between RMB50,000 and RMB200,000 and a tenure up to 24 months. In 2017 and the six months ended June 30, 2018, the APR for our professional credit loans typically ranged from 12% to 18%.
•
Construction machinery loans.
Construction machinery loans include loans for the purchase of construction machinery. These loans generally have principal amounts between RMB700,000 to RMB800,000 and tenures ranging from 12 to 24 months.
•
Home equity loans.
Home equity loans refer to loans secured by the residential property owned by the borrower. We ceased to offer home equity loans to new borrowers in the fourth quarter of 2017, since home equity products are more standardized and providers of home equity loans primarily compete on cost of capital, where we do not have a significant competitive advantage.
•
Others.
We currently also facilitate a number of other loans through our platform, including, among others, (i) consumption loans offered exclusively through our mobile apps, which generally have principal amounts between RMB10,000 and RMB100,000 with tenures of six or 12 months, and (ii) auto-financing loans under both direct lease and sale-and-leaseback models for the purchase of new and used automobiles from auto dealers and financial leasing companies, which generally have principal amounts between RMB30,000 and RMB200,000 with tenures ranging from 24 to 36 months. We have ceased to offer consumption loans involving smaller loan amounts and shorter tenures starting from the fourth quarter of 2017.
OUR TRANSACTION PROCESS
Our platform enables a fast and streamlined transaction process, from initial consultation and credit assessment, automobile appraisal and inspection, GPS tracking device installation and collateral registration to post-loan monitoring and servicing, delivering a superior user experience.
The following diagram illustrates our platform’s facilitation of auto-backed loans:
(a)
Each borrower and investor has an individual custody account with Xiamen Bank, our custodian bank.
(b)
If a borrower meets one of our institutional funding partners’ predetermined investment criteria, we may refer the borrower to the institutional funding partner instead of listing the loan on our platform. Subject to the institutional funding partner’s own credit assessment and loan approval procedures, the loan may be funded by the institutional funding partner.
(c)
For loans funded by online investors, borrowers pay service fees to us and repay principal and interest to online investors on a monthly basis over the life of the loan, with the first payment due one month from the time of loan disbursement. For loans funded by institutional funding partners, the institutional funding partners pay service fees to us and the borrowers repay principal and interest to institutional funding partners.
Step 1: Initial Consultation and Credit Assessment
Our loan application process begins with the prospective borrower’s submission of his basic information including name, PRC ID card number and mobile phone number through one of the following channels: (i) our website, www.weidai.com.cn, which features a fast and user-friendly loan application process and provides the prospective borrower with access to live support and online tools throughout the loan application process and over the life of the loan, (ii) our dedicated mobile app for borrowers, enabling prospective borrowers to access our loan products and services anytime, anywhere and to track the status of their loans and payment schedules using mobile phones or tablet computers, (iii) our WeChat account, (iv) our call center, which provides comprehensive pre-loan consultation to potential borrowers, or (v) one of our service centers across China.
Once we receive the prospective borrower’s name, PRC ID card number and mobile phone number, we conduct an initial credit assessment using our proprietary credit assessment system, Weidai Credit, to generate a Weidai Credit score that ranges from I to VIII for the prospective borrower (with I representing the lowest risk and VIII representing the highest risk). This round of credit assessment is focused on assessing a prospective borrower’s overall creditworthiness by analyzing information retrieved from various data sources using his name, PRC ID card number and mobile phone number, including the prospective borrower’s track records on our platform and other marketplace lending platforms, whether he is blacklisted in any third-party databases, and whether he has any suspicious connection with any existing borrowers. If the prospective borrower’s Weidai Credit score falls between I and VII, he will be assigned a corresponding LTV ratio. If the prospective borrower receives a Weidai Credit score of VIII, his loan application will be rejected. See “— Technology and Risk Management — Risk Management — Credit Assessment System” for more details.
For prospective borrowers who visit our service centers for initial consultation, the entire loan application process can be completed at our service centers. For prospective borrowers submitting information through our mobile app, WeChat account or website, our call center agents will follow up with him to assess individual financing needs and collect additional information, such as his location and desired loan amount and intended use of loan proceeds. Our system then intelligently assigns the prospective borrower to the most suitable customer service representative at one of our service centers near the prospective borrower. The customer service representative will invite the prospective borrower to bring his automobile and all the required materials to the service center to complete loan application.
Step 2: Information Collection and Automobile Appraisal
At our service center, our customer service representative helps the prospective borrower complete loan application forms and collects the required information and materials related to both the prospective borrower and the automobile, including employment information, income proof (such as bank statements) and photocopies of driver’s license and vehicle registration documents. The prospective borrower also authorizes us to obtain a wide array of personal information from various data sources, including phone call records from telecom operators and credit reports from third-party credit scoring service providers.
Once all the automobile related information is uploaded to our system, we determine the value of the automobile through both our proprietary automobile appraisal system and third-party automobile appraisal systems, which generally takes less than one minute. Under certain circumstances, the automobile will be re-appraised by our service center’s automobile appraisers or qualified third-party automobile appraisers. See “— Technology and Risk Management — Risk Management — Automobile Appraisal” for more details.
Step 3: Further Credit Assessment and Credit Limit Approval
Once all the information and materials related to the prospective borrowers are collected (including those obtained from third-party sources with his authorization), we conduct another round of credit assessment. This round of credit assessment collects and analyzes a wider range of information related to both the loan applicant and the automobile with a focus on detecting fraud, such as the prospective borrower’s mobile carrier records and mobile Internet behaviors, and the automobile’s owner information and insurance records. Applicants with high risk of fraud will be rejected. See “— Technology and Risk Management — Risk Management — Fraud Detection” for more details.
Once the automobile appraisal and further credit assessment are completed, our service center’s risk management personnel reviews the loan application to verify the authenticity of the application materials and conduct a face-to-face interview with the prospective borrower. Based on the review of application materials and the face-to-face interview, and subject to the approval of the head of the service center, our risk management personnel may increase or decrease the prospective borrower’s initial LTV ratio by 10% to 20%.
Once the prospective borrower’s final LTV ratio is determined, our system generates details of the loan, including the credit limit, interest rate and our service fees. Our customer service representative will explain the detailed loan terms with the prospective borrower and assist him in choosing the loan tenure that suits his financing needs and preferences.
Separately, if the credit limit of the prospective borrower exceeds specified thresholds or if a fraud alert is triggered, we will initiate further due diligence and verification, including contacting the prospective borrower’s references to verify the information he provided and visit his home or workplace. Depending on the results of such further due diligence and verification, we may reject the loan application or reduce the credit limit. See “— Technology and Risk Management — Risk Management — Post-Loan Management” for more details.
Step 4: Automobile Inspection and GPS Tracking Device Installation
If the loan terms are agreeable to the prospective borrower, our automobile appraisers will conduct comprehensive inspection of the automobile using specialized equipment following our automobile inspection procedures and standards (including inspection of the automobile’s interior and exterior, engine, transmission, circulatory system and electrical system) to detect damages or other issues that cannot be identified by analyzing online data, such as major damages sustained from flood, bad weather or accidents.
If damages are identified during the automobile inspection, we may reject the loan application or approve a lower credit limit. Once the automobile passes the automobile inspection, the loan application will be approved, and our automobile appraisers will install GPS tracking devices on the automobile and collect the spare key from the borrower.
Step 5: Collateral Registration and Loan Listing and Funding
Once the loan application is approved, our service center will register the borrower’s automobile at the local automobile administrative office as collateral. After collateral registration, the loan will be listed on our online platform for online investors to subscribe to.
Alternatively, if a borrower meets one of our institutional funding partners’ predetermined investment criteria, we may refer the borrower to the relevant institutional funding partner instead of listing his loan on our platform. The institutional funding partner, after completing its own credit assessment and loan approval procedures, may choose to enter into a loan agreement with the borrower and fund the borrower’s loan. If the institutional funding partner declines to fund the borrower’s loan, the borrower’s loan will be listed on our online platform for online investors to subscribe to. See “— Our Investors and Investment Products — Our Institutional Funding Partners.”
Once the loan is subscribed to by an online investor, a loan agreement will be entered into among the borrower, the online investor and our platform and funds will be transferred from the investor’s account to the borrower’s account, both of which are opened at and managed by Xiamen Bank, our custodian bank.
Once a borrower’s loan application on our platform is approved and his loan is being listed for online investors to subscribe to, we, through Fuzhou Online Microcredit, offer and the borrower will generally take, an advance to meet his imminent financing needs. The amount of such advance is equal to the borrower’s approved loan amount on our platform. Loans listed on our platform are typically subscribed to within 12 hours. Once the loan is subscribed to, the borrower will use the loan proceeds received from the online investor to settle the advance obtained from Fuzhou Online Microcredit. See “— Our Investors and Investment Products — Microcredit Company” for more details.
Step 6: Post-Loan Monitoring and Servicing
After the loan is disbursed, the borrower follows a detailed loan payment schedule to repay principal and interest to the online investor and pay service fees to us on a monthly basis, with the first payment due one month from the time of loan disbursement. See “Business — Our Borrowers and Loan Products — Loan Products and Services Offered to Borrowers” for more details. Reminder text messages and phone calls are scheduled a few days in advance of every payment due date. The borrower may schedule automatic monthly payments on the payment due date, or make payments each month using our mobile app.
In addition to payment reminders, our advanced, rule-based GPS tracking system closely monitors the automobile’s movements 24/7 to analyze the borrower’s post-loan behavior to prevent delinquency, and triggers notification alarms if there are strong indication of abnormal activities. See “— Technology and Risk Management — Risk Management — Post-Loan Management and Collection of Delinquent Loans” for more details.
We maintain a whitelist of existing auto-backed loan borrowers based on their post-loan performance, such as repayment status and behavior data collected by our GPS tracking system. The whitelisted borrowers are offered the option to go through another credit review to increase their LTV ratio by 10% to 30% and receive another loan disbursement according to the increased LTV ratio and the latest appraised value of their automobiles. See “— Our Borrowers and Loan Products — Auto-backed Loans” for more details.
After the loan is fully repaid, we will de-register the collateral on the automobile, remove the GPS tracking devices from the automobile and return the spare key to the borrower.
If a non-payment occurs, our service center and provincial branch offices’ risk management personnel will follow our standardized collection guidelines and protocols to collect payment. We determine whether and when to take automobiles into custody on a case-by-case basis after assessing a borrower’s ability and willingness to repay, default risks as well as the feasibility and cost of taking the automobiles into custody. See “— Technology and Risk Management — Risk Management — Post-Loan Management and Collection of Delinquent Loans” for more details.
In order to timely compensate the online investors for default losses, we have been voluntarily purchasing delinquent loans from online investors. See “— Our Investors and Investment Products — Our Online Investors — Investment Products and Services Offered to Online Investors” for more details.
The transaction process of other loan products on our platform generally involves initial consultation, credit assessment, information collection, on-site visit and verification (if applicable), loan listing, signing of loan agreement and post-loan monitoring and servicing.
OUR SERVICE CENTERS
As of the date of this prospectus, we have 517 service centers across 30 of 32 provinces, municipalities and autonomous regions in China, including 388 directly-operated service centers and 129 partner-operated service centers.
Our service centers span across major first- to third-tier cities nationwide. We believe our existing service center infrastructure will be sufficient to support our business growth in the near future. As the market demand for auto-backed loans increases, we may selectively expand the geographic coverage of this network to cover additional cities and strengthen our positioning in certain existing markets.
The following map illustrates the locations of our service centers across China as if the date of this prospectus:
Each service center is staffed with a dedicated team of customer service and risk management personnel (including those responsible for pre-loan risk management, automobile appraisal and post-loan risk management), and provides comprehensive services over the life of the loans to borrowers, including:
•
Borrower engagement.
Our service centers provide prospective borrowers convenient access to loan products and services available on our platform across China. A prospective borrower can easily locate a nearby service center to complete the entire application process. A prospective borrower who completed initial consultation online will be invited by our customer service representatives to a nearby service center to complete the remaining application process.
•
Pre-loan services.
Our service centers provide comprehensive pre-loan services that are designed to deliver a fast loan application process and a superior user experience, ranging from information collection, automobile appraisal and inspection, face-to-face interview and application material authentication and installation of GPS tracking devices to collateral registration. If we suspect that a loan application may involve fraud, the relevant service center’s risk management personnel will initiate further due diligence and verification. See “— Technology and Risk Management — Risk Management — Fraud Detection” for more details.
•
Post-loan services.
Our service centers are also responsible for monitoring borrowers’ loan repayment status to prevent delinquency. Our service centers’ risk management personnel send payment reminders to borrowers prior to every payment due date, including text messages and phone calls. If abnormal activities are detected by our GPS tracking system, the relevant service centers’ risk management personnel will follow up with the borrower according to our risk management procedures and protocols. In the event of overdue payments, our service centers work closely with our provincial branch offices to collect payment following our standardized collection guidelines and protocols. See “— Technology and Risk Management — Risk Management — Post-Loan Management and Collection of Delinquent Loans” for more details.
We commenced building our service center network under the partner-operated service center business model in 2011. As our operational capabilities develop, we have since 2014 focused on opening directly-operated service centers and stopped engaging new service center operation partners. As of the date of this prospectus, 129 out of 517 service centers are partner-operated service centers, which are located in Zhejiang province, Jiangsu province, Anhui province, Jiangxi province and Shanghai. Our service center operation partners are responsible for the daily operations of the partner-operated service centers, including hiring their own employees, under our supervision. We collaborate with our service center operation partners for the operation of partner-operated service centers under a revenue sharing model. Pursuant to our one-year cooperation agreements with our service center operation partners, we record 100% of each partner-operated service center’s loan facilitation service fee and post facilitation service fee as revenue, and subsequently pay the service center operation partners an agreed percentage of 60% of such amounts as the partner-operated service center’s operating costs and expenses. These operating costs and expenses include costs and expenses paid to service center operation partners controlled by related parties. See “Related Party Transactions” for more details. If loans facilitated by the partner-operated service centers become delinquent and are subsequently purchased by us, the relevant service center operation partners are obligated to compensate us in the amount equal to 70% of the purchase price of the delinquent loans.
To ensure a consistent, high-quality service experience and effective risk management, we require all of our service centers, including our partner-operated service centers, to follow our standardized operating and financial reporting procedures, including our loan approval process and post-loan management. Our headquarters and provincial branch offices closely monitor the daily operations of our service centers and provide comprehensive training and ongoing support. For example, our service centers closely work with the relevant provincial branch offices for the collection of delinquent loans: once a payment is past due, our service centers’ risk management personnel actively follow up with the borrower with phone calls during the first three days of delinquency, followed by the relevant provincial branch offices’ risk management personal contacting the borrower in accordance with our standardized risk management procedures and protocols.
TECHNOLOGY AND RISK MANAGEMENT
The success of our business is dependent on our strong data analytics and risk management capabilities, which have enabled us to efficiently operate our platform, accurately determine loan applicants’ creditworthiness and consistently deliver a superior user experience.
Our Technology
Since our inception, we have focused on accumulating massive data assets from various data sources and developing our data analytics capabilities, which we believe forms a solid foundation for the efficient operation of our credit assessment, anti-fraud, automobile appraisal and other risk management systems. As of June 30, 2018, we had a dedicated team of 351 technology personnel.
Data Aggregation
We aggregate massive amount of data from various data sources to verify both the prospective borrower’s creditworthiness and assess the automobile’s condition and value, presenting a 360-degree profile of the prospective borrower and the automobile. Our data sources primarily include:
•
Proprietary database.
We have established a proprietary database with over 98.3 terabytes of data, including borrower related data (such as borrowers’ social media behavior) from 1.7 million cumulative borrowers on our platform as of June 30, 2018 and detailed information of more than 943,000 automobiles of over 340 makes and 3,700 models (such as the latest prices of similarly conditioned automobiles of the same make and model). These data are (i) accumulated from the large number of transactions we have facilitated from seven years of operations, or (ii) from public sources, which are continually updated on a weekly or monthly basis.
•
Third-party databases.
We collaborate with third-party data service providers specialized in, among others, facial recognition, identity verification and automobile data solutions, who grant us access to their databases to search for the loan applicant or automobile related data (such as access to an industry-leading automobile database where we are able to search detailed information of automobiles by vehicle identification numbers). We also work with third-party credit scoring service providers who provide us credit reports of the loan applicants, which help us determine, among others, which of the loan applicants have outstanding loans or have defaulted on other online lending platforms.
We are able to aggregate a wide array of information on the borrower and the automobile that is pertinent to our risk management and assessment efforts. The following are loan applicant and automobile related information we typically collect for each loan application using our proprietary and third-party databases:
|
Loan applicant related information
|
|
|
Automobile related information
|
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|
•
track records on our platform
•
track records on other online lending platforms
•
whether the applicant is blacklisted in any third-party databases
•
behavioral data of applicants (such as behavioral data as they apply for loans through our platform)
•
background information (such as address and lawsuit records)
•
contact information, such as key contacts and telephone records
•
personal credit scoring information
•
online and offline transaction records and payment information
•
phone call records from telecom operators
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|
|
•
automobile identification number
•
owner information
•
make, model, year and color
•
manual/automatic transmission
•
historical transaction information
•
retail prices and second-hand market prices
•
popularity
•
date of first vehicle registration
•
date of last vehicle registration
•
date of last annual inspection
•
collateral/pledge record
•
traffic violation records
•
maintenance records
•
insurance records
•
engine number and capacity
|
|
After the relevant information is aggregated, our system converts the originally unstructured data into structured data using machine learning techniques, enabling further analysis of such data.
Data Analytics Capabilities
Data analytics technologies are extensively used in various aspects of our operations. Applying data mining, multi-dimensional real-time analytics and user behavior analytics technologies, we have developed various models and algorithms that are capable of processing massive amount of data from various data
sources in a short period of time and presenting a 360-degree profile for each borrower and automobile. We have also jointly developed models and algorithms with third-party data providers for credit assessment, borrower behavioral data and borrower segmentation leveraging their extensive borrower and automobile related data and our advanced data analytics capabilities. These models and algorithms are executed using our proprietary, big-data enabled rule-based engine, and are applied throughout our loan application and risk management process to enable a fast loan application process and a credit assessment that more accurately determines an applicant’s creditworthiness.
In addition, all of our models and algorithms are continuously enhanced and updated using data-based machine learning technologies to be more tailored to specific tasks and different business scenarios and to deliver the most accurate results.
In addition to our in-house research and development efforts, we conduct joint researches projects with leading universities, including Peking University and Zhejiang University, in China, to increase the application of emerging technologies, including artificial intelligence, machine learning and Internet of Things in our operations in order to more effectively analyze borrower and automobile related data, assess risks and enhance our product offerings. We are also an executive council member of the National Internet Finance Association of China, a national self-regulatory organization for Internet Finance, and a member of various industry associations such as the Auto-backed Loan Association.
Risk Management
We have implemented a robust risk management system, which is comprised of our credit assessment system, automobile appraisal system, anti-fraud system and GPS tracking system. We continuously enhance the sophistication and reliability of our risk management system as our business evolves. For example, we have been increasing the number of variables analyzed for each transaction while evaluating the effectiveness of the variables to more accurately evaluate the credit characteristics of borrowers, appraise the value of automobile, prevent fraud and reduce delinquency. Our risk management system currently uses over 1,300 variables with respect to loan applicants and 80 variables with respect to automobiles for each transaction.
The effectiveness of our risk management system is evidenced by our consistently low delinquency rate while our business continues to grow. As of June 30, 2018, the M1+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.54% and 1.06%; similarly, the M3+ delinquency rate by vintage for loans we facilitated in 2015, 2016 and 2017 (excluding the loan products we have discontinued prior to the date of this prospectus) remained at a level between 0.5% and 0.7%. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Loan Performance Data” for more details.
Credit Assessment
Our credit assessment system is powered by our proprietary, big-data enabled rule engine, models and algorithms, and is continually optimized using machine learning technologies.
Once a prospective borrower submits his name, PRC ID card number and mobile phone number, we conduct a credit review using our credit assessment system, Weidai Credit, whereby data with respect to the loan applicant are aggregated from our proprietary database as well as third-party databases and different models are applied to the prospective borrower with different features in assessing the potential risks associated with them. A Weidai Credit score will be assigned to the prospective borrower. A new Weidai Credit score will be assigned every time a borrower reapplies for a loan on our platform.
Prior to March 13, 2018, our credit assessment system assigned six credit scores to loan applicants, with I representing the lowest risk level and VI representing the highest risk level. Loan applicants receiving a credit score of VI were rejected. For auto-backed loans, loan applicants receiving credit scores in the range of I to V were assigned an LTV ratio between 40% and 110% (which is subject to adjustments on a case by case basis). For other loans, we conducted another round of credit review before approving any loans.
The following table sets forth a breakdown our auto-backed loan borrowers by Weidai Credit score in 2017 and from January 1, 2018 to March 12, 2018:
As we gain more industry expertise and an increasing volume of transactional and borrower behavioral data, we have implemented various measures to continuously enhance and upgrade our credit assessment system, with an aim to assign credit scores and LTV ratios that more accurately reflect the loan applicants’ creditworthiness. These measures include, among others, changing our credit scoring from I to VI to I to VIII in March 2018.
Our current credit assessment system assigns eight credit scores to loan applicants, with I representing the lowest risk level and VIII representing the highest risk level. Loan applicants receiving a credit score of VIII are rejected. For auto-backed loans, loan applicants receiving credit scores in the range of I to VII are assigned an LTV ratio between 40% and 120% (which is subject to adjustments on a case by case basis). For other loans, we conduct another round of credit review before approving any loans.
The following table sets forth a breakdown of our auto-backed loan borrowers by Weidai Credit score from March 13, 2018 to June 30, 2018:
Automobile Appraisal
We have adopted detailed automobile appraisal procedures to appraise the value of the prospective borrowers’ automobiles. Our automobile appraisal process involves:
•
our proprietary automobile appraisal system, which is supported by the massive amount of automobile transaction data from our proprietary and third-party databases and powered by various machine learning algorithms and intelligent information processing and analysis technology;
•
third-party automobile appraisal systems; and
•
our service centers’ automobile appraisers, all of whom have completed our internal training programs and qualified third-party automobile appraisers, including licensed automobile appraisers and automobile appraisers with extensive industry experience who we engage on an as needed basis, all of whom have passed our internal risk management tests.
Each automobile is appraised by our proprietary automobile appraisal system and third-party automobile systems. This appraisal generally takes less than one minute. Under certain circumstances (for example, if there is a significant difference between the appraised value of the automobile generated among these systems or has an appraised value of over RMB200,000), the automobile will be re-appraised by our service centers’ automobile appraisers or qualified third-party automobile appraisers.
Fraud Detection
We collect and analyze a wide variety of information related to the loan applicant and the automobile to detect fraud. We maintain and continually update a blacklist of borrowers who have defaulted on loans facilitated through our platform, whose future loan applications will be rejected. We have also built an anti-fraud database focusing on identifying suspicious connections among loan applicants and existing borrowers, and actively work with third-party data service providers and credit scoring service providers to identify fraudulent activities and organized crimes. In addition, our system is configured with target risk levels and tolerance thresholds, and will issue fraud alerts if the level of fraud risk is higher than these preset thresholds.
We have adopted a multifaceted fraud detection approach which is embedded in our loan application process:
•
once we receive the loan applicant’s name, PRC ID card number and mobile phone number, our system conducts fraud screening and rejects applicants that are blacklisted by our platform or, according to data from public sources, are associated with fraud cases;
•
upon receipt of additional information from the loan applicant and obtaining his authorization, we aggregate a wide array of data related to the loan applicant from various data sources including phone call records from telecom operators and credit reports from third-party credit scoring service providers. Our system analyzes such data using machine learning techniques to uncover abnormal patterns and potential fraudulent behavior (such as suspicious social connections), and reject applicants who have high risk of fraud; and
•
if a fraud alert is triggered indicating that there are signs of fraud, but available information is insufficient for our system to reach a conclusion, we will conduct further due diligence and verification, which involves, among others, running searches in our anti-fraud database, inquiring the applicant about any inconsistencies in his loan application, calling the applicant’s references to verify information and visiting his home or work place. Depending on the results of such further due diligence and verification, we may reject the loan application or approve a lower loan amount.
Post-Loan Management and Collection of Delinquent Loans
After a loan is disbursed, we continuously monitor the performance of the loan to uncover fraudulent behavior and minimize default risk. We send payment reminders to borrowers prior to every payment due date. For example, we send reminder text messages and make phone calls to the borrower a few days ahead of the payment due dates.
We also analyze the borrower’s post-loan behavior data collected by our advanced, rule-based GPS tracking system to prevent delinquency. Our GPS tracking system closely monitors, among others, the real-time location and movement of all automobiles that are used as auto-backed loan collaterals 24/7, and have accumulated 21.7 terabytes of GPS data over our seven years of operations. Such system is configured with over 100 alarm rules that trigger GPS notification alarms when there is a strong indication of abnormal activities (for example, if a GPS tracking device has been switched off). If a GPS notification alarm is triggered, we will immediately deploy the relevant service centers’ risk management personnel to follow up with the borrower according to our risk management procedures and protocols.
We have developed a standardized process to collect delinquent loans. Once a payment is past due, our service centers’ risk management personnel actively follow up with the borrower with phone calls during the first three days of delinquency. Upon being four days delinquent, a loan enters into our collection process, and the relevant provincial branch office’s risk management personnel will follow-up with the borrower in accordance with our standardized procedures and protocols and take automobiles into custody if needed, sometimes in collaboration with third-party collection service providers. Our post-loan risk management personnel are required to undertake, among others, (i) to strictly adhere to our standardized procedures and protocols to collect delinquent loans, (ii) to speak in a well-mannered tone and act civil and polite toward the borrowers and avoid any conversations or interactions that may lead to heated arguments, (iii) to contact the borrowers at reasonable hours, and refrain from making constant collection calls or visits that may be seen as harassment, (iv) in the event of conflicts with borrowers, to take the initiative to contact the police, and (v) not to engage in any practice or take any action during loan collection in violation of any applicable laws or regulations.
In a majority of cases, we are able to collect overdue payments by following up with borrowers by phone without taking automobiles into custody. We determine whether and when to take automobiles into custody on a case-by-case basis after assessing a borrower’s ability and willingness to repay, default risks as well as the feasibility and cost. We may take automobiles into custody when (i) a borrower or his emergency contact fail to answer or return phone calls or have their phones switched off for an extended period of time, (ii) the GPS tracking devices attached to the borrower’s automobile could not be detected for an extended period of time, or (iii) we determine that taking automobiles into custody is the only effective way to recover overdue payments. Our risk management personnel follow standardized procedures and protocols for taking automobiles into custody, and contact the borrower by phone, text-messages, emails or in-person visits and obtain his written consent before taking any automobile into custody (in addition to the explicit authorization the borrower has provided us in the loan agreement). Any amount recovered will be applied first to repay the defaulted principal, followed by payment to investor as to the defaulted interest and late payment penalties before ultimately our collection expenses.
In August 2018, regulatory authorities issued the Notice on Submitting Information of Borrowers Evading Overdue Loans on P2P Platform to focus on monitoring overdue loans. We have provided a list of borrowers with overdue loans on our platform to relevant regulatory authorities pursuant to such notice.
OUR INVESTORS AND INVESTMENT PRODUCTS
We offer a variety of investment options to both online investors and institutional funding partners. We believe that our variety of investment products that offer attractive, risk-adjusted returns, as well as our effective risk management lead to strong word-of-mouth promotion, which drives awareness of our brand among investors.
Our Online Investors
Investor Profile and Demographics
We accept investments primarily from online investors, which primarily include individual investors, as well as corporate investors.
We have been able to rapidly grow our investor base and increase the average investment amount of online investors on our platform. The number of active online investors on our platform increased by 86.8% from 300,081 in 2016 to 560,658 in 2017. The number of active online investors on our platform increased
by 56.6% from 332,838 in the six months ended June 30, 2017 to 521,363 in the six months ended June 30, 2018. According to information provided by individual investors when they register on our platform and an investor survey we conducted in December 2017 with over 2,000 individual investors: (i) 34% were born in the 1980s, 29% in the 1970s, 17% in the 1960s, (ii) 80% were married, and (iii) 82% were white-collar workers and/or high-net-worth individuals. In 2016 and 2017, the average investment amounts of online investors were RMB153,404 and RMB157,728, respectively. In the six months ended June 30, 2017 and 2018, the average investment amounts of online investors were RMB125,124 and RMB73,236, respectively. We believe we have a loyal and well-engaged investor base: in each of 2016, 2017 and the six months ended June 30, 2018, over 95% of the total loan volume facilitated through our platform was subscribed to by repeat online investors.
Investor Acquisition
We attract online investors by conducting comprehensive marketing campaigns and promotional activities through our online sales channels, including our mobile app, website and accounts on social media (such as WeChat and Weibo), and placing performance-based advertisements on our online channel partners’ mobile apps and web portals where our target investors frequently visit. To increase the visibility of our brand and enhance investor confidence, we place advertisements in subway stations and airports and hold investor meetings from time to time where members of our senior management team interact with our investors and address their queries and concerns. We also offer cash rewards to existing online investors upon successful referral of new online investors under our investor referral program. Our investor acquisition efforts are primarily directed towards enhancing our brand name and building investor trust.
We offer a number of incentives to encourage investor referrals and enhance the engagement and participation of online investors on our platform, including:
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Investor referral program.
We have introduced an investor referral program offering daily cash rewards to an existing online investor upon successful referral of each new online investor.
•
New investor privileges.
In order to incentivize online investors to make investments on our platform, we offer them cash coupons which can be redeemed when purchasing our investment products.
•
VIP
investor loyalty program.
We offer a range of special privileges to our VIP online investors, including higher investment returns, cash coupons and designated investment consultants.
VIP Investor Loyalty Program
We have launched a VIP investor loyalty program with six VIP membership levels. An online investor’s VIP membership level is based on his latest balance of investment made through our platform and the amount of funds in his account with us, which is adjusted in real time.
Our VIP investor loyalty program offers investors various privileges based on their VIP membership levels, primarily including:
•
Cash coupons.
We offer cash coupons to investors which can be redeemed when purchasing our investment products; and
•
Designated investment consultants.
VIP investors are entitled to 24/7 complementary investment consulting services from their designated investment consultants via phone calls, SMS and WeChat. Higher level investors generally receive more comprehensive investment consulting services that are tailored to their investment objectives and risk profiles. As of June 30, 2018, we had approximately 70 designated investment consultants.
Investment Products and Services Offered to Online Investors
We provide investment options that cater to the needs of both online investors who prefer to proactively manage their investments using our investing tools as well as those who want to rely on our investment programs to allocate and manage their investments. Loans listed on our platform are typically subscribed to within 12 hours.
In 2016, 2017 and the six months ended June 30, 2018, substantially all of the loans facilitated through our platform were funded by online investors. RMB48.0 billion, RMB95.4 billion and RMB43.2 billion loans were funded by online investors in 2016, 2017 and the six months ended June 30, 2018, respectively.
Current annualized rate of return of our investment products to online investors generally ranges from 4.5% to 11.5% of the principal amount of the loans, which are higher than those offered by traditional investment channels such as bank deposits, bonds and wealth management products. We charge online investors service fees for facilitating their investments through our platform, which equal to a fixed percentage of the interests they receive from borrowers. We also charge a one-time fee for online investors’ transfer of their investments on our secondary loan market. In 2017 and the six months ended June 30, 2018, the average net annualized rate of return to our online investors (after applying cash coupons) was 8.0% and 7.6%, respectively.
Investment Tools
Online investors can invest in individual loans on our platform using our self-discretionary investing tool and automated investing tool. The minimum investment amount for individual loans is RMB500.
•
Self-Discretionary Investing Tool
Our self-discretionary investing tool provides online investors with various filters that help them browse and directly subscribe to individual loans listed on our platform based on, among others, their tenure, principal amounts and interest rates.
•
Automated Investing Tool
Our automated investing tool is designed for online investors who prefer to invest according to their preset investment criteria, such as tenure and interest rate, instead of browsing and subscribing to individual loans manually. Once an online investor invests a specified amount of funds through our automated investing tool, his funds are automatically allocated among individual loans meeting his preset investment criteria. Our automated investing tool automatically reinvests online investors’ funds as soon as a loan is repaid, enabling online investors to accelerate the reinvestment of funds without having to revisit our mobile app or website.
Investment Programs
We offer investment programs that enable online investors to enjoy investment returns while minimizing the time needed to manage their investments. Upon subscription of the investment program, an online investor’s committed fund will be automatically invested by our system into individual loans on our platform.
We currently offer two types of investment programs with different terms and estimated rates of return:
Investment Programs
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Key Features
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Premier Investment Program
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Minimum investment amount of RMB500.
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Programs available in one, two, three, six, 12, 24 and 36 months, among which one-, three- and six-month programs are the most popular.
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Investors subscribe into this program by specifying preset investment criteria for the underlying individual loans, such as investment amounts and loan, and investors’ funds are locked in their accounts upon such subscription. Funds will be invested when the desired amount of individual loans meeting the preset investment criteria become available and upon the online investors’ approval.
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Principal and interest are collected at the end of the investing period.
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Investors have the option to automatically subscribe to a new cycle of the investment program at the end of each investing period.
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Investment Programs
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Key Features
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X Investment Program
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Minimum investment amount of RMB1,000.
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Programs available in three, six and 12 months, among which three- and six-month programs are the most popular.
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Underlying loans also include individual loans that have been transferred.
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Investors subscribe into this program by specifying preset investment criteria for the underlying individual loans, such as investment amounts and investment returns, and investors’ funds are locked in their accounts upon such subscription. Funds will be invested when the desired amount of individual loans meeting the preset investment criteria become available and upon the online investors’ approval.
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If a loan is repaid within the investment period, principal and interest gained during the investment period will be automatically reinvested in other loans as soon as the loan is repaid.
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Investors have the option to automatically subscribe to a new cycle of the investment program at the end of each investing period.
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In 2017, RMB55.9 billion and RMB10.0 billion were invested through our Premiere Investment Program and X Investment Program, respectively, representing 61.3% and 11.0% of funds invested through our platform during the period, respectively. In the six months ended June 30, 2018, RMB16.9 billion and RMB14.4 billion were invested through our Premiere Investment Program and X Investment Program, respectively, representing 44.3% and 37.6% of funds invested through our platform during the period, respectively.
Secondary Loan Market
We have established a secondary loan market on our platform to provide more flexibility and liquidity to online investors. Except for the X Investment Program, loans held by online investors for no less than 24 hours and with outstanding principal amount of no less than RMB50 may be transferred in our secondary loan market. To facilitate loan transfer, our system automatically generates a proposed transfer price taking into consideration the outstanding principal amount and the remaining tenure of the loan. Such transfer prices are for online investors’ reference only and online investors may elect any other prices that they think appropriate and post their offers on our secondary loan market. Online investors may withdraw the offers to transfer at any time before such offers are accepted by transferees. Once an offer to transfer is accepted by a transferee, our system will automatically debit the transferee’s account and credit the transferor’s account the transfer price, and the transferee will become the creditor of the transferred loan at the same time. In 2017 and the six months ended June 30, 2018, most of the loan transfer on our secondary loan market are completed within the same day. We charge the transferor a one-time transfer fee up to 1% of the transfer price for each loan transferred on our secondary loan market.
Institutional Funding Partners
Beginning in 2017, we expanded our funding sources to include those provided by institutional funding partners. We have entered into cooperation agreements with a number of institutional funding partners all of whom were licensed financial institutions, including commercial banks such as China Everbright Bank, a financial leasing company and a trust company. We refer qualified borrowers meeting our institutional funding partners’ predetermined investment criteria to our institutional funding partners. Our institutional funding partners, after completing their internal risk management and loan approval procedures, will fund borrowers’ loans. In 2017 and the six months ended June 30, 2018, RMB1.5 billion and RMB1.5 billion, or 1.5% and 3.3% of our total loan volume, was funded by institutional funding partners, respectively. As of the date of this prospectus, these institutional funding partners had committed funding of up to RMB23.1 billion (US$3.5 billion) for loans to borrowers referred by us, subject to their internal approval procedures.
Online Microcredit Company
We, through a subsidiary of our variable interest entity, Fuzhou Online Microcredit, offer borrowers advances to meet their imminent financing needs before their loans are subscribed by investors. As of December 31, 2017 and June 30, 2018, the outstanding balance of advances extended to borrowers by Fuzhou Online Microcredit was RMB2.5 million (US$0.4 million) and RMB5.6 million (US$0.9 million), respectively.
Our Financial Leasing Company
In June 2018, we acquired Shanghai Zaohui Financial Lease Co., Ltd., which holds a financial leasing license. The acquisition of Shanghai Zaohui Financial Lease Co., Ltd. will allow us to provide funding to borrowers in the form of financial leasing.
Investor Protection
Online investors on our platform are exposed to default risks, and we are under no obligation to compensate online investors’ default losses, except that we provide guarantees for certain consumption loan products. However, in the event of borrower defaults, we have been voluntarily compensating online investors for their default losses by purchasing their delinquent loans.
We are obligated to compensate a portion of our institutional funding partners for delinquent principal and interest payments in the event of borrower defaults. We cannot assure you that our collaboration with such institutional funding partners will not violate the Interim Measures or any other PRC laws and regulations. See “Risk Factors — Risks Related to Our Business and Our Industry — Our cooperation with institutional funding partners exposes us to regulatory uncertainties faced by those partners, and we may be required to obtain government approval or license due to our cooperating with those partners, which requirement will impose negative impacts on our business and results of operations.” We also provide guarantee to a portion of our corporate investors. We ceased to facilitate any new investment made by such corporate investors through our platform or provide guarantee to new corporate investors starting from the fourth quarter of 2017.
We are in ongoing discussions with third-party insurance companies, asset management companies and other financial institutions to provide alternative means of investor protection. In June 2018, we entered into a framework agreement with PICC Property and Casualty Company Limited to explore cooperation opportunities in this area. In July 2018, we entered into a collaboration agreement with a new institutional funding partner and an insurance company, under which we engaged the insurance company to provide insurance coverage for the institutional funding partner’s default losses.
COMPETITION
We face competition in auto-backed loan market in China. We compete directly with other auto-backed loan providers for both borrowers and investors, such as touna.cn and rrjc.com. As we focus on providing financial solutions to small and micro enterprise owners, we also compete with traditional financing channels and other marketplace lending platforms which provide loans to small and micro enterprise owners. In addition, we compete with other marketplace lending platforms for investors. Some of our competitors may have significantly more financial, technical, marketing and other resources than we do. Our competitors may also have more extensive borrower or investor bases, greater brand recognition and brand loyalty and broader partner relationships than us. We believe that our ability to compete effectively for borrowers and investors depends on many factors, including the variety of our products, user experience on our platform, effectiveness of our risk management, the return offered to investors, our partnership with third parties, our sales and marketing efforts and the strength and reputation of our brand.
In addition, as our business continues to grow rapidly, we face significant competition for highly skilled personnel, including management, engineers, product managers and risk management personnel. The success of our growth strategy depends in part on our ability to retain existing personnel and add additional highly skilled employees.
INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark and trade secret laws and confidentiality agreements and provisions to protect our intellectual property rights. We have registered more than thirty software copyrights in China. We have six registered domain names, including www.weidai.com.cn. As of June 30, 2018, we had registered more than twenty trademarks, including “weidai,” “
” and “
”. We have also obtained the exclusive right to use trademarks “
” and “
” from our affiliate Hangzhou Ruituo so long as they are valid. We are also applying for an invention patent for our proprietary GPS tracking system.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. Even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.
See “Risk Factors — Risks Related to Our Business and Our Industry — We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position” and “— We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.”
EMPLOYEES
We had 10,301, 11,847 and 10,794 full-time employees as of December 31, 2016, December 31, 2017 and June 30, 2018, respectively. All of our employees are located in China. The following table sets forth the numbers of our full-time employees categorized by function as of June 30, 2018:
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As of June 30, 2018
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Number
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% of Total
Employees
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Functions:
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Operations
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7,114
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65.9
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Risk Management
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2,999
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27.8
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Online Investor Operations
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142
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1.3
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Technology
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351
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3.3
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General and Administration
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188
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1.7
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Total number of employees
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10,794
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100.0
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As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension, medical insurance and unemployment insurance. We are required under PRC laws to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.
We enter into standard employment, confidentiality and non-compete agreements with our senior management and key personnel. These contracts include a standard non-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his employment and for two years after the termination of his employment, provided that we pay compensation equal to a certain percentage of the employee’s salary during the restriction period. We believe that we maintain a good working relationship with our employees.
We also engage certain dispatched workers from independent third-party professional employment agencies, who primarily provide collection and call center services. As of the date of this prospectus, we have not experienced any business interruption due to this arrangement, and we do not foresee any difficulty in finding any replacement employment agencies.
FACILITIES
Our corporate headquarters is located in Hangzhou, Zhejiang Province where we leased office space with a floor area of approximately 10,000 square meters as of June 30, 2018. The lease for our corporate headquarters has a term of five years and will expire in 2022. As of the same date, we had also leased office space, parking lots and parking space with an aggregate floor area of over 100,500 square meters across China, with leases generally ranging from one to five years. Our servers are hosted at Internet data centers owned by major domestic Internet data center providers. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
LEGAL PROCEEDINGS
We are currently not a party to any material legal or administrative proceedings. We have been, and may from time to time in the future, be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
REGULATIONS
This section sets forth a summary of the most significant laws, rules and regulations that affect our business activities in the PRC and our shareholders’ rights to receive dividends and other distributions from us.
Regulations on Online Lending Information Services
Due to the relatively brief history of the marketplace lending industry in China, a comprehensive regulatory framework governing our industry has yet to be established. Even though a number of specific regulations on online lending information services have been enacted in the past few years, detailed guidance and interpretation have yet to be promulgated by regulators.
Regulations on Online Lending Information Intermediaries
On July 18, 2015, the Guidelines on Promoting the Healthy Development of Online Finance Industry, or the Guidelines, were promulgated by ten PRC regulatory agencies, including the PBOC, the MIIT and the CBRC. The Guidelines define online peer-to-peer lending as direct loans between individuals through an online platform, which is under the supervision of the CBRC, and governed by the PRC Contract Law, the PRC General Principles of the Civil Law, and related judicial interpretations promulgated by the Supreme People’s Court. Pursuant to the Guidelines, online lending information intermediaries shall specify online lending information services in their business scope, and avoid conducting any activities that may be deemed as illegal fund-raising. The Guidelines further require online lending information intermediaries to separate their own capital from funds received from investors and borrowers through their platforms.
On April 13, 2016, the CBRC issued the Notice on the Implementation Plan of the Special Rectification of Peer-to-peer Online Lending Risk by the General Office of the State Council. This notice categorizes market players of the peer-to-peer lending service industry based on their different compliance levels.
On August 17, 2016, the CBRC, the MIIT, the Ministry of Public Security and the State Internet Information Office, jointly issued the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures. The Interim Measures are intended to regulate the business activities of online lending information intermediaries and define online lending information intermediaries as financial information intermediaries.
The Interim Measures require online lending information intermediaries to (i) make relevant record-filing with local financial regulatory authorities for their online lending information services; (ii) apply for relevant telecommunication service license after completion of the record-filing with local financial regulatory authorities; and (iii) specify online lending information services in its business scope.
Pursuant to the Interim Measures, online lending information intermediaries shall not engage in certain activities, including, among others, (i) self-financing through online platforms directly or in a disguised form; (ii) setting up capital pools with investors’ funds, (iii) providing guarantees to investors as to the return of loan principal and interest, (iv) promoting financial services on physical premises, (v) extending loans, unless otherwise as stipulated by laws and regulations; (vi) splitting the terms of loan products; (vii) offering wealth management products to raise funds or selling bank wealth management products, asset management products from securities traders, funds, insurance, trust products or other financial products on a commission basis; (viii) carrying out business similar to asset-backed securities or transfer of creditors’ rights in the form of packaged assets, asset-backed securities, trust assets, and fund units; (ix) engaging in equity crowdfunding; (x) engaging in any form of mixture, bundling or agency relationship with other institutions in investment, sale on a commission basis, brokerage business and other businesses, unless otherwise permitted by laws, regulations and relevant regulatory provisions on online lending information intermediaries; (xi) overstating the authenticity of financing projects and the prospect of profits, concealing the flaws and risks in financing projects, publicizing or promoting in biased language or by other fraudulent means in a false and one-sided way, fabricating or spreading false or incomplete information to damage others’ business reputation, or misleading lenders or borrowers; (xii) providing information intermediary services for high-risk financing projects which uses funds to invest in the stock
market, over-the-counter financial market, futures contracts, structured funds and other derivative products; (xiii) engaging in equity-crowd-funding in equity; and (xiv) undertaking other activities prohibited by laws, regulations and regulatory provisions on online lending information intermediaries.
In addition, the Interim Measures stipulate that online lending intermediaries are not allowed to operate businesses in offline physical locations other than, risk management and necessary business processes, such as, information collection and confirmation, post-loan tracking and pledge management. Furthermore, the Interim Measures require that the aggregate amount of loans extended to any individual must not exceed RMB200,000 through a single online lending information intermediary or RMB1 million in aggregate through all online lending information intermediaries in the PRC. Furthermore, the aggregate amount of loans extended to any entity must not exceed RMB1 million through a single online lending information intermediary or RMB5 million in aggregate through all online lending information intermediaries in the PRC.
Online lending information intermediaries established prior to the effectiveness of the Interim Measures have a transition period of 12 months to rectify activities that are not in compliance with the Interim Measures. For platforms that fail to make such rectification, sanctions could be imposed by the relevant regulatory authorities, including, among others, supervisory interviews, administrative warnings, administrative orders to make rectifications, tainted integrity record, monetary penalties up to RMB30,000, and criminal liabilities if the act constitutes a criminal offense.
On February 22, 2017, the CBRC issued the Guidelines on Online Lending Funds Custodian Business, or the Custodian Guidelines, which provide detailed requirements for setting up a custodian account with a qualified bank and depositing online lending funds. The Custodian Guidelines specify that each online lending information intermediary may only enter into fund custodian agreement with one qualified commercial bank to provide custodian services, and further clarifies detailed requirements and procedures for setting up custodian accounts with qualified commercial banks. Online lending information intermediaries and commercial banks that conducted custodian services prior to the effectiveness of the Custodian Guidance have a six-month grace period to rectify activities that are not in compliance with the Custodian Guidance.
On August 23, 2017, the CBRC issued the Guidelines on Information Disclosure of the Business Activities of Online Lending Information Intermediaries, or the Disclosure Guidelines, which clarified disclosure requirements for online lending information intermediaries. Pursuant to the Disclosure Guidelines, online lending information intermediaries shall disclose certain information on their websites and other internet channels (such as mobile apps, WeChat official accounts or Weibo), which include, among others, (i) record-filing information, organization information, examination and verification information, and transaction related information, including transactions matched through the online lending information intermediaries for the previous month; and (ii) basic information of borrowers and loan products, risk assessment of the loan products, and information of the outstanding transactions, all of which shall be disclosed to investors. The Disclosure Guidelines further require that any event that would result in a material adverse effect to the operations of online lending information services shall be disclosed to the public within 48 hours upon its occurrence. The Disclosure Guidelines require online lending information intermediaries to record all disclosed information and retain such records for no less than five years from the date of the disclosure. Online lending information intermediaries that conducted online lending services prior to the effectiveness of the Disclosure Guidelines have a six-month grace period to rectify activities that are not in compliance with the Disclosure Guidelines.
In December 2017, the Internet Finance Rectification Office and the Online Lending Rectification Office jointly issued the Notice on Regulating and Rectifying “Cash Loan” Business, or Circular 141, which sets out the principles and requirements of “cash loan” businesses conducted by online microcredit companies, financial institutions and online lending information intermediaries. Circular 141 does not define what constitutes “cash loans”; however, it specifies certain features as loans as “cash loans”, such as, loans with no designated purpose and loans that lack selected customer base. Circular 141 imposes general requirements with respect to “cash loan” business, which include, among others, (i) each funding provider of cash loans must have applicable license to conduct lending business; (ii) the loans must be priced fairly to ensure that the total borrowing cost does not exceed the limit of the private lending interest rate provided by
the PRC Supreme People’s Court; (iii) each funding provider of cash loans shall follow the “know-your-customer” principle and prudentially assess and determine the eligibility and credit limit of borrowers, and loans to borrowers without income sources are prohibited; and (iv) each funding provider of cash loans shall enhance its internal risk control and prudentially use a “data-driven” risk management model.
We have taken various measures to comply with the Interim Measures, the Custodian Guidelines, and other laws and regulations that are applicable to our business operations. However, given that detailed regulations and guidance of online lending information services are yet to be promulgated, we cannot be certain that our existing business practices would not be deemed to violate any existing or future rules, laws and regulations.
Regulations on Record-filings of Online Lending Information Intermediaries
In October 2016, the CBRC, the MIIT, and the SAIC, the predecessor of the State Administration of Market Regulation, jointly issued the Guidelines on the Administration of Record-filings of Online Lending Information Intermediaries, or the Record-filings Guidelines, to establish and improve the record-filing mechanisms for online lending intermediaries.
Pursuant to the Record-filings Guidelines, newly established online lending information intermediaries shall make the record-filings with the local financial authorities after obtaining their business licenses. For online lending intermediaries that were established prior to the effectiveness of the Record-filings Guidelines, the local financial regulatory authorities may accept the record-filings applications submitted by qualified online lending information intermediaries, or online lending intermediaries that have received final clearance from the local financial authorities that their rectification measures were sufficient.
On December 8, 2017, the Online Lending Rectification Office issued the Notice on the Rectification and Inspection Acceptance of Risk of Online Lending Intermediaries, or Circular 57, which provides further clarification on several matters in connection with the rectification and record-filing of online lending information intermediaries, including, among other things:
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Requirements relating to risk reserve funds.
The online lending information intermediaries shall cease obtaining risk reserve funds or setting up new risk reserve funds. In addition, the outstanding balance of risk reserve funds shall be gradually reduced. Online lending information intermediaries are prohibited from promoting their risk reserve funds, and authorities shall encourage online lending information intermediaries to seek third parties to provide lenders with alternate means of investors protection, including third-party guarantee arrangements.
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Requirements to qualify for record-filing.
Circular 57 sets forth certain requirements which an online lending intermediary prior to its the record-filing application, including: (i) online lending intermediaries may not conduct the “thirteen prohibited actions” or exceed the limit for aggregate amount of loans borrowed by an individual after August 24, 2016, and shall gradually reduce the balance of loans that exceed such limit; (ii) online lending intermediaries that have offered real estate down payment loans, campus loans or “cash loans,” are required to suspend such loan products and the outstanding balance of the such loans shall be gradually reduced within a certain period as required under the Notice on Further Strengthening the Regulation and Management Work of Campus Online Lending Business and Circular 141; and (iii) the online lending intermediaries are required to set up custodian accounts with commercial banks that have passed certain testing and evaluation procedures, as required by the Online Lending Rectification Office, to hold customers’ funds. For the online lending intermediaries that are unable to received final clearance of their rectification measures and complete record-filings but continue to provide online lending information services, relevant authorities may impose administrative sanctions, including but not limited to, revoking their telecommunications business operation license, shutting down their business websites and requesting financial institutions not to provide any financial services to such online lending information intermediaries.
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Requirements relating to the timing of record-filing.
Local governmental authorities shall conduct and complete final clearance inspection of the rectification measures in accordance with the following timetable: (i) for most of the online lending information intermediaries, record-filing with the local authorities shall be completed by the end of April 2018; (ii) with respect to online lending information intermediaries with substantial outstanding balance of loans prohibited under relevant laws and regulations, and reduction of the outstanding balance of such loans on a timely basis will be difficult, such prohibited loans and outstanding balance shall be disposed and/or carved out, and record-filings with the local authorities shall be completed by the end of May 2018; (iii) with respect to online lending information intermediaries with complex and extraordinary circumstances and substantial difficulties to rectify their businesses, the record-filings with the local authorities shall be completed by the end of June 2018.
Regulations on Loans and Intermediation
The PRC Contract Law, which became effective in October 1999, requires that the interest rates charged under a loan agreement must not violate applicable provisions of the PRC laws and regulations.
In accordance with the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, which came into effect on September 1, 2015, in the event that loans are made through an online lending information intermediary platform that provides only intermediary services, courts shall dismiss any claim against the platform as guarantor for repayment of the loans.
The Private Lending Judicial Interpretations also provide that agreements between lenders and borrowers on loans with interest rates below 24% per annum are valid and enforceable. With respect to the loans with interest rates between 24% and 36% per annum, if the interest on the loans has already been paid to the lender, and so long as such payment does not conflict with the interests of the state, the community and any third parties, the courts will dismiss the borrower’s request to demand the return of the interest payment above 24% per annum. If the annual interest rate of a private loan is higher than 36%, the agreement on the portion of the interest exceeding the maximum interest rate is invalid, and if the borrower requests the lender to return the part of interest exceeding 36% per annum that has been paid, the courts will support such requests. In addition, on August 4, 2017, the Supreme People’s Court issued the Certain Opinions Regarding Further Strengthening the Financial Judgment Work, which provides, among others, that (i) if the total amount of interest, compounded interest, default interest and other fees charged by a lender under a loan contract substantially exceeds the actual loss of such lender, the request by the debtor under such loan contract to reduce or to adjust the part of the aforementioned fees exceeding the amount accrued at an annual rate of 24% will be upheld; and (ii) in the context of Internet finance disputes, if the online lending information intermediaries and lenders circumvent the statutory limit of the interest rate by charging intermediary fees, such fees shall be deemed invalid.
Pursuant to the PRC Contract Law, a creditor may assign its rights under an agreement to a third party, provided that the debtor is notified. Upon due assignment of creditor’s rights, the assignee is entitled to the creditor’s rights and the debtor must perform the relevant obligations under the agreement for the benefit of the assignee. The PRC Contract Law defines an intermediation contract as a contract whereby an intermediary presents to its client an opportunity for entering into a contract or provides the client with other intermediary services in connection with the conclusion of a contract, and the client pays the intermediary service fees. Pursuant to the PRC Contract Law, an intermediary must provide true information relating to the proposed contract. If an intermediary conceals any material fact intentionally or provides false information in connection with the conclusion of the proposed contract, which results in harm to the client’s interests, the intermediary may not claim for service fees and shall be held liable for damages incurred by the client. Certain Opinions Regarding Further Strengthening the Financial Judgment Work further specify that the relationship between an online lending intermediary and each other party of an online lending loan agreement shall be defined as an intermediary contractual relationship, and the intermediary service fees charged by an online lending intermediary to circumvent the statutory limit of the interest rate shall be invalid.
Our services offered through our platform constitute intermediary service, and the agreements with borrowers and investors on our platform may be deemed as intermediation contracts under the PRC Contract Law.
Regulations on Illegal Fund-Raising
The Measures for the Banning of Illegal Financial Institutions and Illegal Financial Business Operations, promulgated by the State Council in July 1998, and amended on January 2011, and the Notice on Relevant Issues Concerning the Penalty on Illegal Fund-Raising, issued by the General Office of the State Council in July 2007, explicitly prohibit illegal public fund-raising. The main features of illegal public fund-raising include: (i) illegally soliciting and raising funds from the general public by means of issuing stocks, bonds, lotteries or other securities without obtaining the approval of relevant authorities, (ii) promising a return of interest or profits or investment returns in cash, properties or other forms within a specified period of time, and (iii) using a legitimate form to disguise the unlawful purpose.
The Supreme People’s Court promulgated the Judicial Interpretations to Issues Concerning Applications of Laws for Trial of Criminal Cases on Illegal Fund-Raising, or the Illegal Fund-Raising Judicial Interpretations, which became effective in January 2011, to clarify the criminal charges and punishments regarding illegal public fund-raising. The Illegal Fund-Raising Judicial Interpretations provide that a public fund-raising will constitute a criminal offense of “illegally soliciting deposits from the public” under the PRC Criminal Law, if it meets all of the following criteria: (i) the fund-raising has not been approved by relevant authorities or is concealed under the disguise of legitimate acts; (ii) the fund-raising employs general solicitation or advertising such as social media, promotion meetings, leafleting and short messaging service advertising; (iii) the fundraiser promises to repay, after a specified period of time, the capital and interests, or investment returns in cash, properties in kind or other payment forms; and (iv) the fund-raising targets the general public as opposed to specific individuals. An illegal fund-raising activity will be fined or prosecuted in the event that it constitutes a criminal offense. Pursuant to the Illegal Fund-Raising Judicial Interpretations, an offender that is an entity will be subject to criminal liabilities, if it illegally solicits deposits from the general public or illegally solicits deposits in disguised form (i) with the amount of deposits involved exceeding RMB1,000,000, (ii) with over 150 fund-raising targets involved, or (iii) with the direct economic loss caused to fund-raising targets exceeding RMB500,000, or (iv) the illegal fund-raising activities have caused baneful influences to the public or have led to other severe consequences. An individual offender is also subject to criminal liabilities but with lower thresholds. The Measures for the Banning of Illegal Financial Institutions and Illegal Financial Business Operations also prohibits facilitating loans to the public without the approval of the PBOC.
We act as a platform for borrowers and investors and are not a party to the loans facilitated through our platform. We rely on third-party payment platforms in handling funds transfer and settlement. We have entered into an agreement with Xiamen Bank, under which the bank provides custodian services for funds of borrowers and investors through our platform.
Regulations on Microcredit Companies
Pursuant to the Guiding Opinions on the Pilot Operation of Microcredit Companies, which was jointly promulgated by the CBRC and the PBOC in May 2008, if a provincial government determines a competent department to be responsible for the supervision and administration of microcredit companies and the regulation of risks associated with microcredit companies, such provincial government may carry out the pilot operation of microcredit companies within such province. Government authorities in Jiangxi Province, where Fuzhou Online Microcredit is incorporated, have issued a series of rules on the administration of microcredit companies incorporated within Jiangxi Province.
The Notice on Issuing Implementation Opinions on and Interim Measures of the Pilot Establishment of Microcredit Companies, issued by the Jiangxi Provincial Government in February 2009, require (i) the source of funds of microcredit companies must be limited to the capital contributions paid by shareholders, donated capital, and capital borrowed from no more than two financial institutions, and such borrowed capital financial institutions shall not exceed 50% of the net capital; (ii) for 70% of the loans granted to borrowers, the aggregate amount of loans borrowed by any individual must not exceed RMB0.5 million, and for the remaining 30% of loans granted to borrowers, the aggregate amount of loans borrowed by any individual must not exceed 5% of the net capital of the microcredit company; and (iii) microcredit companies are permitted to conduct business only in the county where it is incorporated.
In March 2012, Jiangxi Financial Service Office, the regulatory authority for microcredit companies in Jiangxi Province, promulgated Measures for the Supervision and Administration of Microcredit Companies
in Jiangxi Province (Pilot Scheme), to impose the management duties upon the relevant regulatory authorities and to specify detailed requirements on the microcredit companies, which include, among others, (i) microcredit companies are prohibited from engaging in custodian services and illegal fund-raising; (ii) modification of certain company registration issues shall be subject to the approval of relevant regulatory authorities; and (iii) microcredit company shall engage in the loan business in the place of registration and surrounding counties within the corresponding municipality, and the loan balance for borrowers in the county of registration shall not be less than 60% of the loan balance in aggregate.
Jiangxi Financial Service Office, the regulatory authority for microcredit companies in Jiangxi Province, issued the Guidelines for the Supervision and Administration of Online Microcredit Companies of Jiangxi Province (Pilot Scheme), or Jiangxi Online Microcredit Companies Guidelines, in September 2016, to provide specific rules on the supervision and administration of online microcredit companies in Jiangxi Province, which include, among others, (i) apart from capital contributions paid by shareholders and capital borrowed from no more than two financial institutions, online microcredit companies may also raise funds through transferring credit asset and asset-backed securities with the approval from local regulatory authorities; (ii) online microcredit companies shall primarily conduct its microcredit loan business via online platform, and that the operation capital used in such business shall be no less than 70% the total operating capital, and (ii) the aggregate loan balance within the municipality where such online microcredit company is incorporated shall be no less than 30% of the total loan balance.
In November 2017, the Internet Finance Rectification Office issued the Notice on the Immediate Suspension of Approvals for the Establishment of Online Microcredit Companies, which requires all relevant regulatory authorities of microcredit companies to suspend the approval of the establishment of any online microcredit companies and the approval of any microcredit business conducted across provinces.
On December 1, 2017, the Internet Finance Rectification Office and the Online Lending Rectification Office jointly issued Circular 141, which requires the relevant regulatory authorities to suspend the approval of the establishment of online microcredit companies and the approval of any microcredit business across provinces. Circular 141 also specifies that online microcredit companies shall not provide campus loans, shall suspend the funding of online micro-loans with no specific scenario or no designated purpose, and gradually reduce the outstanding amount of such loans and take rectification measures.
On December 8, 2017, the Notice on Specific Rectification Implementation Measures for Risk of Online Microcredit Businesses of Microcredit Companies, or Circular 56, which defines “online micro-loans” as micro-loans provided through the internet by online microcredit companies. The features of online micro-loans include online borrower acquisition, credit assessment based on the online information collected from business operation and internet consumption, as well as loan application, approval and funding made through online procedures.
Consistent with the Guidance on the Pilot Establishment of Microcredit Companies and the Circular 141, the Rectification Implementation Plans of Online Microcredit Companies emphasize several aspects where inspection and rectification measures must be carried out for the online micro-loans industry, which include, among others, (i) the online microcredit companies shall be approved by the local authorities in accordance with the applicable regulations promulgated by the State Council, and the approved online microcredit companies in violation of any regulatory requirements shall be re-examined; (ii) qualification requirements to conduct online micro-loan business (including the qualification of shareholders, sources of borrowers, internet scenario and the digital risk-management technology); (iii) whether the qualification and funding source of the shareholders of online microcredit companies are in compliance with the applicable laws and regulations; (iv) whether the online microcredit companies primarily fund loans with their own funds and whether the funding sources of online microcredit companies include online lending intermediaries; (v) whether the financing activities of online microcredit companies, including credit assets transfer and asset securitization, are in compliance with the applicable regulations; (vi) whether the “integrated real interest” (namely the aggregated borrowing costs charged to borrowers in the form of interest and various fees) are annualized and subject to the limit on interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court and, whether any interest, handling fee, management fee or deposit are deducted from the principal of loans provided to the borrowers in advance; (vii) whether a relatively comprehensive risk control system has been established and
whether the loans are collected with violence; (viii) whether campus loans, or online micro-loans with no specific scenario or designated purpose are granted; (ix) whether online microcredit companies cooperate with internet platforms without relevant website registration or telecommunication business license to offer micro-loans and whether online microcredit companies cooperate with institutions with no lending qualification to offer loans or provide funds to such institutions for them to offer loans, and with respect to the loan business conducted in cooperation with third-party institutions, whether the online microcredit companies outsource their core business (including the credit assessment and risk control), or accept any credit enhancement services provided by any third-party institutions with no guarantee qualification; or whether any applicable third-party institution collects any interests or fees from the borrowers; (x) whether an online information security management system has been established and whether online microcredit companies properly store client data and transaction information and protect client privacy; and (xi) whether entities that conduct online micro-loans business have obtained relevant approval or license for lending business.
The Rectification Implementation Plans of Online Microcredit Companies also sets forth that all related institutions shall be subject to inspection and investigation before the end of January 2018. Depending on the results, different measures will be taken before the end of March 2018, including: (i) for institutions that hold online microcredit licenses but do not meet the qualification requirements to conduct online micro-loan business, their online microcredit licenses shall be revoked and such institutions will be prohibited from conducting loan business outside the administrative jurisdiction of their respective approved authorities; (ii) for institutions holding online microcredit licenses that meet the qualification requirements to conduct online micro-loan business but were found not in compliance with other requirements, such as the requirements on the integrated actual interest rate, the scope of loans and cooperation with third-party institutions, such institutions shall take rectification measures within a certain period specified by the local authorities, and in the event that the rectification measures do not meet the local authorities’ requirements, such institutions shall be subject to several sanctions, including revocation of their online microcredit licenses and to cease their business operations.
Fuzhou Online Microcredit has obtained the approval to operate microcredit businesses as issued by the competent supervising authority, which allows Fuzhou Online Microcredit to conduct nationwide microcredit businesses through the Internet and other kinds of offline small credit business as indicated in the approval to operate microcredit business.
Regulations on Anti-money Laundering
The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as non-financial institutions. Furthermore, the Guidelines, the Interim Measures and the Custodian Guidelines require online lending information intermediaries to comply with certain anti-money laundering requirements, including establishment of a customer identification program, monitoring and reporting of suspicious transactions, preservation of customer information and transaction records, and provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters.
Regulations on Guarantee
In June 1995, the Standing Committee of the National People’s Congress, or the SCNPC, promulgated the PRC Guarantee Law, and in March 2007, the National People’s Congress, or the NPC, promulgated the PRC Property Law, which took effective in October 2007. According to such applicable laws, a mortgage refers to where a debtor or a third party, mortgages property to a creditor instead of transferring of the possession of such property, for guaranteeing payment of debts. If the debtor defaults or if any condition for enforcement of creditor’s rights arises, the creditor shall have preemptive rights to the property. With respect to real estates used for mortgages, the mortgage shall be registered with the local regulatory authority and the mortgage shall come into effect as of the date of registration. With respect to vehicles used for mortgages, the mortgage shall come into effect as of the effective date of the mortgage contract, however, the creditor may not enforce his or her creditor’s right in such mortgage to any bone fide third party if the mortgage has not been registered with the local regulatory authority. Prior to the maturity of
debt, a mortgagee shall not stipulate with the mortgagor that the ownership the mortgaged property will be transferred to a third party if the debtor defaults his or her payment. In cases where the debtor fails to pay the debts, the mortgagee may, by concluding an agreement with the mortgagor, convert the property under mortgage into market value or seek payments from auction or sale of the mortgaged property. In cases where an agreement has damaged the interests of any other third party, the third party may request the PRC court to discharge the agreement. In cases where the mortgagee and the mortgagor fail to agree on the method taken for determining the value of the mortgaged property, the mortgagee may request the PRC court to auction or sell the mortgaged property.
In addition, a debtor or a third party may pledge personal property to a creditor to be held in possession of the creditor, if the debtor defaults or if any condition for enforcement of creditor’s rights arises, the creditor shall have preemptive rights to pledged personal property. A contract for pledge of property generally includes the following: (i) the amount of the debt for the pledged property; (ii) the term for the debtor to repay his debts; (iii) the name, quantity, quality and conditions of the pledged property; (iv) the scope of the secured interest; and (v) the time for delivery of the pledged property. The interest of a pledge is established upon delivery of the pledged property by the pledgor to the pledgee. Prior to maturity of debt, the pledgee shall not enter into an agreement with the pledgor to claim the pledgor’s ownership of the pledged property if the debtor defaults. In cases where the debtor repays the debts prior to maturity of the debt, the pledgee shall return the pledged property to the pledgor. If the debtor defaults or if any condition for enforcement of pledgor’s rights arises, the pledgee may enter into an agreement with the pledgor that the pledged property be converted into market value, or the pledgee may enjoy preemptive rights to the proceeds obtained from auction or sale of the pledged property. In cases where the pledgee fails to cooperate, the pledgor may request the PRC court to auction or sell the mortgaged property.
Regulations on Foreign Investment
Investment activities in the PRC by foreign investors are governed by the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was promulgated and is amended from time to time by the MOC and the National Development and Reform Commission. The Catalog divides industries into three categories in terms of foreign investment, which are “encouraged”, “restricted” and “prohibited”, and industries not listed under one of these categories are generally deemed to be permitted.
Foreign investment in telecommunications companies in the PRC are governed by the Provisions for the Administration of Foreign-Invested Telecommunications Enterprises, or the Foreign-Invested Telecommunications Enterprises Provisions, which was promulgated by the State Council on December 11, 2001, and amended on September 10, 2008 and February 6, 2016, respectively. The Foreign-Invested Telecommunications Enterprises Provisions prohibit a foreign investor from holding over 50% of the total equity interest in any value-added telecommunications service business in China. In addition, the primary foreign investor in a foreign-invested value-added telecommunications enterprise in China must demonstrate a good track record and operational experience of value-added telecommunications business. The Catalog (2017 Revision) and Circular of the Ministry of Industry and Information Technology on Liberalizing the Restrictions on Foreign Shareholding Percentages in Online Data Processing and Transaction Processing Business, promulgated by the MIIT in June 2015, or Circular 196, allow a foreign investor to hold more than 50% of the total equity interest in an e-commerce business. In addition, in June 2018, the Ministry of Commerce of the PRC, or the MOFCOM and the National Development and Reform Commission promulgated the Special Management Measures (Negative List) for the Access of Foreign Investment, or the Negative List, which became effective on July 28, 2018, where foreign investment in value-added telecommunications services (except for e-commerce) falls within the Negative List.
In January 2015 the MOFCOM published the Draft Foreign Investment Law, which provides that entities established in China but “controlled” by foreign investors will be deemed as FIEs. In this connection, “control” is broadly defined in the Draft Foreign Investment Law to cover any of the following: (i) holding 50% or more of the voting rights of the such entity; (ii) holding less than 50% of the voting rights of the such entity but having the power to secure at least 50% of the seats on the board or other equivalent decision-making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision-making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or
other key aspects of its business operations. Once an entity is determined to be a FIE, and if its investment amount exceeds certain thresholds or if its business operation falls within the “catalog of special management measures”, which is proposed to be issued by the State Council, such entity would require market entry clearance by the MOFCOM or its local branches to conduct its business. Pursuant to the Draft Foreign Investment Law, variable interest entities would also be deemed as FIEs if they are ultimately “controlled” by foreign investors, and would be subject to restrictions on foreign investments. However, the Draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structures, whether or not these companies are controlled by Chinese parties.
The Draft Foreign Investment Law emphasizes on the security review requirements, whereby all foreign investments that jeopardize or may jeopardize national security must be reviewed and approved in accordance with the security review procedure. In addition, the Draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report would be mandatory, and large foreign investors meeting certain criteria would be required to report on a quarterly basis. Any company found to be non-compliant with these information reporting requirements may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible for non-compliance may be subject to criminal liabilities.
The MOFCOM completed the solicitation of comments on the Draft Foreign Investment Law in February 2015. Since then, MOFCOM has not yet published an updated draft and none of the government authorities have taken any formal action to adopt such law. Substantial uncertainties exist with respect to the enactment timetable and the final content of the Foreign Investment Law.
In September 2016, the SCNPC published its decision to revise the laws relating to wholly foreign-owned enterprises and other foreign-invested enterprises. Such decision, which became effective in October 2016, changes the “filing or approval” procedures for foreign investments in China. Foreign investments in business sectors that are not subject to special entry administrative measures will only be need to complete a filing, instead of the existing requirement to apply for approval. Pursuant to the Interim Measures for the Recordation Administration of the Formation and Modification of Foreign-Invested Enterprises, promulgated by the MOFCOM in October 2016 and further revised in July 2017, establishment and changes of foreign investment enterprises not subject to the approval under the special entry administrative measures must be filed with the relevant authorities.
Regulations on Internet Companies
Regulations on Value-Added Telecommunication Services
The Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated by the State Council on September 25, 2000 and amended on July 29, 2014 and February 6, 2016, respectively, sets forth a general framework for telecommunications services providers in the PRC. Pursuant to the Telecommunications Regulations, telecommunications services providers are required to obtain an operating license prior to the commencement of their operations. The Telecommunications Regulations categorize various types of telecommunications services into basic telecommunication services and value-added telecommunications services. The Catalog of Telecommunications Business was issued as an attachment to the Telecommunications Regulations to categorize telecommunications services, which categorized information services provided via fixed network, mobile network and Internet, and call center services, as value-added telecommunications services.
In September 2000, the State Council issued the Administrative Measures on Internet Information Services, which was amended in January 2011. Pursuant to these measures, “internet information services” refer to provision of internet information to online users, and are divided into “commercial internet information services” and “non-commercial internet information services.” A commercial internet information services operator must obtain a value-added telecommunications services license, or VATS license, for internet information services from the relevant government authorities before engaging in any commercial internet information services operations in China.
In July 2017, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses. Under these regulations, a commercial operator of value-added telecommunications services must first obtain a VATS license from the MIIT or its local branches. In July 2006, the Ministry of Information Industry, the predecessor of the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in the Operation of Value-added Telecommunications Business, which prohibits holders of these services licenses from leasing, transferring or selling their licenses in any form, or providing any resource, sites or facilities, to any foreign investors intending to conduct such businesses in China.
Prior to the issuance of the Interim Measures in August 2016, there was no clear or official regulation or guidance from the PRC government as to whether online lending information services was a type of value-added telecommunication services and whether its provider should be subject to value-added telecommunication regulations. The Interim Measures require that online lending information intermediaries must apply for applicable telecommunication business licenses in accordance with the relevant provisions of telecommunications authorities after record-filing with a local financial regulatory authority. However, PRC telecommunication authorities have not explicitly stipulated which kind of telecommunications service license is required for online lending intermediaries (including in the form of a website or mobile app) engaged in telecommunication services.
Our platform, operated by Weidai Financial Information, has obtained a VATS license, for the operations of internet content service from the Hangzhou Administration of Telecommunications in August 2016, which will remain valid until August 2021, and a VATS license for the operations of our domestic call center service from the MIIT in August 2017, which will remain valid until August 2022.
Furthermore, since we operate mobile apps to reach mobile device users, it is uncertain whether Weidai Financial Information and its subsidiaries will be required to obtain a separate operating license in addition to the VATS License.
Regulation on Mobile Internet Applications Information Services
Administration of mobile internet application information services is strengthened through Regulations for Administration on Mobile Internet Applications Information Services, or the MIAIS Regulations, which was promulgated by the Cyberspace Administration of China, or the CAC, on June 28, 2016 and became effective on August 1, 2016. The MIAIS Regulations were enacted to regulate mobile app information service providers. Pursuant to the MIAIS Regulations, the CAC and local offices of cyberspace administration shall be responsible for the supervision and administration of nationwide or local mobile app information, respectively.
Under the MIAIS Regulations, mobile app information service providers are required to obtain relevant qualifications and are responsible for the supervision and administration of mobile app information. Mobile app information service providers are required to strictly implement information security management responsibilities, including, but not limited to: (i) authenticate the identity of the registered users, (ii) protect user information and obtain users’ consents for collecting and using their personal information in a lawful manner, (iii) establish information content audit and management mechanism, and prohibit any content in violation of laws or regulations, and (iv) record and keep users’ logged information for 60 days.
Regulations on Internet Security
Internet information in China is regulated and restricted from a national security standpoint. The SCNPC, has enacted the Decisions on Maintaining Internet Security on December 28, 2000, amended on August 27, 2009, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. In 1997, the Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.
On November 7, 2016, the SCNPC promulgated the Network Security Law of the PRC, or the Network Security Law, which became effective on June 1, 2017. The Network Security Law requires network operators, including online lending information intermediaries, to comply with laws and regulations and fulfill their obligations to safeguard security of the network when conducting business and providing services. The Network Security Law further requires network operators to take all necessary measures in accordance with applicable laws, regulations and compulsory national requirements to safeguard the safe and stable operation of the networks, respond to network security incidents effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data.
Regulations on Privacy Protection
In December 2011, the MIIT issued The Several Provisions on Regulating the Market Order of Internet Information Services, which provides that an internet information service provider may not collect any user’s personal information or provide any such information to third parties without such user’s consent. Pursuant to The Several Provisions on Regulating the Market Order of Internet Information Services, internet information service providers are required to, among others, (i) expressly inform the users of the method, content and purpose of the collection and processing of such users’ personal information and may only collect such information necessary for the provision of its services; and (ii) properly maintain the users’ personal information, and in case of any leak or possible leak of a user’s personal information, online lending service providers must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.
In addition, pursuant to the Decision on Strengthening the Protection of Online Information, issued by the SCNPC in December 2012, and the Order for the Protection of Telecommunication and Internet User Personal Information, issued by the MIIT in July 2013, any collection and use of any user personal information must be subject to the consent of the user, and abide to the applicable law, rationality and necessity of the business and fall within the specified purposes, methods and scopes in the applicable law.
Pursuant to the Ninth Amendment to the Criminal Law, issued by the SCNPC in August 2015, which became effective in November, 2015, any internet service provider that fails to fulfill its obligations related to internet information security administration as required under applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty. In addition, Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Infringement of Personal Information, issued on May 8, 2017 and became effective on June 1, 2017, clarified certain standards for the conviction and sentencing of the criminals in relation to personal information infringement.
In addition, the PRC General Provisions of the Civil Law, promulgated on March 15, 2017, which became effective on October 1, 2017, require personal information of individuals to be protected. Any organization or individual requiring personal information of others shall obtain such information legally and ensure the security of such information, and shall not illegally collect, use, process, or transmit such personal information, or illegally buy, sell, provide, or publish such personal information.
Furthermore, the Interim Measures require online lending information intermediaries to reinforce the management of lenders’ and borrowers’ information, so as to ensure the legitimacy and security regarding the collection, processing and use of lenders’ and borrowers’ information. Also, online lending information intermediaries are required to keep information of lenders and borrowers collected during the course of their business confidential, and are prohibited to use such information for any other purpose without approval of lenders or borrowers, other than for the services online lending information intermediaries provide.
While we have taken measures to protect the confidentiality of information that we have access to, our security measures could be breached. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential information of borrowers and investors to be stolen and used for criminal purposes. Any security breaches or unauthorized access to confidential information could also expose us to liability for loss of information and negative publicity.
Regulations on Foreign Exchange
Regulations on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, which was most recently amended in August 2008. Under the PRC Foreign Exchange Administration Regulations, Renminbi is freely convertible for payments of current account items, such as distribution of dividends, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE. On the contrast, approval from or registration with appropriate government authorities is required where Renminbi is to convert into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.
In November 2012, SAFE promulgated the Circular on Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or Circular on Improving and Adjusting Foreign Exchange Policies, which substantially amends and simplifies the foreign exchange procedure. Pursuant to Circular on Improving and Adjusting Foreign Exchange Policies, the opening of various foreign exchange accounts for designated purposes, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by foreign-invested enterprises to their foreign shareholders, no longer require approval or verification from SAFE, and the same entity may open multiple capital accounts in different provinces. In May 2013, SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business for direct investment in the PRC based on the registration information provided by SAFE and its local branches.
On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, will directly examine the applications and conduct the registration.
On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 allows foreign-invested enterprises to make equity investments by using Renminbi fund converted from foreign exchange capital. SAFE Circular 19 allows foreign-invested enterprises to settle their foreign exchange capital at banks based on the operation needs of the enterprises upon the confirmation of rights and interests of capital contribution by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks). The proportion of discretionary settlement of foreign exchange capital of foreign-invested enterprises is currently 100%. SAFE can adjust such proportion based on the international balance of payments. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, which became effective in June 2016. SAFE Circular 19 and SAFE Circular 16 prohibit foreign-invested enterprises from using Renminbi fund converted from their foreign exchange capitals for expenditure beyond their business scopes, providing entrusted loans or repaying loans between non-financial enterprises.
On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity and Compliance to further Promote Foreign Exchange Control, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks must check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities must hold income to account for previous years’
losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents
On July 4, 2014, SAFE issued the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Round-trip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former circular commonly known as “SAFE Circular 75”. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity or entities for the purpose of seeking offshore investment or making offshore financing. SAFE Circular 37 refer to the PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests as a “special purpose vehicle”. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of investment amount, share transfers or exchanges, mergers or divisions, or any other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of such special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and such special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above may result in liability under PRC law for evasion of foreign exchange controls. All beneficial owners of our ordinary shares who we know are PRC residents, including Mr. Hong Yao, have completed the foreign exchange registrations in 2018 in accordance with SAFE Circular 37.
SAFE Notice 13 has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branches in connection with their establishment or control of an offshore entity established for the purpose of seeking offshore investment or making offshore financing.
Regulations on Employee Share Incentive Plans of Overseas Publicly-Listed Company
In February 2012, SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participation in Share Incentive Plan of Companies Listed Overseas, or the 2012 SAFE Notice. Under such notice and other relevant rules and regulations, PRC residents, including PRC citizens or non-PRC citizens who reside in China for a continuous period of not less than one year, that participate in any share incentive plan of any overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a share incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plan on behalf of the participants. We and our executive officers and other employees who are PRC residents that have been granted share incentive awards will be subject to these regulations upon the completion of this offering. Failure by these individuals to complete their SAFE registrations may subject such individuals and us to fines and other legal sanctions.
The SAT has issued certain circulars concerning employee share incentive awards. Under these circulars, our employees working in China who exercise share incentive awards will be subject to PRC individual income tax. Our PRC subsidiary has the obligation to make filings related to employee share incentive awards with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share incentive awards. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.
Regulations on Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks and domain names.
Copyright.
The SCNPC adopted the PRC Copyright Law in September 1990 and amended it in October 2001 and February 2010, respectively. Copyright protection in the PRC, including copyright protection to software, is primarily regulated under the PRC Copyright Law and related rules and regulations. Under the PRC Copyright Law, the term of copyright protection for software is 50 years.
Patent.
The Patent Law of the PRC promulgated in December 2008 and which became effective in October 2009, or the Patent Law, protect patentable inventions, utility models and designs. Any invention or utility model for which patents may be granted must meet three conditions: novelty, inventiveness and practical applicability. The State Intellectual Property Office under the State Council is responsible for examining and approving patent applications. The term of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.
Trademark.
The Trademark Law of the PRC promulgated in August 2013 which took effect in May 2014, or the Trademark Law, and its implementation rules protect registered trademarks. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registrations. The State Intellectual Property Office, formerly the Trademark Office under the SAIC is responsible for the registration and administration of trademarks and grants a term of 10 years to registered trademarks and another 10 years if requested upon expiry of the initial or any renewed 10-year term. Trademark license agreements must be filed with the State Intellectual Property Office for record.
Domain Name.
Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT, which became effective on November 1, 2017. The MIIT is the primary regulatory authority responsible for the administration of the PRC Internet domain names. The registration of domain names in PRC has adopted a “first-to-file” principle. A domain name applicant will become the domain name holder upon the completion of its application procedure. Our domain name weidai.com.cn has been registered.
Regulations on Dividend Distribution
Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from Weidai Co., Ltd., which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may have. The principal regulations governing distribution of dividends of foreign-invested enterprises include the Foreign-Invested Enterprise Law, issued in 1986 and amended in September 2016, and its implementation rules. Under these regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, which is determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned enterprises may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.
Regulations on Overseas Listings
Six PRC regulatory agencies, including the CSRC, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective in September 2006 and was amended in June 2009. The M&A Rules, among other things, require offshore special purpose vehicles, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, must obtain approval from the CSRC prior to publicly listing such special purpose vehicle’s securities on an overseas stock exchange.
While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC counsel, Grandall Law Firm (Shanghai), that CSRC approval is not required in the context of this offering because: (a) we established our PRC subsidiary, Weidai Co., Ltd., by means of direct investment rather than
by merger with or acquisition of PRC domestic companies as defined in the M&A Rules, and (b) no explicit provision in the M&A Rules that classifies the respective contractual arrangements between Weidai Co., Ltd., Weidai Financial Information and its shareholders as a type of acquisition under the M&A Rules. However, as there has been no official interpretation or clarification of the M&A Rules and there remains uncertainty as to the implementation of such regulation.
Regulations on Employment
Pursuant to the PRC Labor Law, promulgated by the NPC in July 1994 and revised in August 2009, and the PRC Labor Contract Law, promulgated by Standing Committee of the NPC in June 2007 and amended in December 2012, employers must execute written employment contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimum wage. Violations of the PRC Labor Law and the PRC Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities.
Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. According to the Social Insurance Law, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a stipulated deadline and be subject to a late fee of up to 0.05% or 0.2% per day, as the case may be. If the employer still fails to rectify the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to three times the amount overdue. In addition, the PRC Individual Income Tax Law requires companies operating in China to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment. We have not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations.
Regulations Relating to Tax
Dividend Withholding Tax
Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the withholding tax rate in respect of the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. In August 2015, the SAT promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Weidai HK Limited, our Hong Kong subsidiary, may be able to enjoy the 5% withholding tax rate for the dividends it receives from our
PRC subsidiary, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81 and Circular 60, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.
Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented in January 2008. The EIT Law imposes a uniform enterprise income tax rate of 25% on all resident enterprises in the PRC, including foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions.
In addition, according to the EIT Law, enterprises registered in countries or regions outside the PRC with “de facto management bodies” located within China may be considered as PRC resident enterprises and will be subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The implementation rules of the EIT Law define “de facto management bodies” as establishments that exercise full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. The only detailed guidance currently available for the definition of “de facto management body” as well as the determination and administration of tax residency status of offshore-incorporated enterprises are set forth in the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies issued by the SAT in April 2009, or Circular 82, and the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version) issued by the SAT in July 2011, or Bulletin No. 45, which provides guidance on the administration as well as the determination of the tax residency status of a Chinese-controlled offshore-incorporated enterprise, defined as an enterprise that is incorporated under the law of a foreign country or territory and that has a PRC company or PRC corporate group as its primary controlling shareholder.
According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met:
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the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC;
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decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel in the PRC;
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the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and
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50% or more of voting board members or senior executives habitually reside in the PRC.
Bulletin No. 45 further clarifies certain issues related to the determination of tax resident status and competent tax authorities. It also specifies that when provided with a copy of Recognition of Residential Status from a resident Chinese-controlled offshore-incorporated enterprise, a payer does not need to withhold income tax when paying certain PRC-sourced income such as dividends, interest and royalties to such Chinese-controlled offshore-incorporated enterprise.
Income Tax for Share Transfers
According to the Announcement of the SAT on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or Circular 7, promulgated by the SAT in February 2015, if a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly through transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by a PRC resident enterprise through or in a public securities market) without a reasonable commercial purpose, the PRC tax authorities have the power to reassess the nature of the
transaction and the indirect equity transfer will be treated as a direct transfer. As a result, the gain derived from such transfer, which means the equity transfer price less the cost of equity, will be subject to PRC withholding tax at a rate of up to 10%. Under the terms of Circular 7, the transfer which meets all of the following circumstances shall be directly deemed as having no reasonable commercial purposes: (i) over 75% of the value of the equity interests of the offshore holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over 90% of the total properties of the offshore holding company are investments within PRC territory, or in the year before the indirect transfer, over 90% of the offshore holding company’s revenue is directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshore holding company are insufficient to substantiate its corporate existence; and (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer of the PRC taxable properties. In October, 2017, the SAT issued the Bulletin of SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which, among others, repeals certain rules stipulated in Circular 7. Bulletin 37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises.
PRC Value-Added Tax
Pursuant to applicable PRC regulations promulgated by the Ministry of Finance of China and the SAT, entities or individuals conducting business in the service industry are required to pay a valued-added tax, or VAT, at a rate of 6% with respect to revenues derived from the provision of online information services. A taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided.
MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers as of the date of this prospectus.
Directors and Executive Officers
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Age
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Position/Title
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Hong Yao
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37
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Founder, chairman of the board of directors and chief executive officer
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Feng Chen
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42
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Director and vice president of sales operations
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Yuqun Sun
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37
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Director and vice president of human resources
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Desheng Ding
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36
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Director and vice president of finance and risk management
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Wei Ye
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33
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Director and vice president of online operations
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Menma Huang
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50
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Director
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Ziyang Li
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33
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Director
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Tony Cai*
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51
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Independent director appointee
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Pengfei Wang
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36
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Vice president of brand development, strategy and compliance
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Jianzhong Zhu
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39
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Vice president of technology, research and development
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Quanlin Gu
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36
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Chief risk officer
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Leo Li
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33
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Chief financial officer
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*
Mr. Tony Cai has accepted our appointment to be a director of our company, effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part.
Mr. Hong Yao
is our founder and the chairman of our board of directors and has served as our chief executive officer since our inception in 2011. Mr. Yao has over 11 years of experience in China’s small and micro enterprise sector. Mr. Yao has received various industry awards and accolades, including the “2014 New Zhejiang Merchants Award”, from Zhejiang Youth Entrepreneurs’ Association, Youth Times and Xinhua News Agency and the “2017 Top Ten Finance Innovation Award” from Zhejiang Online News Network. Mr. Yao received his bachelor’s degree in computer applications and maintenance from Zhejiang Business College in 2000 and his EMBA degree from China Europe International Business School in 2015.
Mr. Feng Chen
has served as our director since March 2018, our vice president of finance and risk management from 2015 to January 2018 and our vice president of sales operations since January 2018. Prior to joining us, Mr. Chen served as chief financial officer and vice president of Greentown E-commerce, an online platform for construction materials, from 2014 to 2015 and as chief financial officer and vice president of Fullerton Investment & Credit Guarantee Co. Ltd. from 2013 to 2014. Mr. Chen was special assistant to vice-chairman of Bank of Chengdu from 2012 to 2013 and financial controller of Tianjin Rural Commercial Bank Co., Ltd. from 2010 to 2012. Prior to 2010, Mr. Chen served as a senior manager of Deloitte Consulting LLP, a director of SAS Institute Inc., a manager of BearingPoint, Inc. and a manager of Ernst & Young LLP. Mr. Chen received his bachelor’s degree in economics from Shenzhen University in 1998. Mr. Chen is a certified public accountant in China and Australia and a certified tax agent in China.
Ms. Yuqun Sun
has served as our director since March 2018 and our vice president of human resources since 2014. Prior to joining us, Ms. Sun served as director of executive office and chief operating officer of Greentown E-commerce from 2011 to 2014. From 2009 to 2011, Ms. Sun worked as branch manager and senior product manager of the China division of Best Buy Co., Inc., a consumer electronics corporation listed on the New York Stock Exchange (NYSE: BBY). From 2001 to 2008, Ms. Sun served as general manager and senior manager of public affairs of the China branch of Tesco, a grocery and general merchandise retailer listed on the London Stock Exchange (LSE: TSCO). Ms. Sun received her bachelor’s degree in business administration from Zhejiang Gongshang University in 2006.
Mr. Desheng Ding
has served as our director since March 2018 and has been our vice president of sales operations from 2015 to January 2018 and our vice president of finance and risk management since January 2018. Prior to joining us, Mr. Ding served as a department manager of Bank of Ningbo’s
Hangzhou branch from 2008 to 2015, a business director of Industrial Bank, Co., Ltd.’s cardholder center from 2005 to 2008 and a client manager of China Merchants Bank’s Shenzhen Branch from 2004 to 2005. Mr. Ding received his bachelor’s degree in business administration from Beijing Mingyuan University in 2004 and his master’s degree in software engineering from East China Normal University in 2011.
Mr. Wei Ye
has served as our director since March 2018 and has been our vice president of online operations since July 2017. Prior to joining us, Mr. Ye served as a general manager of Ping An Financial Technology Co., Ltd., a subsidiary of Ping An Insurance (Group) Company of China, Ltd. (SSE: 601318), from 2013 to 2016. Mr. Ye was a marketing director of Alisoft Co., Ltd., a subsidiary of Alibaba Group Holding Limited (NYSE:BABA), from 2009 to 2010 and a deputy business director of Tencent Holdings Limited, an investment corporation listed on the Hong Kong Stock Exchange (HKSE: 0700), from 2007 to 2009. Mr. Ye received his bachelor’s degree in software engineering from Zhejiang University in 2007.
Mr. Menma Huang
has served as our director since March 2018. Mr. Huang has been the general manager of Hakim Unique Internet Co., Ltd., or Hakim, a company listed on the on the Shenzhen Stock Exchange (SZ: 300300), since 2017. Mr. Huang was the deputy general manager of Hakim from 2015 to 2017 and the general manager of the Hakim’s Western Branch from 2012 to 2015. Prior to this, Mr. Huang was the chairman of the board of directors of Sichuan Yuyoutongpu System Engineering Co., Ltd. from 1998 to 2012. Mr. Huang received his bachelor’s degree in marketing from Sichuan University in 1988.
Mr. Ziyang Li
has served as our director since March 2018. Mr. Li has served as chairman of Hangzhou Hakim Yuyou Business Development Co., Ltd. since 2016 and has been assistant to chairman and director of strategy and development of Hakim since 2010. Mr. Li received his bachelor’s degree in business administration from Zhejiang University of Technology in 2009.
Prof. Tony Cai
will serve as our independent director commencing from the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Professor Cai is a Vice Dean and a Dorothy Silberberg Professor of Statistics at the Wharton School of the University of Pennsylvania, where he focuses his research on big data analytics, including high-dimensional data analysis, statistical machine learning, large-scale multiple testing, functional data analysis, statistical decision theory, as well as applications to genomics, and financial engineering. Professor Cai is a member of the editorial board of the journal of Annals of Statistics and has served on the editorial boards of many other academic journals. He received the COPSS Presidents’ Award from the Committee of Presidents of Statistical Societies in 2008 and was elected to the presidency of International Chinese Statistical Association (ICSA) in 2017. Professor Cai has received numerous research grants, including consecutive research grants from National Science Foundation (NSF) since 2000, multi-year research grants from National Institutes of Health (NIH) in 2012 and 2017 and a grant from Wharton School Global Initiatives in 2016. Professor Cai received his bachelor’s degree in science from Shanghai Jiao Tong University in 1989 and his Ph.D. degree in statistics from Cornell University in 1996.
Mr. Pengfei Wang
has served as our vice president of brand development, strategy and compliance since 2015. Prior to joining us, Mr. Wang was the general manager of Hangzhou’s Gongbei branch of Bank of China from 2012 to 2014 and the general manager of Hangzhou’s Hushu branch of Bank of China from 2008 to 2012. Mr. Wang received his bachelor’s degree in chemical science from Nanjing Tech University in 2004 and his master’s degree in business administration from Zhejiang University in 2011.
Mr. Jianzhong Zhu
has served as our vice president of technology, research and development since 2016. Prior to joining us, Mr. Zhu was a system architect at IBM Global Business Services from 2012 to 2014, Taobao from 2008 to 2012 and Alibaba Group Holding Limited (NYSE:BABA) from 2006 to 2007. Mr. Zhu is a member of the National Committee of Experts on the Internet Financial Security Technology. Mr. Zhu received his bachelor’s degree in software engineering from Zhejiang University in 2007.
Dr. Quanlin Gu
has served as our chief risk officer since 2017. Prior to joining us, Dr. Gu worked in the risk management team of the headquarters of Bank of China from 2008 to 2016. From 2004 to 2008, Dr. Gu was an assistant research fellow for the Institute of Business Administration at Peking University. Dr. Gu received his bachelor’s degree in finance from Peking University in 2003, his master’s degree in economics from McMaster University in 2004 and his Ph.D. degree in industrial economics from Peking University in 2015.
Mr. Leo Li
has served as our chief financial officer since January 2018. Prior to joining us, Mr. Li served as an investment director and later an executive director of Vision Knight Capital, or VKC, a private equity fund focusing on China’s internet-driven sectors from 2015 to January 2018; VKC led our PRC operating company’s series C round of financing in 2016. Prior to VKC, Mr. Li worked at Morgan Stanley Asia Ltd from 2013 to 2015 and at HSBC Markets (Asia) Ltd. from 2010 to 2013, where he focused on capital market transactions of Asian issuers in the United States and Hong Kong. From 2008 to 2010, Mr. Li worked as a management and corporate strategy consultant at Monitor Group in London. Mr. Li attended University of Oxford from 2004 to 2008 and received a four-year Master of Physics degree. Mr. Li is a Chartered Financial Analyst.
Board of Directors
Our board of directors will consist of eight directors upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part. A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is considered, provided (a) such director, if his interest (whether direct or indirect) in such contract or arrangement is material, has declared the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically or by way of a general notice and (b) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the audit committee. The directors may exercise all the powers of the company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures or other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of service.
Committees of the Board of Directors
We will establish three committees under the board of directors immediately upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part: an audit committee, a compensation committee and a nominating and corporate governance committee. We will adopt a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee
. Our audit committee will consist of Feng Chen, Tony Cai and Desheng Ding. Feng Chen will be the chairman of our audit committee. We have determined that Tony Cai satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. We have determined that Feng Chen qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among other things:
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appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;
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reviewing with the independent auditors any audit problems or difficulties and management’s response;
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discussing the annual audited financial statements with management and the independent auditors;
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reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;
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reviewing and approving all proposed related party transactions;
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meeting separately and periodically with management and the independent auditors; and
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monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Compensation Committee
. Our compensation committee will consist of Hong Yao, Yuqun Sun and Tony Cai. Hong Yao will be the chairman of our compensation committee. We have determined that Tony Cai satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:
•
reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;
•
reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
•
reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
•
selecting compensation consultant, legal counsel or other advisers only after taking into consideration all factors relevant to that person’s independence from management.
Nominating and Corporate Governance Committee
. Our nominating and corporate governance committee will consist of Hong Yao, Yuqun Sun and Tony Cai. Hong Yao will be the chairman of our nominating and corporate governance committee. Tony Cai satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee will be responsible for, among other things:
•
selecting and recommending nominees for election by the shareholders or appointment by the board;
•
reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;
•
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and
•
advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our company has the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited exceptional circumstances have the right to seek damages in our name if a duty owed by the directors is breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:
•
convening shareholders’ annual and extraordinary general meetings;
•
declaring dividends and distributions;
•
appointing officers and determining the term of office of the officers;
•
exercising the borrowing powers of our company and mortgaging the property of our company; and
•
approving the transfer of shares in our company, including the registration of such shares in our register of members.
Terms of Directors and Officers
Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders. A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated. Our officers are elected by and serve at the discretion of the board of directors.
Employment Agreements and Indemnification Agreements
We [have entered] into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. We may also terminate an executive officer’s employment without cause upon three-month advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as expressly required by applicable law of the jurisdiction where the executive officer is based. The executive officer may resign at any time with a three-month advance written notice.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.
We [have entered] into indemnification agreements with each of our directors and executive officers. Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
Compensation of Directors and Executive Officers
In 2017, we paid an aggregate of approximately RMB6.7 million (US$1.0 million) in cash to our executive officers, and we did not pay any compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiary and our variable interest entity are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
Share Incentive Plans
Share Incentive Plan of Weidai Financial Information
On December 18, 2015, the board of Weidai Financial Information approved the Virtual Share Plan for the purpose of providing incentives and rewards to certain of its employees and executives. In 2017, Weidai Financial Information issued a total of 2,714,452 options in virtual shares under the Virtual Share Plan, representing 2.72% of its equity interest. These virtual share options have no exercise price and will be cash settled at the amount equal to the differences between the fair value on the exercise date and the fair value on the grant date. 33%, 33% and 34% of these options are vested on the second, third and fourth anniversary of the vesting commencement date, respectively. The vested virtual share options are exercisable within five years from the grant date. These virtual share options are in substance stock appreciation rights, which are classified as liability awards. At our discretion, each grantee may receive certain percentage of annual attributable net profit as annual dividend, which is also settled in cash. In addition, each grantee has an option to purchase Weidai Financial Information’s shares when the grantee’s accumulated number of virtual shares granted exceed 0.1% of Weidai Financial Information’s total paid-in-capital. The purchase price will be determined by us. The Virtual Share Plan and all outstanding vested virtual share options will terminate upon completion of this offering. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Share-based Compensation” for more detail.
Share Incentive Plan of Our Company
In August 2018, our board of directors approved our 2018 share incentive plan, or the 2018 Plan, to provide incentives to employees, directors and consultants and promote the success of our business. The maximum number of ordinary shares that may be issued under the 2018 Plan is 66,000. As of the date of this prospectus, we have not granted any awards under the 2018 Plan.
The following paragraphs describe the principal terms of the 2018 Plan:
Type of Awards.
The 2018 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards that the plan administrator decides.
Plan Administration.
Our board of directors or a committee of one or more members of the board of directors will administer the 2018 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant.
Award Agreement.
Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility.
We may grant awards to directors, officers, employees and consultants of our company or any of our subsidiaries.
Vesting Schedule.
In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options.
The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a grant.
Transfer Restrictions.
Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator.
Termination and Amendment.
Unless terminated earlier, the 2018 Plan has a term of ten years. Our board of directors has the authority to amend or terminate the 2018 Plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.
PRINCIPAL [AND SELLING] SHAREHOLDERS
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of the date of this prospectus by:
•
each of our directors and executive officers;
•
each of our principal shareholders who beneficially own more than 5% of our total outstanding ordinary shares; and
•
[each selling shareholder.]
The calculations in the table below are based on 1,309,815 ordinary shares on an as-converted basis outstanding as of the date of this prospectus, and Class A ordinary shares and Class B ordinary shares outstanding immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
|
|
|
Ordinary Shares
Beneficially Owned
Prior to
This Offering
|
|
|
[Ordinary Shares
Being Sold in This
Offering]
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|
|
Ordinary Shares Beneficially
Owned Immediately After This Offering
|
|
|
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|
Number
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|
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%
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|
|
Number
|
|
|
%
|
|
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Class A
ordinary
shares
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|
|
Class B
ordinary
shares
|
|
|
Total
ordinary shares
on an as-
converted
basis
|
|
|
% of
aggregate
voting
power†
|
|
Directors and Executive Officers**:
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|
|
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|
|
|
|
|
Hong Yao
(1)
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|
|
|
|
701,428
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|
|
|
|
|
53.6
%
|
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|
|
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|
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|
|
|
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|
|
|
|
|
|
Feng Chen
|
|
|
|
|
*
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|
|
|
|
|
*
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuqun Sun
|
|
|
|
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*
|
|
|
|
|
|
*
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desheng Ding
|
|
|
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wei Ye
|
|
|
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
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Menma Huang
(2)
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|
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|
|
—
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|
|
|
|
|
—
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|
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|
|
|
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Ziyang Li
(3)
|
|
|
|
|
—
|
|
|
|
|
|
—
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|
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|
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|
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|
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|
|
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Tony Cai***
|
|
|
|
|
—
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|
|
|
|
—
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|
|
|
|
|
|
|
|
Pengfei Wang
|
|
|
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
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|
|
|
|
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|
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|
|
|
|
|
Jianzhong Zhu
|
|
|
|
|
*
|
|
|
|
|
|
*
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|
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
Quanlin Gu
|
|
|
|
|
—
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|
|
|
|
|
—
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|
|
|
|
|
|
Leo Li
|
|
|
|
|
*
|
|
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|
|
*
|
|
|
|
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|
|
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|
|
|
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|
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|
All Directors and Executive
Officers as a Group
|
|
|
|
|
734,172
|
|
|
|
|
|
56.1
%
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
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Principal [and Selling] Shareholders:
|
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|
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|
YAOH WDAI LTD
(1)
|
|
|
|
|
701,428
|
|
|
|
|
|
53.6
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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Hakim Unique Technology
Limited
(4)
|
|
|
|
|
199,066
|
|
|
|
|
|
15.2
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Less than 1% of our total outstanding shares.
**
Except as indicated otherwise below, the business address of our directors and executive officers is 50/F, West Building, Fortune Finance Center, No. 33 Jiefang East Road, Jianggan District, Hangzhou, Zhejiang Province, People’s Republic of China.
***
Mr. Tony Cai has accepted our appointment to be a director of our company, effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part.
†
For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per share and each holder of our Class B ordinary shares is entitled to five votes per share on all matters submitted to them for a vote. Our Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Our Class B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis.
(1)
Represents 701,428 ordinary shares held by YAOH WDAI LTD, a British Virgin Islands company. YAOH WDAI LTD is indirectly wholly owned by a family trust, of which Mr. Hong Yao is the sole beneficiary. The registered address of YAOH WDAI LTD is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. All of these shares will be redesignated as Class B ordinary shares immediately prior to the completion of this offering.
(2)
The business address of Mr. Huang is 12/F, Handing Building, No. 5 Yongfuqiao Road, Xiacheng District, Hangzhou, Zhejiang Province, People’s Republic of China.
(3)
The business address of Mr. Li is 18/F, Handing Building, No. 5 Yongfuqiao Road, Xiacheng District, Hangzhou, Zhejiang Province, People’s Republic of China.
(4)
Represents 182,925 series A preferred shares and 16,141 series B preferred shares held by Hakim Unique Technology Limited, a British Virgin Islands company. The registered address of Hakim Unique Technology Limited is Craigmuir Chamers, Road Town, Tortola, VG 1110, British Virgin Islands. Hakim Unique Technology Limited is wholly owned by Hakim Unique internet Co., Ltd., a public company listed on the Shenzhen Stock Exchange. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
As of the date of this prospectus, none of our ordinary shares or preferred shares are held by record holder in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
RELATED PARTY TRANSACTIONS
Before the completion of this offering, we intend to adopt an audit committee charter, which will require the committee to review all related-party transactions on an ongoing basis and all such transactions be approved by the committee. Set forth below are material related-party transactions in 2016 and 2017.
Transactions with Mr. Hong Yao, Companies Controlled by Mr. Yao or His Immediate Family Members
As of December 31, 2016, 2017 and June 30, 2018, we had RMB64.7 million, RMB0.2 million (US$24 thousand) and nil due from Mr. Hong Yao, respectively. Such amounts mainly represented advances Mr. Yao made in relation to our daily operations, and were settled in 2018.
As of December 31, 2016, 2017 and June 30, 2018, we had RMB21.3 million, RMB4.3 million (US$0.7 million) and RMB6.0 million (US$0.9 million), due to Mr. Hong Yao, respectively. Such amounts mainly represented Mr. Yao’s investment balance on our platform.
We incurred RMB2.2 million and RMB3.7 million (US$0.6 million) of revenues from Beijing Lezhihui Technology Co., Ltd., or Beijing Lezhihui, a company controlled by Mr. Hong Yao, related to our collaboration with Beijing Lezhihui for the facilitation of home equity loans in 2016 and 2017, respectively. As of December 31, 2016 and 2017, we had RMB5.3 million and nil due from Beijing Lezhihui, respectively. Such amounts mainly represented a short-term loan to Beijing Lezhihui and service fees collected by Beijing Lezhihui payable to us in relation to such collaboration on the facilitation of home equity loans. The loan was repayed in the second quarter of 2017.
We incurred RMB5.6 million, RMB49.4 million (US$7.5 million) and RMB8.6 million (US$1.3 million) of service fees to Beijing Lezhihui related to our collaboration with Beijing Lezhihui for the facilitation of home equity loans in 2016, 2017 and the six months ended June 30, 2018, respectively. As of December 31, 2016 and 2017 and June 30, 2018, we had RMB5.6 million, RMB2.9 million (US$0.4 million) and RMB1.3 million (US$0.2 million) due to Beijing Lezhihui in relation to such collaboration, respectively.
In 2016, 2017 and the six months ended June 30, 2018, we incurred service fees in the amounts of nil, nil and RMB45 million (US$0.7 million) to Zhejiang Ruituo Information Technology Co., Ltd., a company controlled by Mr. Hong Yao, respectively. Such amount represented service fees for collection of deliquent loans.
We incurred RMB87.4 million, RMB99.6 million (US$15.1 million) and RMB44.4 million (US$6.7 million) of partner-operated service centers’ operating costs and expenses to Chunan Wencai Information Advisory Services Company, or Chunan Wencai, our service center operation partner controlled by an immediate family member of Mr. Hong Yao, in 2016, 2017 and the six months ended June 30, 2018, respectively. As of December 31, 2016, 2017 and June 30, 2018, we had RMB8.4 million, RMB5.7 million (US$0.9 million) and RMB4.2 million (US$0.9 million) due to Chunan Wencai, respectively.
In 2016, 2017 and the six months ended June 30, 2018, we incurred service fees in the amounts of RMB13.2 million, RMB20.5 million (US$3.1 million) and RMB6.2 million (US$0.9 million) to Zhejiang Hongrui Investment Management Co., Ltd., or Zhejiang Hongrui, a company controlled by an immediate family member of Mr. Hong Yao, respectively. Such amounts represented service fees for collection of delinquent loans.
As of December 31, 2016, 2017 and the six months ended June 30, 2018, we had RMB3.1 million, RMB4.5 million (US$0.7 million) and RMB5.6 million (US$0.8 million) due from Hangzhou Ruituo, a company controlled by Mr. Hong Yao, respectively. Such amounts mainly represented creditor’s right purchased from certain corporate investors through Hangzhou Ruituo.
As of December 31, 2016, 2017 and June 30, 2018, we had RMB0.9 million, RMB10.1 million (US$1.5 million) and RMB1.1 million (US$0.2 million) due to Hangzhou Ruituo, respectively. Such amounts mainly represented Hangzhou Ruituo’s investment balance on our platform.
We incurred RMB10.1 million, RMB25.3 million (US$3.8 million) and nil of GPS costs to Zhejiang Qunshuo Electronics Co., Ltd. in 2016, 2017 and the six months ended June 30, 2018, respectively, in which Mr. Yao held a minority interest.
Transactions with Certain Other Members of Our Management, Companies Controlled by Them or Their Immediate Families
In addition to our transactions with Mr. Hong Yao, we have engaged in transactions with certain other members of our key management and their immediate families.
We incurred RMB0.8 million, RMB0.9 million (US$129 thousand) and RMB0.5 million (US$71 thousand) of financing income from our key management and their immediate family members in 2016, 2017 and the six months ended June 30, 2018, respectively. We also incurred RMB3.3 million, RMB8.0 million (US$1.2 million) and RMB6.9 million (US$1.1 million) of promotion expenses from a company controlled by a director of the company in 2016, 2017 and the six months ended June 30, 2018, respectively. As of December 31, 2016 and 2017 and June 30, 2018, we had RMB15.0 million, RMB30.7 million (US$4.6 million) and RMB21.5 million (US$3.2 million) due to our key management and their immediate families, respectively. Such amounts mainly represented their investment balance on our platform.
We incurred RMB57.8 million, RMB62.5 million (US$9.4 million) and RMB13.7 million (US$2.1 million) of partner-operated service centers’ operating costs and expenses to Chunan Wangcai Information Advisory Services Company, or Chunan Wangcai, our service center operation partner controlled by an immediate family member of Mr. Yuqun Sun, in 2016, 2017 and the six months ended June 30, 2018, respectively. As of December 31, 2016 and 2017 and June 30, 2018, we had RMB9.5 million and RMB6.2 million (US$1.0 million) and RMB1.6 million (US$0.2 million) due to Chunan Wangcai, respectively.
As of December 31, 2016 and 2017 and June 30, 2018, we had RMB0.3 million, RMB4.0 million (US$0.6 million) and nil due from Shanghai Zaohui Finance Lease Co., Ltd., or Shanghai Zaohui, a financial leasing company then controlled by Mr. Desheng Ding, respectively. Such amounts mainly represented excess advance payments we made to Shanghai Zaohui for the procurement of automobiles. In June 2018, we, through our wholly owned subsidiary Weidai Hong Kong Limited, acquired all equity interest in Rymo Technology Industry Limited, or Rymo, Shanghai Zaohui’s parent company, for a total consideration of HK$1. The transaction was conducted pursuant to an equity transfer agreement among Weidai Hong Kong Limited. Rymo, Mr. Desheng Ding and Rymo’s other two shareholders. Rymo’s sole operation is to hold equity interests in Shanghai Zaohui. Rymo had total assets, total liabilities and shareholders’ deficit of RMB4.2 million (US$0.7 million), RMB5.9 million (US$0.9 million) and RMB1.7 million (US$0.3 million) as of December 31, 2017, and its net loss in 2017 was RMB490.3 thousand (US$75.4 thousand); Rymo had total assets, total liabilities and shareholders’ deficit of RMB4.5 million (US$0.7 million), RMB7.6 million (US$1.1 million) and RMB3.0 million (US$0.5 million) as of June 30, 2018, and its net loss in the six months ended June 30, 2018 was RMB300.6 thousand (US$45.4 thousand).
Contractual Arrangements with Weidai Financial Information and Its Shareholders
PRC laws and regulations currently restrict foreign ownership and investment in value added telecommunications services in China. As a result, we operate our relevant business through Weidai Financial Information, our variable interest entity, based on a series of contractual arrangements. For a description of these contractual arrangements, see “Corporate History and Structure — Contractual Arrangements with Weidai Financial Information.”
Shareholders Agreement
See “Description of Share Capital — History of Securities Issuances — Shareholders Agreement.”
Employment Agreements and Indemnification Agreements
See “Management — Employment Agreements and Indemnification Agreements.”
Share Incentive Plan
See “Management — Share Incentive Plan.”
DESCRIPTION OF SHARE CAPITAL
We are a Cayman Islands exempted company with limited liability and our affairs are governed by our memorandum and articles of association, the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised), as amended, of the Cayman Islands, which is referred to as the Companies Law below, and the common law of the Cayman Islands.
As of the date of this prospectus, our authorized share capital was US$50,000 divided into 500,000,000 shares, par value of US$0.0001 each, of which (i) 499,658,026 shares are designated as ordinary shares; (ii) 182,925 shares are designated as series A preferred shares; (iii) 36,585 shares are designated as series A+ preferred shares; (iv) 60,976 shares are designated as series B preferred shares; and (v) 61,488 shares are designated as series C preferred shares.
As of the date of this prospectus, there were 967,841 ordinary shares, 182,925 series A preferred shares, 36,585 series A+ preferred shares, 60,976 series B preferred shares and 61,488 series C preferred shares issued and outstanding.
Upon completion of this offering, we will have Class A ordinary shares and Class B ordinary shares issued and outstanding. All of our ordinary shares issued and outstanding prior to the completion of the offering are and will be fully paid, and all of our Class A ordinary shares to be issued in the offering will be issued as fully paid. Our authorized share capital post-offering will be US$ divided into Class A ordinary shares with a par value of US$0.0001 each, Class B ordinary shares with a par value of US$0.0001 each and preference shares of a par value of US$0.0001 each of such class or classes (however designated) as our board of directors may determine in accordance with the second amended and restated memorandum and articles of association.
Our second amended and restated memorandum and articles of association will become effective immediately prior to completion of this offering. The following are summaries of material provisions of our second amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our Class A and Class B ordinary shares.
Ordinary Shares
General.
Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and transfer their ordinary shares.
Dividends.
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our second amended and restated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no longer needed. Dividends may also be declared and paid out of share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Law. Holders of Class A ordinary shares and Class B ordinary shares will be entitled to the same amount of dividends, if declared.
Voting Rights.
In respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five (5) votes, voting together as one class. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than 10% of the nominal value of the total issued voting shares of our company present in person or by proxy. An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding ordinary shares at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our second amended and restated memorandum and articles of association.
Conversion.
Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equivalent number of Class A ordinary shares.
Transfer of Ordinary Shares.
Subject to the restrictions contained in our second amended and restated articles of association, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
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the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
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the instrument of transfer is in respect of only one class of ordinary shares;
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the instrument of transfer is properly stamped, if required;
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in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and
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a fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof.
If our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the NYSE, be suspended and the register of members closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register of members closed for more than 30 days in any year as our board may determine.
Liquidation.
On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately. Any distribution of assets or capital to a holder of a Class A ordinary share and a holder of a Class B ordinary share will be the same in any liquidation event.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares.
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares.
The Companies Law and our second amended and restated articles of association permit us to purchase our own shares. In accordance with our second amended and restated articles of association and provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined by our board of directors.
Variations of Rights of Shares.
All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.
General Meetings of Shareholders
Shareholders’ meetings may be convened by a majority of our board of directors or our chairman. Advance notice of at least ten clear days is required for the convening of our annual general shareholders’
meeting and any other general meeting of our shareholders. A quorum required for and throughout a meeting of shareholders consists of at least one shareholder entitled to vote and present in person or by proxy or (in the case of a shareholder being a corporation) by its duly authorised representative representing not less than one-third of all voting power of our share capital in issue.
Inspection of Books and Records
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will in our articles provide our shareholders with the right to inspect our list of shareholders and to receive annual audited financial statements. See “Where You Can Find More Information.”
Changes in Capital
We may from time to time by ordinary resolution:
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increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;
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consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
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sub-divide our existing shares, or any of them into shares of a smaller amount; or
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cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.
However, no alteration contemplated above, or otherwise, may be made to the par value of the Class A ordinary shares or Class B ordinary shares unless an identical alteration is made to the par value of the Class B ordinary shares and Class A ordinary shares, as the case may be.
We may by special resolution, subject to any confirmation or consent required by the Companies Law, reduce our share capital or any capital redemption reserve in any manner permitted by law.
Exempted Company
We are an exempted company with limited liability incorporated under the Companies Law. The Companies Law in the Cayman Islands distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:
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an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;
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an exempted company’s register of members is not open to inspection;
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an exempted company does not have to hold an annual general meeting;
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an exempted company may issue no par value shares;
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an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
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an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
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an exempted company may register as a limited duration company; and
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an exempted company may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company. Upon the completion of this offering, we will be subject to reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers. We currently intend to comply with the NYSE rules in lieu of following home country practice. The NYSE rules require that every company listed on the NYSE hold an annual general meeting of shareholders. In addition, our second amended and restated articles of association allow directors to call special meeting of shareholders pursuant to the procedures set forth in our articles.
Differences in Corporate Law
The Companies Law is modelled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware.
Mergers and Similar Arrangements
A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directors of each constituent company and authorization by a special resolution of the members of each constituent company.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
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the statutory provisions as to the required majority vote have been met;
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the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
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the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
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the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits
In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle, including when:
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a company acts or proposes to act illegally or ultra vires;
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the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and
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those who control the company are perpetrating a “fraud on the minority.”
Indemnification of Directors and Executive Officers and Limitation of Liability
Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our second amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we intend to enter into indemnification agreements with our directors and senior executive officers that will provide such persons with additional indemnification beyond that provided in our second amended and restated memorandum and articles of association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Anti-Takeover Provisions in the Memorandum and Articles of Association
Some provisions of our second amended and restated memorandum and articles of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our second amended and restated memorandum and articles of association, as amended and restated from time to time, for what they believe in good faith to be in the best interests of our company.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its
shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company — a duty to act
bona fide
in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Our second amended and restated articles of association provide that shareholders may not approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
Neither Cayman Islands law nor our second amended and restated articles of association allow our shareholders to requisition a shareholders’ meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. As permitted under Cayman Islands law, our second amended and restated articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our second amended and restated articles of association, directors may be removed by an ordinary resolution of shareholders.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into
bona fide
in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
Under the Companies Law and our second amended and restated articles of association, our company may be dissolved, liquidated or wound up by the vote of holders of two-thirds of our shares voting at a meeting
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our second amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, our second amended and restated memorandum and articles of association may only be amended by a special resolution of shareholders.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our second amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
Directors’ Power to Issue Shares
Subject to applicable law, our board of directors is empowered to issue or allot shares or grant options and warrants with or without preferred, deferred, qualified or other special rights or restrictions.
History of Securities Issuances
The following is a summary of our securities issuances in the past three years.
Subscription of Registered Capital of Weidai Financial Information
On August 27, 2015, Deqing Partnership subscribed to another RMB15,870,000 registered capital of Weidai Financial Information with a consideration of RMB15,870,000.
On October 15, 2015, two minority shareholders of Weidai Financial Information subscribed to RMB3,658,500 registered capital of Weidai Financial Information with a total consideration of RMB3,658,500.
On September 6, 2015, Zhejiang Hakim group companies subscribed to RMB18,292,500 registered capital of Weidai Financial Information with a consideration of RMB18,292,500.
On October 24, 2016, three minority shareholders of Weidai Financial Information subscribed to RMB6,148,790 registered capital of Weidai Financial Information with a total consideration of RMB240,000,000.
Securities Issuances by Our Company
Upon the incorporation of our company on January 26, 2018, we issued one ordinary share to the initial subscriber and this one ordinary share was transferred to YAOH WDAI LTD on the same day. We further issued, on January 26, 2018, 98,299 ordinary shares to YAOH WDAI LTD and 1,700 ordinary shares to certain of our minority shareholders and employees.
We further issued shares to existing shareholders of Weidai Financial Information on April 10, 2018, including: (i) 967,841 ordinary shares to YAOH WDAI LTD and certain employees and minority shareholders for a consideration of US$0.0001 per share; (ii) 182,925 series A preferred shares to Hakim Unique Technology Limited for a consideration of US$0.0001 per share, (iii) 36,585 series A+ preferred shares to a minority shareholder for a consideration of US$0.0001 per share, (iv) an aggregate number of 60,976 series B preferred shares to Hakim Unique Technology Limited and certain minority shareholders for a consideration of US$0.0001 per share, and (v) an aggregate number of 61,488 series C preferred shares to certain minority shareholders for a consideration of US$0.0001 per share.
Shareholders Agreement
On April 10, 2018, we and our shareholders entered into a shareholders agreement, which provides for certain preferential rights, including director nomination rights, drag-along rights, put options and consent rights on certain corporate matters. The shareholders agreement and all such preferential rights will terminate upon the filing of final prospectus of this offering.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Citibank, N.A. has agreed to act as the depositary for the American Depositary Shares. Depositary offices of Citibank, N.A. are located at 388 Greenwich Street, 23
rd
Floor, New York, New York 10013. American Depositary Shares are frequently referred to as “ADSs” and represent ownership interests in securities that are on deposit with the depositary. ADSs may be represented by certificates that are commonly known as “American Depositary Receipts” or “ADRs.” The depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank Hong Kong, located at 9/F, Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.
We have appointed Citibank, N.A. as depositary pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the deposit agreement from the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and from the SEC’s website (www.sec.gov). Please refer to Registration Number 333- when retrieving such copy.
We are providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that the rights and obligations of an owner of ADSs will be determined by reference to the terms of the deposit agreement and not by this summary. We urge you to review the deposit agreement in its entirety. The portions of this summary description that are italicized describe matters that may be relevant to the ownership of ADSs but that may not be contained in the deposit agreement.
Each ADS represents the right to receive, and to exercise the beneficial ownership interests in, Class A ordinary share(s) on deposit with the depositary and/or custodian. An ADS also represents the right to receive, and to exercise the beneficial interests in, any other property received by the depositary or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations. We and the depositary may agree to change the ADS-to-Class A ordinary share ratio by amending the deposit agreement. This amendment may give rise to, or change, the depositary fees payable by ADS owners. The custodian, the depositary and their respective nominees will hold all deposited property for the benefit of the holders and beneficial owners of ADSs. The deposited property does not constitute the proprietary assets of the depositary, the custodian or their nominees. Beneficial ownership in the deposited property will under the terms of the deposit agreement be vested in the beneficial owners of the ADSs. The depositary, the custodian and their respective nominees will be the record holders of the deposited property represented by the ADSs for the benefit of the holders and beneficial owners of the corresponding ADSs. A beneficial owner of ADSs may or may not be the holder of ADSs. Beneficial owners of ADSs will be able to receive, and to exercise beneficial ownership interests in, the deposited property only through the registered holders of the ADSs, the registered holders of the ADSs (on behalf of the applicable ADS owners) only through the depositary, and the depositary (on behalf of the owners of the corresponding ADSs) directly, or indirectly, through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.
If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the terms of any ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations as owner of ADSs and those of the depositary. As an ADS holder you appoint the depositary to act on your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New York law. However, our obligations to the holders of Class A ordinary shares will continue to be governed by the laws of the Cayman Islands, which may be different from the laws in the United States.
In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in certain circumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither the depositary, nor the custodian, nor us nor any of their or our respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.
As an owner of ADSs, we will not treat you as one of our shareholders and you will not have direct shareholder rights. The depositary will hold on your behalf the shareholder rights attached to the Class A ordinary shares underlying your ADSs. As an owner of ADSs you will be able to exercise the shareholders rights for the Class A ordinary shares represented by your ADSs through the depositary only to the extent contemplated in the deposit agreement. To exercise any shareholder rights not contemplated in the deposit agreement you will, as an ADS owner, need to arrange for the cancelation of your ADSs and become a direct shareholder.
The manner in which you own the ADSs (e.g., in a brokerage account vs. as registered holder, or as holder of certificated vs. uncertificated ADSs) may affect your rights and obligations, and the manner in which, and extent to which, the depositary’s services are made available to you. As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name, through a brokerage or safekeeping account, or through an account established by the depositary in your name reflecting the registration of uncertificated ADSs directly on the books of the depositary (commonly referred to as the “direct registration system” or “DRS”). The direct registration system reflects the uncertificated (book-entry) registration of ownership of ADSs by the depositary. Under the direct registration system, ownership of ADSs is evidenced by periodic statements issued by the depositary to the holders of the ADSs. The direct registration system includes automated transfers between the depositary and The Depository Trust Company (“DTC”), the central book-entry clearing and settlement system for equity securities in the United States. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADS owner. Banks and brokers typically hold securities such as the ADSs through clearing and settlement systems such as DTC. The procedures of such clearing and settlement systems may limit your ability to exercise your rights as an owner of ADSs. Please consult with your broker or bank if you have any questions concerning these limitations and procedures. All ADSs held through DTC will be registered in the name of a nominee of DTC. This summary description assumes you have opted to own the ADSs directly by means of an ADS registered in your name and, as such, we will refer to you as the “holder.” When we refer to “you,” we assume the reader owns ADSs and will own ADSs at the relevant time.
The registration of the Class A ordinary shares in the name of the depositary or the custodian shall, to the maximum extent permitted by applicable law, vest in the depositary or the custodian the record ownership in the applicable Class A ordinary shares with the beneficial ownership rights and interests in such Class A ordinary shares being at all times vested with the beneficial owners of the ADSs representing the Class A ordinary shares. The depositary or the custodian shall at all times be entitled to exercise the beneficial ownership rights in all deposited property, in each case only on behalf of the holders and beneficial owners of the ADSs representing the deposited property.
Dividends and Distributions
As a holder of ADSs, you generally have the right to receive the distributions we make on the securities deposited with the custodian. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of ADSs will receive such distributions under the terms of the deposit agreement in proportion to the number of ADSs held as of the specified record date, after deduction of the applicable fees, taxes and expenses.
Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with the custodian, we will deposit the funds with the custodian. Upon receipt of confirmation of the deposit of the requisite funds, the depositary will arrange for the funds received in a currency other than U.S. dollars to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders, subject to the laws and regulations of the Cayman Islands and any other applicable jurisdiction.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The depositary will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.
The distribution of cash will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. The depositary will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of the applicable holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States.
Distributions of Class A Ordinary Shares
Whenever we make a free distribution of Class A ordinary shares for the securities on deposit with the custodian, we will deposit the applicable number of Class A ordinary shares with the custodian. Upon receipt of confirmation of such deposit, the depositary will
either
distribute to holders new ADSs representing the Class A ordinary shares deposited or modify the ADS-to-Class A ordinary share ratio, in which case each ADS you hold will represent rights and interests in the additional Class A ordinary shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-Class A ordinary share ratio upon a distribution of Class A ordinary shares will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes or governmental charges, the depositary may sell all or a portion of the new Class A ordinary shares so distributed.
No such distribution of new ADSs will be made if it would violate a law (e.g., the U.S. securities laws) or if it is not operationally practicable. If the depositary does not distribute new ADSs as described above, it may sell the Class A ordinary shares received upon the terms described in the deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to subscribe for additional Class A ordinary shares, we will give prior notice to the depositary and we will assist the depositary in determining whether it is lawful and reasonably practicable to distribute rights to subscribe for additional ADSs to holders.
The depositary will establish procedures to distribute rights to subscribe for additional ADSs to holders and to enable such holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, and if we provide all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to subscribe for new Class A ordinary shares other than in the form of ADSs.
The depositary will
not
distribute the rights to you if:
•
We do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; or
•
We fail to deliver satisfactory documents to the depositary; or
•
It is not reasonably practicable to distribute the rights.
The depositary will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary is unable to sell the rights, it will allow the rights to lapse.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will give prior notice thereof to the depositary and will indicate whether we wish the elective distribution to be made available to you. In such case, we will assist the depositary in determining whether such distribution is lawful and reasonably practicable.
The depositary will make the election available to you only if we timely request it to do so, if it is reasonably practicable and if we have provided all of the documentation contemplated in the deposit agreement. In such case, the depositary will establish procedures to enable you to elect to receive either cash or additional ADSs, in each case as described in the deposit agreement. The depositary is not obligated to establish procedures to facilitate the distribution and exercise by holders of elective distributions to subscribe for new Class A ordinary shares other than in the form of ADSs.
If the election is not made available to you, you will receive either cash or additional ADSs, depending on what a shareholder in the Cayman Islands would receive upon failing to make an election, as more fully described in the deposit agreement.
Other Distributions
Whenever we intend to distribute property other than cash, Class A ordinary shares or rights to subscribe for additional Class A ordinary shares we will notify the depositary in advance and will indicate whether we wish such distribution to be made to you. If so, we will assist the depositary in determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you, if we timely request the depositary to do so and if we provide to the depositary all of the documentation contemplated in the deposit agreement, the depositary will distribute the property to the holders in a manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes and governmental charges, the depositary may sell all or a portion of the property received.
The depositary will
not
distribute the property to you and will sell the property if:
•
We do not request that the property be distributed to you or if we request that the property not be distributed to you; or
•
We do not deliver satisfactory documents to the depositary; or
•
The depositary determines that all or a portion of the distribution to you is not reasonably practicable.
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the custodian, we will notify the depositary in advance. If it is practicable and if we provide all of the documentation contemplated in the deposit agreement, the depositary will provide notice of the redemption to the holders.
The custodian will be instructed to surrender the shares being redeemed against payment of the applicable redemption price. The depositary will convert into U.S. dollars upon the terms of the deposit agreement the redemption funds received in a currency other than U.S. dollars and will establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their ADSs to the depositary. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your ADSs. If less than all ADSs are being redeemed, the ADSs to be retired will be selected by lot or on a
pro rata
basis, as the depositary may determine.
Changes Affecting Class A Ordinary Shares
The Class A ordinary shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, split-up, cancelation, consolidation or any other reclassification of such Class A ordinary shares or a recapitalization, reorganization, merger, consolidation or sale of assets of the Company.
If any such change were to occur, your ADSs would, to the extent permitted by law and the deposit agreement, represent the right to receive the property received or exchanged in respect of the Class A ordinary shares held on deposit. The depositary may in such circumstances deliver new ADSs to you, amend the deposit agreement, the ADRs and the applicable Registration Statement(s) on Form F-6, call for the exchange of your existing ADSs for new ADSs and take any other actions that are appropriate to reflect as to the ADSs the change affecting the Class A ordinary shares. You may have to pay fees, expenses, taxes and other governmental charges in connection with such actions. If the depositary may not lawfully distribute such property to you, the depositary may sell such property and distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs Upon Deposit of Class A Ordinary Shares
After the completion of this offering, the Class A ordinary shares that are being offered for sale by us and by the selling shareholders pursuant to this prospectus will be deposited with the custodian. Upon receipt of confirmation of such deposit, the depositary will issue ADSs to the underwriters named in this prospectus.
After the closing of this offer, the depositary may create ADSs on your behalf if you or your broker deposit Class A ordinary shares with the custodian. The depositary will deliver these ADSs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the Class A ordinary shares to the custodian. Your ability to deposit Class A ordinary shares and receive ADSs is subject to your provision of certain documentation, as described in the deposit agreement, and may be limited by U.S. and Cayman Islands legal considerations applicable at the time of deposit. Further, we have instructed the depositary not to accept deposits of Class A ordinary shares for the purpose of issuance of ADSs without our prior written consent.
The issuance of ADSs may be delayed until the depositary or the custodian receives confirmation that all required approvals have been given and that the Class A ordinary shares have been duly transferred to the custodian. The depositary will only issue ADSs in whole numbers.
When you make a deposit of Class A ordinary shares, you will be responsible for transferring good and valid title to the depositary. As such, you will be deemed to represent and warrant that:
•
The Class A ordinary shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained.
•
All preemptive (and similar) rights, if any, with respect to such Class A ordinary shares have been validly waived or exercised.
•
You are duly authorized to deposit the Class A ordinary shares.
•
The Class A ordinary shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADSs issuable upon such deposit will not be, “restricted securities” (as defined in the deposit agreement).
•
The Class A ordinary shares presented for deposit have not been stripped of any rights or entitlements.
If any of the representations or warranties are incorrect in any way, we and the depositary may, at your cost and expense, take any and all actions necessary to correct the consequences of the misrepresentations.
Transfer, Combination and Split Up of ADRs
As an ADR holder, you will be entitled to transfer, combine or split up your ADRs and the ADSs evidenced thereby. For transfers of ADRs, you will have to surrender the ADRs to be transferred to the depositary and also must:
•
ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer;
•
provide such proof of identity and genuineness of signatures as the depositary deems appropriate;
•
provide any transfer stamps required by the State of New York or the United States; and
•
pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the terms of the deposit agreement, upon the transfer of ADRs.
To have your ADRs either combined or split up, you must surrender the ADRs in question to the depositary with your request to have them combined or split up, and you must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the terms of the deposit agreement, upon a combination or split up of ADRs.
Withdrawal of Class A Ordinary Shares Upon Cancelation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary for cancelation and then receive the corresponding number of underlying Class A ordinary shares at the custodian’s offices. Your ability to withdraw the Class A ordinary shares held in respect of the ADSs may be limited by U.S. and Cayman Islands considerations applicable at the time of withdrawal. In order to withdraw the Class A ordinary shares represented by your ADSs, you will be required to pay to the depositary the fees for cancelation of ADSs and any charges and taxes payable upon the transfer of the Class A ordinary shares. You assume the risk for delivery of all funds and securities upon withdrawal. Once canceled, the ADSs will not have any rights under the deposit agreement.
If you hold ADSs registered in your name, the depositary may ask you to provide proof of identity and genuineness of any signature and such other documents as the depositary may deem appropriate before it will cancel your ADSs. The withdrawal of the Class A ordinary shares represented by your ADSs may be delayed until the depositary receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary will only accept ADSs for cancelation that represent a whole number of securities on deposit.
You will have the right to withdraw the securities represented by your ADSs at any time except for:
•
Temporary delays that may arise because (i) the transfer books for the Class A ordinary shares or ADSs are closed, or (ii) Class A ordinary shares are immobilized on account of a shareholders’ meeting or a payment of dividends.
•
Obligations to pay fees, taxes and similar charges.
•
Restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.
Voting Rights
As a holder, you generally have the right under the deposit agreement to instruct the depositary to exercise the voting rights for the Class A ordinary shares represented by your ADSs. The voting rights of holders of Class A ordinary shares are described in “Description of Share Capital.”
At our request, the depositary will distribute to you any notice of shareholders’ meeting received from us together with information explaining how to instruct the depositary to exercise the voting rights of the securities represented by ADSs.
If the depositary timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities (in person or by proxy) represented by the holder’s ADSs in accordance with such voting instructions as follows:
•
In the event of voting by show of hands
, the depositary will vote (or cause the custodian to vote) all Class A ordinary shares held on deposit at that time, including those represented by ADSs for which no timely voting instructions are received, in accordance with the voting instructions received from a majority of holders of ADSs who provide timely voting instructions.
•
In the event of voting by poll
, the depositary will vote (or cause the Custodian to vote) the Class A ordinary shares held on deposit in accordance with the voting instructions received from the holders of ADSs.
In the event of voting by poll, holders of ADSs in respect of which no timely voting instructions have been received shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us to vote the Class A ordinary shares represented by such holders’ ADSs; provided, that no such instructions shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which we inform the depositary that (i) we do not wish such proxy to be given, (ii) there exists substantial opposition or (iii) the rights of our shareholders may be materially adversely affected. No discretionary proxy shall be given with respect to any vote by show of hands.
Please note that the ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting instructions to the depositary in a timely manner.
The depositary will not join in demanding a vote by poll. A holder of ADSs will not be able to exercise any rights that may attach to the Class A ordinary shares represented by such ADSs to requisition a shareholder meeting or propose resolutions for a shareholder vote. At our request, the depositary will represent deposited Class A ordinary shares for the purpose of establishing a quorum regardless of whether voting instructions have been provided with respect thereto.
Fees and Charges
As an ADS holder or beneficial owner, person depositing Class A ordinary shares for issuance of ADSs, person surrendering ADSs for withdrawal of Class A ordinary shares or person for whom ADSs are being issued or surrendered, you will be required to pay the following fees under the terms of the deposit agreement:
Service
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Fees
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•
Issuance of ADSs (e.g., an issuance of ADS upon a deposit of Class A ordinary shares, upon a change in the ADS(s)-to-Class A ordinary share(s) ratio, or for any other reason), excluding ADS issuances as a result of distributions of Class A ordinary shares
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Up to U.S. 5¢ per ADS (or fraction thereof) issued
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•
Cancelation of ADSs (e.g., a cancelation of ADSs for delivery of deposited property, upon a change in the ADS(s)-to-Class A ordinary share(s) ratio, or for any other reason)
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Up to U.S. 5¢ per ADS (or fraction thereof) canceled
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•
Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements)
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Up to U.S. 5¢ per ADS (or fraction thereof) held
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•
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs
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Up to U.S. 5¢ per ADS (or fraction thereof) held
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•
Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., upon a spin-off)
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Up to U.S. 5¢ per ADS (or fraction thereof) held
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•
ADS Services
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Up to U.S. 5¢ per ADS (or fraction thereof) held on the applicable record date(s) established by the depositary
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As an ADS holder or beneficial owner, person depositing Class A ordinary shares for issuance of ADSs, person surrendering ADSs for withdrawal of Class A ordinary shares or person for whom ADSs are being issued or surrendered, you will also be responsible to pay certain charges such as:
•
taxes (including applicable interest and penalties) and other governmental charges;
•
such registration fees as may from time to time be in effect for the registration of deposited shares or other securities on the share register and applicable to transfers of deposited shares or other securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively;
•
such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of the person depositing shares or withdrawing deposited shares and other deposited property or of the holders and beneficial owners of ADSs;
•
the expenses and charges incurred by the depositary in the conversion of foreign currency (including transaction spreads);
•
such fees and expenses as are incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to deposited shares or other securities, ADSs and ADRs; and
•
the fees and expenses incurred by the depositary, the custodian, or any nominee in connection with the servicing or delivery of deposited shares or other securities.
ADS fees and charges payable upon (i) the issuance of ADSs, and (ii) the cancelation of ADSs are charged to the person to or for whom the ADSs are issued (in the case of ADS issuances) and to the person whose ADSs are canceled (in the case of ADS cancellations). In the case of ADSs issued by the depositary into DTC, the ADS issuance and cancelation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC participant(s) holding the ADSs being canceled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS services fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS services fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS services fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. CERTAIN OF THE DEPOSITARY FEES AND CHARGES (SUCH AS THE ADS SERVICES FEE) MAY BECOME PAYABLE SHORTLY AFTER THE CLOSING OF THE ADS OFFERING. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of such changes. The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary agree from time to time.
Amendments and Termination
We may agree with the depositary to modify the deposit agreement at any time without your consent. We undertake to give holders 30 days’ prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. We will not consider to be materially prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADSs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges you are required to pay. In addition, we may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.
You will be bound by the modifications to the deposit agreement if you continue to hold your ADSs after the modifications to the deposit agreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the Class A ordinary shares represented by your ADSs (except as permitted by law).
We have the right to direct the depositary to terminate the deposit agreement. Similarly, the depositary may in certain circumstances on its own initiative terminate the deposit agreement. In either case, the depositary must give notice to the holders at least 30 days before termination. Until termination, your rights under the deposit agreement will be unaffected.
After termination, the depositary will continue to collect distributions received (but will not distribute any such property until you request the cancelation of your ADSs) and may sell the securities held on deposit. After the sale, the depositary will hold the proceeds from such sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the depositary will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding (after deduction of applicable fees, taxes and expenses).
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary will maintain in New York facilities to record and process the issuance, cancelation, combination, split-up and transfer of ADSs. These facilities may be closed from time to time, to the extent not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary’s obligations to you. Please note the following:
•
We and the depositary are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith. Without limiting the foregoing, neither we nor the depositary is obligated to participate in any action, suit or other proceeding relating to deposited property or the ADSs without satisfactory indemnity.
•
The depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement.
•
The depositary disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on our behalf or for the accuracy of any translation of such a document, for the investment risks associated with investing in Class A ordinary shares or other deposited property, for the validity or worth of the Class A ordinary shares or other deposited property, for the value of any Class A ordinary shares or other deposited property or any distribution thereon, for interest on Class A ordinary shares or other deposited property, for any tax consequences that result from the ownership of ADSs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the deposit agreement, for the timeliness of any of our notices or for our failure to give notice, for acts or omissions of any successor or predecessor depositary, so long as the potential liability did not arise out of the depositary’s negligence or bad faith, or for any action of or failure to act by, or any information provided or not provided by, DTC or any DTC Participant.
•
We and the depositary will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement.
•
We and the depositary disclaim any liability if we or the depositary are prevented or forbidden from or subject to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement, by reason of any
provision, present or future of any law or regulation, or by reason of present or future provision of any provision of our articles of association, or any provision of or governing the securities on deposit, or by reason of any act of God or war or other circumstances beyond our control.
•
We and the depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in our articles of association or in any provisions of or governing the securities on deposit.
•
We and the depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting Class A ordinary shares for deposit, any holder of ADSs or authorized representatives thereof, or any other person believed by either of us in good faith to be competent to give such advice or information.
•
We and the depositary also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Class A ordinary shares but is not, under the terms of the deposit agreement, made available to you.
•
We and the depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties.
•
We and the depositary also disclaim liability for any action or inaction of any clearing or settlement system (and any participant thereof) for the Class A ordinary shares, other deposited property or ADSs.
•
We and the depositary also disclaim liability for any consequential or punitive damages for any breach of the terms of the deposit agreement.
•
No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement.
•
Nothing in the deposit agreement gives rise to a partnership or joint venture, or establishes a fiduciary relationship, among us, the depositary and you as ADS holder.
•
Nothing in the deposit agreement precludes the depositary (or its affiliates) from engaging in transactions in which parties adverse to us or the ADS owners have interests, and nothing in the deposit agreement obligates the depositary to disclose those transactions, or any information obtained in the course of those transactions, to us or to the ADS owners, or to account for any payment received as part of those transactions.
Pre-Release Transactions
Subject to the terms and conditions of the deposit agreement, the depositary may issue ADSs before receiving a deposit of Class A ordinary shares or release Class A ordinary shares before receiving ADSs for cancelation. These transactions are commonly referred to as “pre-release transactions,” and are entered into between the depositary and the applicable ADS holder or depositor of Class A ordinary shares, or such person’s agent. The deposit agreement limits the aggregate size of pre-release transactions (not to exceed 30% of the Class A ordinary shares on deposit in the aggregate), which limit may be changed or disregarded by the depositary, and imposes a number of conditions on such transactions (e.g., the need to receive collateral, the type of collateral required, the representations required from brokers, etc.). The depositary may retain the compensation received from the pre-release transactions.
Taxes
You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We, the depositary and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities or other property on deposit until all taxes and charges are paid by the applicable holder. The depositary and the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary and to the custodian proof of taxpayer status and residence and such other information as the depositary and the custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements, as well as transaction spreads, brokerage fees, transmission fees and expenses.
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within a reasonable period, the depositary may take the following actions in its discretion:
•
Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversion and distribution is lawful and practical.
•
Distribute the foreign currency to holders for whom the distribution is lawful and practical.
•
Hold the foreign currency (without liability for interest) for the applicable holders.
Affiliate Transactions
The depositary may execute transactions contemplated herein (e.g., foreign currency conversions, and sales of deposited securities and other property) through one or more divisions of Citibank or through one or more Citibank affiliates, and any such entity may act as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and may earn and retain revenue from such transactions, including, without, without limitation, transaction spreads and commissions. The depositary does not guarantee or represent that the price or rate obtained in any such transaction, or the method for obtaining such price or rate, will be the most favorable that could be obtained at that time.
Governing Law/Waiver of Jury Trial
The deposit agreement and the ADRs will be interpreted in accordance with the laws of the State of New York. The rights of holders of Class A ordinary shares (including Class A ordinary shares represented by ADSs) are governed by the laws of the Cayman Islands.
AS A PARTY TO THE DEPOSIT AGREEMENT, YOU IRREVOCABLY WAIVE YOUR RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THE DEPOSIT AGREEMENT OR THE ADRs AGAINST US AND/OR THE DEPOSITARY.
SHARES ELIGIBLE FOR FUTURE SALES
Upon completion of this offering, we will have ADSs outstanding, representing approximately % of our outstanding ordinary shares, assuming the underwriters do not exercise their over-allotment option to purchase additional ADSs. All of the ADSs sold in this offering will be freely transferable by persons other than by our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our ADSs in the public market could adversely affect prevailing market prices of our ADSs. Prior to this offering, there has been no public market for our ordinary shares or the ADSs. We intend to apply to list the ADSs on the New York Stock Exchange, but we cannot assure you that a regular trading market will develop in the ADSs. We do not expect that a trading market will develop for our ordinary shares not represented by the ADSs.
Lock-up Agreements
We have agreed not to, for a period of 180 days after the date of this prospectus, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, lend or otherwise dispose of, except in this offering, any of our ordinary shares or ADSs or securities that are substantially similar to our ordinary shares or ADSs, including but not limited to any options or warrants to purchase our ordinary shares, ADSs or any securities that are convertible into or exchangeable for, or that represent the right to receive, our ordinary shares, ADSs or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date such lock-up agreement was executed), without the prior written consent of the representatives of the underwriters.
Furthermore, each of our directors, executive officers and existing shareholders has also entered into a similar lock-up agreement for a period of 180 days from the date of this prospectus, subject to certain exceptions, with respect to our ordinary shares, ADSs and securities that are substantially similar to our ordinary shares or ADSs. These parties collectively own all of our outstanding ordinary shares, without giving effect to this offering.
The restrictions described in the preceding paragraphs will be automatically extended under certain circumstances. See “Underwriting.”
Other than this offering, we are not aware of any plans by any significant shareholders to dispose of significant numbers of our ADSs or ordinary shares. However, one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our ADSs or ordinary shares may dispose of significant numbers of our ADSs or ordinary shares in the future. We cannot predict what effect, if any, future sales of our ADSs or ordinary shares, or the availability of ADSs or ordinary shares for future sale, will have on the trading price of our ADSs from time to time. Sales of substantial amounts of our ADSs or ordinary shares in the public market, or the perception that these sales could occur, could adversely affect the trading price of our ADSs.
Rule 144
All of our ordinary shares that will be outstanding upon the completion of this offering, other than those Class A ordinary shares sold in this offering, are “restricted securities” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144 and Rule 701 promulgated under the Securities Act. In general, beginning 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who at the time of a sale is not, and has not been during the three months preceding the sale, an affiliate of ours and has beneficially owned our restricted securities for at least six months will be entitled to sell the restricted securities without registration under the Securities Act, subject only to the availability of
current public information about us, and will be entitled to sell restricted securities beneficially owned for at least one year without restriction. Persons who are our affiliates and have beneficially owned our restricted securities for at least six months may sell a number of restricted securities within any three-month period that does not exceed the greater of the following:
•
1% of the then outstanding ordinary shares of the same class, in the form of ADSs or otherwise, which immediately after this offering will equal ordinary shares, assuming the underwriters do not exercise their over-allotment option; or
•
the average weekly trading volume of our ordinary shares of the same class, in the form of ADSs or otherwise, during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.
Sales by our affiliates under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public information about us.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those ordinary shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
TAXATION
The following summary of the material Cayman Islands, PRC and United States federal income tax consequences of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this registration statement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the ordinary shares, nor will gains derived from the disposal of the ordinary shares be subject to Cayman Islands income or corporation tax.
No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
We do not believe that Weidai Ltd. meets all of the conditions above. Weidai Ltd. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with ours.
However, if the PRC tax authorities determine that Weidai Ltd. is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. Such 10% tax rate could be reduced by applicable tax treaties or similar arrangements between China and the jurisdiction of our shareholders. For example, for shareholders eligible for the benefits of the tax treaty between China and Hong Kong, the tax rate is reduced to 5% for dividends if relevant conditions are met. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of Weidai Ltd. would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that Weidai Ltd. is treated as a PRC resident enterprise.
Provided that our Cayman Islands holding company, Weidai Ltd., is not deemed to be a PRC resident enterprise, holders of our ADSs and ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However, under Circular 7, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee would be obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under Circular 7, and we may be required to expend valuable resources to comply with Bulletin 37, or to establish that we should not be taxed under Circular 7 and Bulletin 37. See “Risk Factors — Risks Related to Doing Business in China — We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company, or immovable properties located in China owned by non-Chinese companies.”
United States Federal Income Tax Considerations
The following is a summary of material U.S. federal income tax considerations that are likely to be relevant to the purchase, ownership and disposition of our Class A ordinary shares or ADSs by a U.S. Holder (as defined below).
This summary is based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial interpretations thereof, in force as of the date hereof. Those authorities may be changed at any time, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below.
This summary is not a comprehensive discussion of all of the tax considerations that may be relevant to a particular investor’s decision to purchase, hold, or dispose of Class A ordinary shares or ADSs. In particular, this summary is directed only to U.S. Holders that hold Class A ordinary shares or ADSs as capital assets and does not address all of the tax consequences to U.S. Holders who may be subject to special tax rules, such as banks, brokers or dealers in securities or currencies, traders in securities electing to mark to market, financial institutions, insurance companies, tax exempt entities, partnerships (including any entities treated as partnerships for U.S. federal income tax purposes) and the partners therein, holders that own or are treated as owning 10% or more of our shares (measured by vote or value), persons holding Class A ordinary shares or ADSs as part of a hedging or conversion transaction or a straddle, or persons whose functional currency is not the U.S. dollar. Moreover, this summary does not address state, local or
non-U.S. taxes, the U.S. federal estate and gift taxes, or the Medicare contribution tax applicable to net investment income of certain non-corporate U.S. Holders, or alternative minimum tax consequences of acquiring, holding or disposing of Class A ordinary shares or ADSs.
For purposes of this summary, a “U.S. Holder” is a beneficial owner of Class A ordinary shares or ADSs that is a citizen or resident of the United States or a U.S. domestic corporation or that otherwise is subject to U.S. federal income taxation on a net income basis in respect of such Class A ordinary shares or ADSs.
You should consult your own tax advisors about the consequences of the acquisition, ownership and disposition of the ordinary shares or ADSs, including the relevance to your particular situation of the considerations discussed below and any consequences arising under non-U.S., state, local or other tax laws.
ADSs
In general, if you are a U.S. Holder of ADSs, you will be treated, for U.S. federal income tax purposes, as the beneficial owner of the underlying ordinary shares that are represented by those ADSs.
Taxation of Dividends
Subject to the discussion below under “Passive Foreign Investment Company Rules,” the gross amount of any distribution of cash or property with respect to our Class A ordinary shares or ADSs (including amounts, if any, withheld to reflect PRC taxes) that is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will generally be includible in your taxable income as ordinary dividend income on the day on which you receive the dividend, in the case of Class A ordinary shares, or the date the depositary receives the dividends, in the case of ADSs, and will not be eligible for the dividends-received deduction allowed to U.S. corporations under the Code.
We do not expect to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles. U.S. Holders therefore should expect that distributions generally will be treated as dividends for U.S. federal income tax purposes.
Subject to certain exceptions for short-term and hedged positions, the dividends received by a non-corporate U.S. Holder with respect to the Class A ordinary shares or ADSs will be subject to taxation at a preferential rate if the dividends are “qualified dividends.” Dividends paid on the Class A ordinary shares or ADSs will be treated as qualified dividends if:
•
the Class A ordinary shares or ADSs on which the dividend is paid are readily tradable on an established securities market in the United States or we are eligible for the benefits of a comprehensive tax treaty with the United States that the U.S. Treasury determines is satisfactory for purposes of these rules and that includes an exchange of information program; and
•
we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC.
We will apply to list the ADSs on the New York Stock Exchange, and the ADSs will qualify as readily tradable on an established securities market in the United States so long as they are so listed. As discussed under “Passive Foreign Investment Company Rules,” we are not able to determine at this time whether we will be a PFIC for U.S. federal income tax purposes for any taxable year.
Because the Class A ordinary shares are not themselves listed on a U.S. exchange, dividends received with respect to the Class A ordinary shares that are not represented by ADSs may not be treated as qualified dividends. U.S. Holders of Class A ordinary shares or ADSs should consult their own tax advisors regarding the potential availability of the reduced dividend tax rate in light of their own particular circumstances.
In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “Taxation — People’s Republic of China Taxation”), a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our ADSs or Class A ordinary shares. In that case, we may, however, be eligible for the benefits of the Agreement Between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and
the Prevention of Tax Evasion with Respect to Taxes on Income (the “Treaty”). If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented by the ADSs, would be eligible for the reduced rates of taxation described above (assuming we are not a PFIC in the year the dividend is paid or the prior year). Dividend distributions with respect to our Class A ordinary shares or ADSs generally will be treated as “passive category” income from sources outside the United States for purposes of determining a U.S. Holder’s U.S. foreign tax credit limitation. Subject to the limitations and conditions provided in the Code and the applicable U.S. Treasury Regulations, a U.S. Holder may be able to claim a foreign tax credit against its U.S. federal income tax liability in respect of any PRC income taxes withheld at the appropriate rate applicable to the U.S. Holder from a dividend paid to such U.S. Holder. Alternatively, the U.S. Holder may deduct such PRC income taxes from its U.S. federal taxable income, provided that the U.S. Holder elects to deduct rather than credit all foreign income taxes for the relevant taxable year. The rules with respect to foreign tax credits are complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit or the deductibility of foreign taxes under their particular circumstances.
U.S. Holders that receive distributions of additional ADSs or Class A ordinary shares or rights to subscribe for ADSs or Class A ordinary shares as part of a pro rata distribution to all our shareholders generally will not be subject to U.S. federal income tax in respect of the distributions.
Taxation of Dispositions of ADSs or Class A Ordinary Shares
Subject to the discussion below under “Passive Foreign Investment Company Rules,” if a U.S. Holder realizes gain or loss on the sale, exchange or other disposition of ADSs or Class A ordinary shares, that gain or loss will be capital gain or loss and generally will be long-term capital gain or loss if the ADS or Class A ordinary shares have been held for more than one year. Long-term capital gain realized by a non-corporate U.S. Holder generally is subject to taxation at a preferential rate. The deductibility of capital losses is subject to limitations.
Gain, if any, realized by a U.S. Holder on the sale or other disposition of the ADSs or Class A ordinary shares generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, if a PRC tax is imposed on the sale or other disposition, a U.S. Holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such PRC tax. However, in the event that gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in the PRC, and a U.S. Holder is eligible for the benefits of the Treaty, such holder may elect to treat such gain as PRC source gain under the Treaty. U.S. Holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, the ADSs or Class A ordinary shares.
Deposits and withdrawals of Class A ordinary shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
Passive Foreign Investment Company Rules.
Special U.S. tax rules apply to companies that are considered to be PFICs. We will be classified as a PFIC in a particular taxable year if either
•
75 percent or more of our gross income for the taxable year is passive income; or
•
the average percentage of the value of our assets that produce or are held for the production of passive income is at least 50 percent.
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. Although the law in this regard is not entirely clear, we treat our VIE as being owned by us for U.S. federal income tax purposes because we control its management decisions and are entitled to substantially all of the economic benefits associated with it.
Based on our current financial statements, as well as uncertainty as to the composition of our income and assets and the value of our assets, we may be a PFIC for the current taxable year, and for future years. The PFIC tests must be applied each year, taking into account our income and assets throughout the entire year, with such assets measured at the end of each quarter. The composition of our income and assets and the value of our assets may change at the end of the remaining quarters of the current year. In particular, because the value of our assets will be determined by reference to the market value of our ADS, and the market value of our ADSs at the end of the remaining quarters of this year is uncertain and subject to change, we cannot predict what the value of our assets will be for purposes of the PFIC asset test described above for the current year. Similarly, depending on the market value of our ADSs and the overall composition of our assets and income, we may be a PFIC in future years. We are not able to determine at this time whether we will be a PFIC for our current taxable year or any future taxable year, and there is a substantial risk that we will be so treated.
In the event that we are classified as a PFIC in any year during which a U.S. Holder holds our Class A ordinary shares or ADSs and such U.S. Holder does not make a mark-to-market election, as described below, the holder will be subject to a special tax at ordinary income tax rates on “excess distributions,” including certain distributions by us (generally, distributions that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the Holder’s holding period for the Class A ordinary shares or ADSs) and gain that the holder recognizes on the sale of our Class A ordinary shares or ADSs. The amount of income tax on any excess distributions will be increased by an interest charge to compensate for tax deferral, calculated as if the excess distributions were earned ratably over the period that the U.S. Holder holds its Class A ordinary shares or ADSs. Classification as a PFIC may also have other adverse tax consequences, including, in the case of individuals, the denial of a step-up in the basis of his or her Class A ordinary shares or ADSs at death.
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year during which a U.S. Holder holds our Class A ordinary shares or ADSs, such holder will generally be subject to the unfavorable rules described above for that year and for each subsequent year in which such holder holds the Class A ordinary shares or ADSs (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be a PFIC, a U.S. Holder can avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if such holder’s Class A ordinary shares or ADSs had been sold on the last day of the last taxable year during which we were a PFIC. U.S. Holders should consult their own tax advisor about this election.
A U.S. Holder may be able to avoid the unfavorable rules described above by electing to mark its ADSs to market, provided the ADSs are treated as “marketable stock.” The ADSs generally will be treated as marketable stock if the ADSs are “regularly traded” on a “qualified exchange or other market” (which includes the New York Stock Exchange). It should also be noted that it is intended that only the ADSs and not the Class A ordinary shares will be listed on the New York Stock Exchange. Consequently, a U.S. Holder that holds Class A ordinary shares that are not represented by ADSs may not be eligible to make a mark-to-market election. If the U.S. Holder makes a mark-to-market election, the holder will be required in any year in which we are a PFIC to include as ordinary income the excess of the fair market value of its ADSs at year-end over the holder’s basis in those ADSs. A U.S. Holder’s adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. In addition, any gain the U.S. Holder recognizes upon the sale of the holder’s ADSs in a year in which we are PFIC will be taxed as ordinary income in the year of sale. If a U.S. Holder makes a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a “qualified exchange or other market” or the Internal Revenue Service (“IRS”) consents to the revocation of the election. U.S. Holders are urged to consult their own tax advisors about the availability of the mark- to-market election, the consequences of not making a mark-to-market election for the first year during which a U.S. Holder holds interests in our ADSs or Class A ordinary shares and we are a PFIC, and whether making the election would be advisable in their particular circumstances.
Although a U.S. Holder can avoid the unfavorable PFIC rules described above by electing to treat its ADSs or Class A ordinary shares as interests in a qualified electing fund (“QEF”), we do not intend to provide the information that would allow a U.S. Holder to make such an election. Accordingly, in the event that we are treated as a PFIC, a U.S. Holder will not be able to make a “QEF election.”
A U.S. Holder that owns an equity interest in a PFIC must annually file IRS Form 8621. A failure to file one or more of these forms as required may toll the running of the statute of limitations in respect of each of the U.S. Holder’s taxable years for which such form is required to be filed. As a result, the taxable years with respect to which the U.S. Holder fails to file the form may remain open to assessment by the IRS indefinitely, until the form is filed.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, such holder will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. U.S. Holders should consult their own tax advisors about the possible application of the PFIC rules to any of our subsidiaries.
U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax considerations discussed above and the desirability of making a mark-to-market election.
Foreign Financial Asset Reporting
Certain U.S. Holders who are individuals that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the Class A ordinary shares and the ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. Holders that fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Class A ordinary shares or the ADSs, including the application of the rules to their particular circumstances.
Backup Withholding and Information Reporting
Dividends paid on, and proceeds from the sale or other disposition of, the ADSs or Class A ordinary shares that are paid to a U.S. Holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the U.S. Holder provides an accurate taxpayer identification number and makes any other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a refund or credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS in a timely manner.
A holder that is a foreign corporation or a non-resident alien individual may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.
UNDERWRITING
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. International plc, Credit Suisse Securities (USA) LLC and Citigroup Global Markets Inc. are acting as representatives, have severally agreed to purchase, and we [and the selling shareholders] have agreed to sell to them, severally, the number of ADSs indicated below:
Name
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Number of ADSs
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Morgan Stanley & Co. International plc
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Credit Suisse Securities (USA) LLC
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Citigroup Global Markets Inc.
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Total:
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The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the ADSs subject to their acceptance of the ADSs from us [and the selling shareholders] and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken. However, the underwriters are not required to take or pay for the ADSs covered by the underwriters’ over-allotment option described below.
The underwriters initially propose to offer part of the ADSs directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of US$ per ADS under the initial public offering price. After the initial offering of the ADSs, the offering price and other selling terms may from time to time be varied by the representatives.
We [and the selling shareholders] have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional ADSs at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the ADSs offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional ADSs as the number listed next to the underwriter’s name in the preceding table bears to the total number of ADSs listed next to the names of all underwriters in the preceding table.
The following table shows the per ADS and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us [and the selling shareholders]. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional ADSs.
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Total
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Per ADS
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No Exercise
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Full Exercise
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Public offering price
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US$
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|
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US$
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US$
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|
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Underwriting discounts and commissions to be paid by us:
|
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US$
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|
|
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US$
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|
|
|
|
|
US$
|
|
|
|
Proceeds, before expenses, to us
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
|
|
Underwriting discounts and commissions to be paid by the selling shareholders:
|
|
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US$
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US$
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Proceeds, before expenses, to the selling shareholders
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The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately US$ .
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of ADSs offered by them.
Some of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC. Morgan Stanley & Co. International plc will offer ADSs in the United States through its registered broker-dealer affiliate in the United States, Morgan Stanley & Co. LLC.
We intend to apply for the listing of our ADSs on the New York Stock Exchange under the trading symbol “WEI.”
We and all directors and officers and all existing shareholders have agreed that, without the prior written consent of the representatives on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus (the “restricted period”):
•
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares, ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs;
•
file any registration statement with the Securities and Exchange Commission relating to the offering of any ordinary shares, ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs; or
•
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of ordinary shares or ADSs,
whether any such transaction described above is to be settled by delivery of ordinary shares, ADSs or such other securities, in cash or otherwise. In addition, we and each such person agrees that, without the prior written consent of the representatives on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any ordinary shares, ADSs or any security convertible into or exercisable or exchangeable for ordinary shares or ADSs.
The restrictions described in the preceding paragraph are subject to certain exceptions.
The representatives, in their sole discretion, may release the ordinary shares, ADSs and other securities subject to the lock-up agreements described above in whole or in part at any time.
In order to facilitate the offering of the ADSs, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the ADSs. Specifically, the underwriters may sell more ADSs than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of ADSs available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing ADSs in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell ADSs in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, ADSs in the open market to stabilize the price of the ADSs. Finally, the underwriters may reclaim selling concessions allowed to an underwriter or a dealer for distributing the ADSs in this offering, if the syndicate repurchases previously distributed ADSs to cover syndicate short positions or to stabilize the price of the ADSs. These activities may raise or maintain the market price of the ADSs above independent market levels or prevent or retard a decline in the market price of the ADSs. The underwriters are not required to engage in these activities and may end any of these activities at any time.
We[, the selling shareholders] and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of ADSs to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
The address of Morgan Stanley & Co. International plc is 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom. The address of Credit Suisse Securities (USA) LLC is Eleven Madison Avenue, New York, New York 10010, United States of America. The address of Citigroup Global Markets Inc. is 388 Greenwich Street, New York, New York 10013, United States of America.
Pricing of the Offering
Prior to this offering, there has been no public market for our ordinary shares or ADSs. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
[Directed Share Program
At our request, the underwriters have reserved up to % of the ADSs to be issued by us and offered by this prospectus for sale, at the initial public offering price, to some of our existing shareholders and business associates and related persons. The number of ADSs available for sale to the general public will be reduced to the extent these individuals purchase such reserved ADSs. Any reserved ADSs that are not so purchased will be offered by the underwriters to the general public on the same basis as the other ADSs offered by this prospectus.]
Selling Restrictions
No action may be taken in any jurisdiction other than the United States that would permit a public offering of the ADSs or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither the prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.
Australia
This document has not been lodged with the Australian Securities & Investments Commission and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:
(a)
you confirm and warrant that you are either:
(i)
“sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act 2001 (Cth) of Australia, or the Corporations Act;
(ii)
“sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;
(iii)
person associated with the company under section 708(12) of the Corporations Act; or
(iv)
“professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act;
and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act, any offer made to you under this document is void and incapable of acceptance;
(b)
you warrant and agree that you will not offer any of the ADSs issued to you pursuant to this document for resale in Australia within 12 months of those ADSs being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
Canada
The ADSs may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106
Prospectus Exemptions
or subsection 73.3(1) of the
Securities Act
(Ontario), and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations
. Any resale of the ADSs must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105
Underwriting Conflicts
(“NI 33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Cayman Islands
This prospectus does not constitute an invitation or offer to the public in the Cayman Islands of the ADSs, whether by way of sale or subscription. The underwriters have not offered or sold, and will not offer or sell, directly or indirectly, any ADSs in the Cayman Islands.
Dubai International Finance Center
This document relates to an Exempt Offer, as defined in the Offered Securities Rules module of the DFSA Rulebook, or the OSR, in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to Persons, as defined in the OSR, of a
type specified in those rules. It must not be delivered to, or relied on by, any other Person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The ADSs to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the ADSs offered should conduct their own due diligence on the ADSs. If you do not understand the contents of this document you should consult an authorized financial adviser.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State unless the prospectus has been approved by the competent authority in such Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
•
to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
•
to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000 and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
•
by the underwriters to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or
•
in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that no such offer of shares shall result in a requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Any person making or intending to make any offer of shares within the EEA should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of shares through any financial intermediary, other than offers made by the underwriters which constitute the final offering of shares contemplated in this prospectus.
For the purposes of this provision, and your representation below, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any shares under, the offer of shares contemplated by this prospectus will be deemed to have represented, warranted and agreed to and with us and each underwriter that:
•
it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and
•
in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the shares acquired by it in the offering have not been
acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” (as defined in the Prospectus Directive), or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or (ii) where shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Hong Kong
The ADSs may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the ADSs may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder.
Japan
The ADSs have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, and ADSs will not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to any exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Korea
The ADSs may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for reoffering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Korea Securities and Exchange Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. The ADSs have not been registered with the Financial Services Commission of Korea for public offering in Korea. Furthermore, the ADSs may not be resold to Korean residents unless the purchaser of the ADSs complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with the purchase of the ADSs.
Kuwait
Unless all necessary approvals from the Kuwait Ministry of Commerce and Industry required by Law No. 31/1990 “Regulating the Negotiation of Securities and Establishment of Investment Funds,” its Executive Regulations and the various Ministerial Orders issued pursuant thereto or in connection
therewith, have been given in relation to the marketing and sale of the ADSs, these may not be marketed, offered for sale, nor sold in the State of Kuwait. Neither this prospectus (including any related document), nor any of the information contained therein is intended to lead to the conclusion of any contract of whatsoever nature within Kuwait.
Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the securities has been or will be registered with the Securities Commission of Malaysia, or Commission, for the Commission’s approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services License; (iii) a person who acquires the securities as principal, if the offer is on terms that the securities may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the securities is made by a holder of a Capital Markets Services License who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.
Mexico
None of the ADSs or the ordinary shares have been or will be registered with the National Securities Registry (Registro Nacional de Valores) maintained by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) of Mexico and, as a result, may not be offered or sold publicly in Mexico. The ADSs and the ordinary shares may only be sold to Mexican institutional and qualified investors, pursuant to the private placement exemption set forth in the Mexican Securities Market Law (Ley del Mercado de Valores).
People’s Republic of China
This prospectus has not been and will not be circulated or distributed in the PRC, and ADSs may not be offered or sold, and will not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.
Qatar
In the State of Qatar, the offer contained herein is made on an exclusive basis to the specifically intended recipient thereof, upon that person’s request and initiative, for personal use only and shall in no way be construed as a general offer for the sale of securities to the public or an attempt to do business as a bank, an investment company or otherwise in the State of Qatar. This prospectus and the underlying securities have not been approved or licensed by the Qatar Central Bank or the Qatar Financial Centre Regulatory Authority or any other regulator in the State of Qatar. The information contained in this
prospectus shall only be shared with any third parties in Qatar on a need to know basis for the purpose of evaluating the contained offer. Any distribution of this prospectus by the recipient to third parties in Qatar beyond the terms hereof is not permitted and shall be at the liability of such recipient.
Saudi Arabia
This prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority. The Capital Market Authority does not make any representation as to the accuracy or completeness of this prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this prospectus. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this prospectus you should consult an authorized financial adviser.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our ADSs may not be circulated or distributed, nor may our ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where our ADSs are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor; shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the ADSs under Section 275 of the SFA, except: (1) to an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation of law.
Switzerland
The ADSs will not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to our company or the ADSs have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of the ADSs will not be supervised by, the Swiss Financial Market Supervisory Authority, and the offer of the ADSs has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the ADSs.
Taiwan
The ADSs have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that require a registration, filing or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the ADSs in Taiwan.
United Arab Emirates.
This prospectus is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of the United Arab Emirates, or the UAE. The ADSs have not been and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and the Emirates Security and Commodity Exchange, or with the UAE Central Bank, the Dubai Financial Market, the Abu Dhabi Securities Market or with any other UAE exchange.
The offering, the ADSs and interests therein have not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities in the UAE, and do not constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise.
In relation to its use in the UAE, this prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the ADSs may not be offered or sold directly or indirectly to the public in the UAE.
United Kingdom
Each underwriter has represented and agreed that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) received by it in connection with the issue or sale of the ADSs in circumstances in which Section 21(1) of the FSMA does not apply to us; and
(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the ADSs in, from or otherwise involving the United Kingdom.
EXPENSES RELATED TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee, and the NYSE market entry and listing fee, all amounts are estimates.
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SEC Registration Fee
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US$
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FINRA Filing Fee
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NYSE Market Entry and Listing Fee
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Printing and Engraving Expenses
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Legal Fees and Expenses
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Accounting Fees and Expenses
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Miscellaneous
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Total
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US$
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LEGAL MATTERS
We are being represented by Cleary Gottlieb Steen & Hamilton LLP with respect to certain legal matters as to United States federal securities and New York State law. The underwriters are being represented by Simpson Thacher & Bartlett LLP with respect to certain legal matters as to United States federal securities and New York State law. The validity of the ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Conyers Dill & Pearman. Certain legal matters as to PRC law will be passed upon for us by Grandall Law Firm (Shanghai) and for the underwriters by Han Kun Law Offices. Cleary Gottlieb Steen & Hamilton LLP may rely upon Conyers Dill & Pearman with respect to matters governed by Cayman Islands law and Grandall Law Firm (Shanghai) with respect to matters governed by PRC law. Simpson Thacher & Bartlett LLP may rely upon Han Kun Law Offices with respect to matters governed by PRC law.
EXPERTS
The consolidated financial statements of Weidai Ltd. at December 31, 2017 and 2016, and for the years then ended, appearing in this prospectus and registration statement have been audited by Ernst & Young Hua Ming LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in auditing and accounting.
The office of Ernst &Young Hua Ming LLP is located at 18/F, Ernst & Young Tower, No. 13 Zhujiang East Road, Tianhe District, Guangzhou 510623, People’s Republic of China.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement, including relevant exhibits, with the SEC on Form F-1 under the Securities Act with respect to the underlying ordinary shares represented by the ADSs to be sold in this offering. We have also filed a related registration statement on Form F-6 with the SEC to register the ADSs. This prospectus, which constitutes a part of the registration statement on Form F-1, does not contain all of the information contained in the registration statement. You should read our registration statements and their exhibits and schedules for further information with respect to us and our ADSs.
Immediately upon the effectiveness of the registration statement on Form F-1 of which this prospectus forms a part, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be obtained over the internet at the SEC’s website at
www.sec.gov
or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of documents, upon payment of a duplicating fee, by writing to the SEC.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to furnish the depositary with our annual reports, which will include a review of operations and annual audited consolidated combined financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, if we so request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.
[Page intentionally left blank for graphics]
WEIDAI LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Page
|
|
|
|
|
|
|
F-2
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
F-7
|
|
|
|
|
|
|
|
F-8
|
|
|
|
|
|
|
|
F-9
|
|
|
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
Page
|
|
|
|
|
|
|
F-54
|
|
|
|
|
|
|
|
F-58
|
|
|
|
|
|
|
|
F-60
|
|
|
|
|
|
|
|
F-62
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Weidai Ltd.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Weidai Ltd. (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young Hua Ming LLP
We have served as the Company’s auditor since 2018.
Guangzhou, The People’s Republic of China
May 25, 2018, except for Note 22, as to which the date is August 10, 2018
WEIDAI LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Note
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
266,820
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
1,092,921
|
|
|
|
|
|
165,166
|
|
|
Loans and advances, net (net of allowance of RMB67,528 and RMB404,930 (US$61,194) as of December 31, 2016 and 2017, respectively)
|
|
|
4
|
|
|
|
|
293,158
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
292,952
|
|
|
Short-term investments
|
|
|
5
|
|
|
|
|
—
|
|
|
|
|
|
8,500
|
|
|
|
|
|
1,285
|
|
|
Prepaid expenses and other assets
|
|
|
6
|
|
|
|
|
328,853
|
|
|
|
|
|
433,597
|
|
|
|
|
|
65,527
|
|
|
Amounts due from related parties
|
|
|
17
|
|
|
|
|
74,200
|
|
|
|
|
|
9,168
|
|
|
|
|
|
1,385
|
|
|
Total current assets
|
|
|
|
|
|
|
|
2,011,025
|
|
|
|
|
|
5,248,250
|
|
|
|
|
|
793,135
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
4,000
|
|
|
|
|
|
604
|
|
|
Long-term investments
|
|
|
7
|
|
|
|
|
13,333
|
|
|
|
|
|
359,333
|
|
|
|
|
|
54,304
|
|
|
Loans and advances, net (net of allowance of nil and RMB1,360 (US$206) as of December 31, 2016 and 2017, respectively)
|
|
|
4
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
Prepaid expenses and other assets
|
|
|
6
|
|
|
|
|
2,043
|
|
|
|
|
|
8,048
|
|
|
|
|
|
1,216
|
|
|
Property, equipment and software, net
|
|
|
8
|
|
|
|
|
45,410
|
|
|
|
|
|
99,433
|
|
|
|
|
|
15,027
|
|
|
Deferred tax assets
|
|
|
14
|
|
|
|
|
33,679
|
|
|
|
|
|
158,566
|
|
|
|
|
|
23,963
|
|
|
Total non-current assets
|
|
|
|
|
|
|
|
94,465
|
|
|
|
|
|
1,019,551
|
|
|
|
|
|
154,078
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
|
2,105,490
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
947,213
|
|
|
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
(including current liabilities of the consolidated VIE
and subsidiaries without recourse to the primary beneficiary of
RMB1,360,563 and RMB4,633,990 (US$700,305) as of
December 31, 2016 and 2017, respectively):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
9
|
|
|
|
|
—
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Payable to institutional funding partners and online investors
|
|
|
10
|
|
|
|
|
94,663
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
267,592
|
|
|
Current account with online investors and borrowers
|
|
|
11
|
|
|
|
|
890,192
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
284,633
|
|
|
Income tax payable
|
|
|
|
|
|
|
|
111,450
|
|
|
|
|
|
243,338
|
|
|
|
|
|
36,774
|
|
|
Accrued expenses and other liabilities
|
|
|
12
|
|
|
|
|
189,514
|
|
|
|
|
|
461,295
|
|
|
|
|
|
69,713
|
|
|
Amounts due to related parties
|
|
|
17
|
|
|
|
|
61,548
|
|
|
|
|
|
62,900
|
|
|
|
|
|
9,506
|
|
|
Deferred revenue
|
|
|
|
|
|
|
|
13,196
|
|
|
|
|
|
12,330
|
|
|
|
|
|
1,862
|
|
|
Total current liabilities
|
|
|
|
|
|
|
|
1,360,563
|
|
|
|
|
|
4,633,990
|
|
|
|
|
|
700,305
|
|
|
Non-current liabilities
(including non-current liabilities of the consolidated VIE and subsidiaries without recourse to the primary beneficiary of RMB9,433 and RMB457,724 (US$69,173) as of December 31, 2016 and 2017, respectively):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to institutional funding partners
|
|
|
10
|
|
|
|
|
—
|
|
|
|
|
|
416,118
|
|
|
|
|
|
62,885
|
|
|
Deferred revenue
|
|
|
|
|
|
|
|
1,100
|
|
|
|
|
|
887
|
|
|
|
|
|
134
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
8,333
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
|
9,433
|
|
|
|
|
|
457,724
|
|
|
|
|
|
69,173
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
1,369,996
|
|
|
|
|
|
5,091,714
|
|
|
|
|
|
769,478
|
|
|
Commitments and contingencies
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED BALANCE SHEETS – (CONTINUED)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Note
|
|
|
As of December 31,
|
|
|
Pro forma
shareholders’ equity
as of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
Mezzanine equity:
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred shares (par value of
US$0.0001 per share; 182,925 shares
authorized, issued and outstanding as
of December 31, 2016 and 2017)
|
|
|
|
|
|
|
|
18,856
|
|
|
|
|
|
18,856
|
|
|
|
|
|
2,850
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series A+ preferred shares (par value of
US$0.0001 per share; 36,585 shares
authorized, issued and outstanding as
of December 31, 2016 and 2017)
|
|
|
|
|
|
|
|
3,771
|
|
|
|
|
|
3,771
|
|
|
|
|
|
570
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series B preferred shares (par value of
US$0.0001 per share; 60,976 shares
authorized, issued and outstanding as
of December 31, 2016 and 2017)
|
|
|
|
|
|
|
|
6,283
|
|
|
|
|
|
6,283
|
|
|
|
|
|
950
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series C redeemable convertible preferred
shares (par value of US$0.0001 per
share; 61,488 shares authorized, issued
and outstanding as of December 31,
2016 and 2017)
|
|
|
|
|
|
|
|
360,000
|
|
|
|
|
|
360,000
|
|
|
|
|
|
54,403
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total mezzanine equity
|
|
|
|
|
|
|
|
388,910
|
|
|
|
|
|
388,910
|
|
|
|
|
|
58,773
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares (par value of US$0.0001
per share; 499,658,026 shares
authorized, 967,841 shares issued and
outstanding as of December 31, 2016
and 2017)
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Class A ordinary shares (par value of US$0.0001 per share; 608,387 shares issued and outstanding as of December 31, 2016 and 2017, pro forma)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Class B ordinary shares (par value of US$0.0001 per share; 701,428 shares issued and outstanding, as of December 31, 2016 and 2017, pro forma)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
468,352
|
|
|
|
|
|
468,352
|
|
|
|
|
|
70,779
|
|
|
|
|
|
857,263
|
|
|
|
|
|
129,553
|
|
|
(Accumulated deficit)/retained
earnings
|
|
|
|
|
|
|
|
(123,769
)
|
|
|
|
|
|
318,824
|
|
|
|
|
|
48,183
|
|
|
|
|
|
318,824
|
|
|
|
|
|
48,182
|
|
|
Total Weidai Ltd. shareholder’s equity
|
|
|
|
|
|
|
|
344,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
118,962
|
|
|
|
|
|
1,176,087
|
|
|
|
|
|
177,735
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total shareholders’ equity
|
|
|
|
|
|
|
|
346,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
118,962
|
|
|
|
|
|
1,176,087
|
|
|
|
|
|
177,735
|
|
|
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
2,105,490
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
947,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Note
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan facilitation services (including related party amounts of RMB833 and RMB851 (US$129) for the years ended December 31, 2016 and 2017, respectively)
|
|
|
|
|
|
|
|
1,410,246
|
|
|
|
|
|
2,691,953
|
|
|
|
|
|
406,818
|
|
|
Post facilitation services
|
|
|
|
|
|
|
|
146,051
|
|
|
|
|
|
300,185
|
|
|
|
|
|
45,365
|
|
|
Other revenues (including related party amounts of RMB2,179 and
RMB3,740 (US$565) for the years ended December 31, 2016 and
2017, respectively)
|
|
|
|
|
|
|
|
204,953
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
Financing income
|
|
|
|
|
|
|
|
9,053
|
|
|
|
|
|
303,292
|
|
|
|
|
|
45,835
|
|
|
Less: Funding costs
|
|
|
|
|
|
|
|
(2,439
)
|
|
|
|
|
|
(39,056
)
|
|
|
|
|
|
(5,903
)
|
|
|
Net financing income
|
|
|
|
|
|
|
|
6,614
|
|
|
|
|
|
264,236
|
|
|
|
|
|
39,932
|
|
|
Business related taxes and surcharges
|
|
|
|
|
|
|
|
(6,484
)
|
|
|
|
|
|
(15,981
)
|
|
|
|
|
|
(2,415
)
|
|
|
Total net revenues
|
|
|
|
|
|
|
|
1,761,380
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
Provision for loans and advances
|
|
|
|
|
|
|
|
(144,617
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
Net revenues after provision for loans and advances
|
|
|
|
|
|
|
|
1,616,763
|
|
|
|
|
|
3,061,367
|
|
|
|
|
|
462,645
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and servicing (including related party amounts of
RMB177,210 and RMB260,026 (US$39,296) for the years ended
December 31, 2016 and 2017, respectively)
|
|
|
|
|
|
|
|
(993,623
)
|
|
|
|
|
|
(1,784,914
)
|
|
|
|
|
|
(269,743
)
|
|
|
Sales and marketing (including related party amounts of RMB3,264
and RMB7,978 (US$1,206) for the years ended December 31,
2016 and 2017, respectively)
|
|
|
|
|
|
|
|
(71,139
)
|
|
|
|
|
|
(273,838
)
|
|
|
|
|
|
(41,383
)
|
|
|
General and administrative (including related party amounts of RMB179 and RMB21,387 (US$3,232) for the years ended December 31, 2016 and 2017, respectively)
|
|
|
|
|
|
|
|
(117,004
)
|
|
|
|
|
|
(316,772
)
|
|
|
|
|
|
(47,872
)
|
|
|
Research and development
|
|
|
|
|
|
|
|
(56,142
)
|
|
|
|
|
|
(100,966
)
|
|
|
|
|
|
(15,258
)
|
|
|
Total operating costs and expenses
|
|
|
|
|
|
|
|
(1,237,908
)
|
|
|
|
|
|
(2,476,490
)
|
|
|
|
|
|
(374,256
)
|
|
|
Income from operations
|
|
|
|
|
|
|
|
378,855
|
|
|
|
|
|
584,877
|
|
|
|
|
|
88,389
|
|
|
Interest income, net
|
|
|
13
|
|
|
|
|
13,648
|
|
|
|
|
|
30,303
|
|
|
|
|
|
4,579
|
|
|
Government subsidies
|
|
|
|
|
|
|
|
4,653
|
|
|
|
|
|
53,616
|
|
|
|
|
|
8,103
|
|
|
Other expense, net
|
|
|
|
|
|
|
|
(997
)
|
|
|
|
|
|
(772
)
|
|
|
|
|
|
(117
)
|
|
|
Net income before income taxes
|
|
|
|
|
|
|
|
396,159
|
|
|
|
|
|
668,024
|
|
|
|
|
|
100,954
|
|
|
Income tax expenses
|
|
|
14
|
|
|
|
|
(105,130
)
|
|
|
|
|
|
(193,203
)
|
|
|
|
|
|
(29,197
)
|
|
|
Net income
|
|
|
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net income and comprehensive income attributable to Weidai Ltd.’s shareholders
|
|
|
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Dividends declared to preferred shareholders
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(8,604
)
|
|
|
|
|
|
(1,301
)
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
|
|
|
(861
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Accretion to redemption value of Series C redeemable convertible preferred shares
|
|
|
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net income and comprehensive income attributable to ordinary shareholders
|
|
|
|
|
|
|
|
170,168
|
|
|
|
|
|
466,217
|
|
|
|
|
|
70,456
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (CONTINUED)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Note
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
Diluted
|
|
|
15
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
Shares used in earnings per share computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Diluted
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
Pro forma earnings per share for Class A and Class B ordinary shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
362.51
|
|
|
|
|
|
54.78
|
|
|
Diluted (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
362.51
|
|
|
|
|
|
54.78
|
|
|
Class A and Class B ordinary shares used in pro forma earnings per share computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
Diluted (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Notes
|
|
|
Attributable to Weidai Ltd.
|
|
|
Noncontrolling
interests
|
|
|
Total
shareholders’
equity
|
|
|
|
|
Ordinary Shares
|
|
|
Preferred Shares
|
|
|
Additional
paid-in
capital
|
|
|
Subscription
receivables
|
|
|
(Accumulated
Deficit)/
Retained
Earnings
|
|
|
Total
Weidai Ltd.
shareholders’
equity
|
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Balance as of January 1, 2016
|
|
|
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
1
|
|
|
|
|
|
280,486
*
|
|
|
|
|
|
—
|
|
|
|
|
|
464,075
|
|
|
|
|
|
(121,951
)
|
|
|
|
|
|
(293,937
)
|
|
|
|
|
|
48,188
|
|
|
|
|
|
—
|
|
|
|
|
|
48,188
|
|
|
Capital injection by shareholders
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
121,951
|
|
|
|
|
|
—
|
|
|
|
|
|
121,951
|
|
|
|
|
|
2,000
|
|
|
|
|
|
123,951
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
20
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(280,486
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(28,049
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(861
)
|
|
|
|
|
|
(28,910
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(28,910
)
|
|
|
Accretion of Series C
redeemable
convertible preferred
shares
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(120,000
)
|
|
|
Share-based compensation
|
|
|
|
|
18
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
32,326
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
32,326
|
|
|
|
|
|
—
|
|
|
|
|
|
32,326
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
291,029
|
|
|
|
|
|
291,029
|
|
|
|
|
|
—
|
|
|
|
|
|
291,029
|
|
|
Balance as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
468,352
|
|
|
|
|
|
—
|
|
|
|
|
|
(123,769
)
|
|
|
|
|
|
344,584
|
|
|
|
|
|
2,000
|
|
|
|
|
|
346,584
|
|
|
Dividends declared
|
|
|
|
|
16
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(32,228
)
|
|
|
|
|
|
(32,228
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(32,228
)
|
|
|
Acquisition of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,000
)
|
|
|
|
|
|
(2,000
)
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
474,821
|
|
|
|
|
|
474,821
|
|
|
|
|
|
—
|
|
|
|
|
|
474,821
|
|
|
Balance as of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
468,352
|
|
|
|
|
|
—
|
|
|
|
|
|
318,824
|
|
|
|
|
|
781,177
|
|
|
|
|
|
—
|
|
|
|
|
|
787,177
|
|
|
Balances as of December 31, 2017, in US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
70,779
|
|
|
|
|
|
—
|
|
|
|
|
|
48,183
|
|
|
|
|
|
118,962
|
|
|
|
|
|
—
|
|
|
|
|
|
118,962
|
|
|
|
*
As of January 1, 2016, the Company has 182,925 Series A preferred shares, 36,585 Series A+ preferred shares and 60,976 Series B preferred shares authorized, issued and outstanding, respectively, with the par value of US$0.0001 per share.
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loans and advances
|
|
|
|
|
144,617
|
|
|
|
|
|
484,063
|
|
|
|
|
|
73,153
|
|
|
Depreciation and amortization
|
|
|
|
|
3,294
|
|
|
|
|
|
12,747
|
|
|
|
|
|
1,926
|
|
|
Share-based compensation expenses
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
(311,126
)
|
|
|
|
|
|
(24,895
)
|
|
|
|
|
|
(3,762
)
|
|
|
Amounts due from related parties
|
|
|
|
|
(73,687
)
|
|
|
|
|
|
65,032
|
|
|
|
|
|
9,828
|
|
|
Deferred tax assets
|
|
|
|
|
(31,271
)
|
|
|
|
|
|
(124,887
)
|
|
|
|
|
|
(18,873
)
|
|
|
Current account with online investors and borrowers
|
|
|
|
|
635,863
|
|
|
|
|
|
993,254
|
|
|
|
|
|
150,104
|
|
|
Income tax payable
|
|
|
|
|
94,461
|
|
|
|
|
|
131,888
|
|
|
|
|
|
19,931
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
148,169
|
|
|
|
|
|
231,062
|
|
|
|
|
|
34,919
|
|
|
Amounts due to related parties
|
|
|
|
|
(19,930
)
|
|
|
|
|
|
1,352
|
|
|
|
|
|
204
|
|
|
Deferred revenue
|
|
|
|
|
10,643
|
|
|
|
|
|
(1,079
)
|
|
|
|
|
|
(163
)
|
|
|
Net cash provided by operating activities
|
|
|
|
|
924,388
|
|
|
|
|
|
2,284,077
|
|
|
|
|
|
345,178
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of short-term investments
|
|
|
|
|
(5,658,220
)
|
|
|
|
|
|
(11,423,820
)
|
|
|
|
|
|
(1,726,409
)
|
|
|
Redemption of short-term investments
|
|
|
|
|
5,742,220
|
|
|
|
|
|
11,415,320
|
|
|
|
|
|
1,725,124
|
|
|
Payments to originate loans and advances
|
|
|
|
|
(1,268,593
)
|
|
|
|
|
|
(6,885,314
)
|
|
|
|
|
|
(1,040,533
)
|
|
|
Proceeds from collection of loans and advances
|
|
|
|
|
913,204
|
|
|
|
|
|
4,360,261
|
|
|
|
|
|
658,938
|
|
|
Addition of long-term investments
|
|
|
|
|
(74,733
)
|
|
|
|
|
|
(346,000
)
|
|
|
|
|
|
(52,289
)
|
|
|
Redemption of long-term investments
|
|
|
|
|
61,400
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Purchase of property, equipment and software
|
|
|
|
|
(52,329
)
|
|
|
|
|
|
(62,368
)
|
|
|
|
|
|
(9,425
)
|
|
|
Net cash used in investing activities
|
|
|
|
|
(337,051
)
|
|
|
|
|
|
(2,941,921
)
|
|
|
|
|
|
(444,594
)
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
|
|
—
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Proceeds from institutional funding partners and online investors
|
|
|
|
|
165,212
|
|
|
|
|
|
4,627,087
|
|
|
|
|
|
699,262
|
|
|
Payments to institutional funding partners and online investors
|
|
|
|
|
(70,549
)
|
|
|
|
|
|
(2,587,336
)
|
|
|
|
|
|
(391,008
)
|
|
|
Proceeds from issuance of ordinary shares and preferred shares
|
|
|
|
|
361,951
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Contribution from noncontrolling interest holder
|
|
|
|
|
2,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Acquisition of noncontrolling interests
|
|
|
|
|
—
|
|
|
|
|
|
(2,000
)
|
|
|
|
|
|
(302
)
|
|
|
Payments of dividends to shareholders
|
|
|
|
|
—
|
|
|
|
|
|
(32,228
)
|
|
|
|
|
|
(4,870
)
|
|
|
Net cash provided by financing activities
|
|
|
|
|
458,614
|
|
|
|
|
|
2,205,523
|
|
|
|
|
|
333,307
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
|
|
1,045,951
|
|
|
|
|
|
1,547,679
|
|
|
|
|
|
233,891
|
|
|
Cash, cash equivalents and restricted cash at beginning of year
|
|
|
|
|
268,863
|
|
|
|
|
|
1,314,814
|
|
|
|
|
|
198,699
|
|
|
Cash, cash equivalents and restricted cash at end of year
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
2,438
|
|
|
|
|
|
43,524
|
|
|
|
|
|
6,578
|
|
|
Income taxes paid
|
|
|
|
|
41,935
|
|
|
|
|
|
219,988
|
|
|
|
|
|
33,245
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
(861
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Accretion on Series C convertible redeemable preferred shares to redemption
value
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Reconciliation of cash, cash equivalents and restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,314,814
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
266,820
|
|
|
Restricted cash – current
|
|
|
|
|
—
|
|
|
|
|
|
1,092,921
|
|
|
|
|
|
165,166
|
|
|
Restricted cash – non-current
|
|
|
|
|
—
|
|
|
|
|
|
4,000
|
|
|
|
|
|
604
|
|
|
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization
Weidai Ltd. (the “Company”) was incorporated as a limited company under the law of Cayman Islands on January 26, 2018. The Company does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries, variable interest entity (“VIE”) and subsidiaries of the VIE. The Company, its subsidiaries, VIE and subsidiaries of the VIE are hereinafter collectively referred to as the “Group”. The Company is principally engaged in the online finance marketplace business in the People’s Republic of China (the “PRC”). As described below, the Company, through a series of transactions which is accounted for as a reorganization of entities under common control (the “Reorganization”), became the ultimate parent entity of its subsidiaries, VIE and subsidiaries of VIE. Accordingly, these consolidated financial statements reflect the historical operations of the Company as if the current organization structure had been in existence throughout the periods presented.
Reorganization transactions
In preparation of its initial public offering in the United States (“IPO”), the following transactions were undertaken to reorganize the legal structure of the Company. On February 5, 2018, the Company set up a wholly-owned subsidiary, Weidai HK Limited (“Weidai HK”) in Hong Kong. On March 15, 2018, Weidai HK set up a wholly-owned subsidiary, Weidai Co., Ltd (“Weidai Co.”) in the PRC. On April 10, 2018, the Company, through Weidai Co., entered into a series of contractual agreements with Weidai (Hangzhou) Financial Information Service Ltd (“Weidai (Hangzhou), or the “VIE”) and its shareholders (the “VIE Agreements”) to transfer the business operations of the VIE to the Company. In return, the Company issued 967,841 of ordinary shares to YAOH WDAI LTD, an entity controlled by Mr. Yao Hong (“the Founder”) and the other ordinary shareholders of the VIE, as well as 182,925 of Series A preferred shares, 36,585 of Series A+ preferred shares, 60,976 of Series B preferred shares, 61,488 of Series C preferred shares to the respective series of preferred shareholders of the VIE.
As all the entities involved in the process of the Reorganization are under common control before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling-of-interest with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts.
As of December 31, 2017, the Company’s subsidiaries, VIE and primary subsidiaries of VIE are as follows:
Entity
|
|
|
Date of
incorporation
|
|
|
Place of
incorporation
|
|
|
Percentage
of legal
ownership
by the
Company
|
|
|
Principal
activities
|
|
Subsidiaries
|
|
|
|
|
|
Weidai HK
|
|
|
February 5, 2018
|
|
|
Hong Kong
|
|
|
100%
|
|
|
Investment holding
|
|
Weidai Co.
|
|
|
March 15, 2018
|
|
|
PRC
|
|
|
100%
|
|
|
Investment holding
|
|
VIE
|
|
|
|
|
|
Weidai (Hangzhou)
|
|
|
December 25, 2014
|
|
|
PRC
|
|
|
Nil
|
|
|
Online finance
marketplace
business
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
Entity
|
|
|
Date of
incorporation
|
|
|
Place of
incorporation
|
|
|
Percentage
of legal
ownership
by the
Company
|
|
|
Principal
activities
|
|
Subsidiaries of the VIE
|
|
|
|
|
|
Qianwei (Hangzhou) Technology Co., Ltd.
|
|
|
September 29, 2015
|
|
|
PRC
|
|
|
Nil
|
|
|
Asset management
|
|
Ruituo (Hangzhou) Internet Financial Information Services Co., Ltd.
|
|
|
July 30, 2015
|
|
|
PRC
|
|
|
Nil
|
|
|
Asset management
|
|
Yiwu Weirui Internet Technology Co., Ltd.
|
|
|
September 29, 2015
|
|
|
PRC
|
|
|
Nil
|
|
|
Asset management
|
|
Hangzhou Yiqitou Investment Advisory Co., Ltd
|
|
|
October 28, 2016
|
|
|
PRC
|
|
|
Nil
|
|
|
Consulting
|
|
Liangche (Hangzhou) Internet Technology Co., Ltd.
|
|
|
February 21, 2017
|
|
|
PRC
|
|
|
Nil
|
|
|
Internet technology
|
|
Hangzhou Jingwei Assets Management Co., Ltd.
|
|
|
August 9, 2016
|
|
|
PRC
|
|
|
Nil
|
|
|
Assets management
|
|
Fuzhou Weidai Online Microcredit Co., Ltd.
|
|
|
June 23, 2017
|
|
|
PRC
|
|
|
Nil
|
|
|
Micro-loan business
|
|
Khorgos Micro-car Auction Information Technology Co., Ltd.
|
|
|
May 18, 2017
|
|
|
PRC
|
|
|
Nil
|
|
|
Second-hand car
operation
|
|
Khorgos Micron Internet Technology Co., Ltd.
|
|
|
August 23, 2017
|
|
|
PRC
|
|
|
Nil
|
|
|
Technology development
and service
|
|
Khorgos Weiyi Internet Technology Co., Ltd.
|
|
|
August 23, 2017
|
|
|
PRC
|
|
|
Nil
|
|
|
Technology development
and service
|
|
As PRC laws and regulations prohibit and restrict foreign ownership of internet value-added businesses, the Company operates its websites and primarily conducts its business in the PRC through the VIE and the subsidiaries of the VIE. On April 10, 2018, the Company entered into share pledge agreements with the nominee shareholders of the VIE through its wholly-owned subsidiary in the PRC, for the equity interests in the VIE held by the shareholders of the VIE. In addition, the Company entered into a power of attorney and an exclusive call option agreement with the VIE and nominee shareholders of the VIE through its wholly-owned subsidiaries in the PRC, which provide its wholly-owned subsidiary the power to direct the activities that most significantly affect the economic performance of the VIE and to acquire the equity interests in the VIE when permitted by the PRC laws, respectively. The Company agreed to provide unlimited financial support to the VIE for its operations which obligated the Company to absorb losses of the VIE that could potentially be significant to the VIE. In addition, pursuant to the resolution of all shareholders of the Company and the resolution of the board of directors of the Company on April 10, 2018 (the “Resolutions”), the rights under the aforementioned power of attorney and the exclusive call
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
option agreement were assigned to the board of directors of the Company (the “Board”) or any officer authorized by the Board, which entitle the Company or its wholly-owned subsidiary to receive economic benefits from the VIE that potentially could be significant to the VIE.
Despite the lack of technical majority ownership, the Company has effective control of the VIE through a series of VIE Agreements and a parent-subsidiary relationship exists between the Company and the VIE. Through the VIE Arrangements, the shareholders of the VIE effectively assigned all of their voting rights underlying their equity interest in the VIE to the Company. In addition, through the exclusive business operation agreement, the Company, through its wholly-owned subsidiary in the PRC, have the right to receive economic benefits from the VIE that potentially could be significant to the VIE. Lastly, through the financial support undertaking letter, the Company has the obligation to absorb losses of the VIE that could potentially be significant to the VIE. Therefore, the Company is considered the primary beneficiary of the VIE and consolidates the VIE and its subsidiaries as required by SEC Regulation S-X Rule 3A-02 and ASC topic 810 (“ASC 810”),
Consolidation
.
The principal terms of the VIE Agreements are further described below:
(1)
Power of Attorney:
Pursuant to the power of attorney signed between Weidai (Hangzhou)’s nominee shareholders and Weidai Co., each nominee shareholder irrevocably appointed Weidai Co. as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of its equity interest in Weidai (Hangzhou) (including but not limited to executing the exclusive right to purchase agreements, the voting rights and the right to appoint directors and executive officers of Weidai (Hangzhou). This agreement is effective and irrevocable as long as the nominee shareholder remains a shareholder of Weidai (Hangzhou).
(2)
Exclusive Call Option Agreement:
Pursuant to the exclusive call option agreement entered into amongst the Company, Weidai (Hangzhou)’s nominee shareholders and Weidai Co, the nominee shareholders irrevocably granted Weidai Co. a call option to request the nominee shareholders to transfer or sell any part or all of its equity interests in the VIE, or any or all of the assets of VIE, to Weidai Co, or its designees. The purchase price of the equity interests in the VIE is equal to the minimum price required by PRC law. The purchase price of the VIE’s assets is equal to the book value of the assets or the minimum price as permitted by applicable PRC law, whichever is higher. Without Weidai Co.’s prior written consent, the VIE and its nominee shareholders may not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of its assets or beneficial interest, create or allow any encumbrance on its assets or other beneficial interests and provide any loans or guarantees, etc. The nominee shareholders cannot request any dividends or other form of assets. If dividends or other form of assets are distributed, the nominee shareholders are required to transfer all distribution received to Weidai Co. or their designees. This agreement is not terminated until all of the equity interest of the VIE has been transferred to Weidai Co. or the person(s) designated by Weidai Co.. None of the nominee shareholders have the right to terminate or revoke the agreement under any circumstance unless otherwise regulated by law.
(3)
Exclusive Business Cooperation Agreement:
Pursuant to the exclusive business cooperation agreement entered into amongst Weidai Co. and Weidai (Hangzhou), Weidai Co. provides exclusive technical support and consulting services in return for fees based on 100% of Weidai (Hangzhou)’s net income, which is adjustable at the sole discretion
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
of Weidai Co.. Without Weidai Co.’s consent, the VIE and its subsidiaries cannot procure services from any third party or enter into similar service arrangements with any other third party, except for the ones appointed by Weidai Co.. This agreement is irrevocable or can only be unilaterally revoked or amended by Weidai Co..
(4)
Share Pledge Agreements:
Pursuant to the share pledge agreements amongst the Company and Weidai (Hangzhou)’s nominee shareholders, each nominee shareholder of the VIE pledged all of their respective equity interests in the VIE to Weidai Co. as continuing first priority security interest to guarantee the performance of these nominee shareholders and the VIE’s obligations under the shareholder voting rights proxy agreement, the exclusive call option agreement and the exclusive business cooperation agreement. Weidai Co. is entitled to all dividends during the effective period of the share pledge except as it agrees otherwise in writing. If Weidai (Hangzhou) or any of the nominee shareholder breaches its contractual obligations, Weidai Co. is entitled to certain rights regarding the pledged equity interests, including the right to receive proceeds from the auction or sale of all or part of the pledged equity interests of Weidai (Hangzhou) in accordance with PRC law. None of the nominee shareholders may, without the prior written consent of Weidai Co, assign or transfer to any third party, distribute dividends and create or cause any security interest and any liability in whatsoever form to be created on, all or any part of the equity interests it holds in the VIE. This agreement is not terminated until all of the technical support and consulting and service fees are fully paid under the exclusive business cooperation agreement and all of Weidai (Hangzhou)’ obligations have been terminated under the other controlling agreements. As of May 23, 2018, the Company completed the registration of all the equity pledges with the relevant office of the administration for industry and commerce in accordance with the PRC Property Rights Law.
(5)
Financial support undertaking letter:
Pursuant to the financial support undertaking letter, the Company is obligated to provide unlimited financial support to the VIE, to the extent permissible under the applicable PRC laws and regulations. The Company will not request repayment of the loans or borrowings if the VIE or its shareholders do not have sufficient funds or are unable to repay.
(6)
Resolutions of all shareholders and resolution of the board of directors of Weidai Ltd.:
The shareholders and the Company’s Board resolved that the rights under the shareholder voting rights proxy agreements and the exclusive call option agreements were assigned to the board of directors of the Company or any officer authorized by the Board.
In the opinion of the Company’s legal counsel, (i) the ownership structure of the Company and its VIE is in compliance with PRC laws and regulations; (ii) the contractual arrangements with the VIE and their shareholders are valid and binding, and not in violation of current PRC laws or regulations; (iii) the resolutions are valid in accordance with the articles of association of the Company and Cayman Islands Law.
However, uncertainties in the PRC legal system could cause the Company’s current ownership structure to be found in violation of existing and/or future PRC laws or regulations and could limit the Company’s ability to enforce its rights under these contractual arrangements. Furthermore, the nominee shareholders of the VIE may have interests that are different from those of the Company, which could potentially increase the risk that they would seek to act contrary to the terms of the contractual agreements with the VIE.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
In addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future PRC laws or regulations, the Company may be subject to penalties, including but not be limited to, revocation of business and operating licenses, discontinuing or restricting business operations, restricting the Company’s right to collect revenues, temporary or permanent blocking of the Company’s internet financial services platforms, restructuring of the Company’s operations, imposition of additional conditions or requirements with which the Company may not be able to comply, or other regulatory or enforcement actions against the Company that could be harmful to its business. The imposition of any of these or other penalties could have a material adverse effect on the Company’s ability to conduct its business.
As of December 31, 2016 and 2017, the aggregate carrying amounts of the total assets and total liabilities of the VIE and its subsidiaries were the same as those of the Company. Creditors of the VIE have no recourse to the general credit of the Company, who is the primary beneficiary of the VIE, through its wholly-owned subsidiary Weidai Co.. The Company did not provide any additional financial or other support that it was not previously contractually required to provide to the VIE during the periods presented. The table sets forth the assets and liabilities of the VIE and subsidiaries of VIE included in the Company’s consolidated balance sheets:
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,314,814
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
266,820
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
1,096,921
|
|
|
|
|
|
165,166
|
|
|
Loans and advances, net
|
|
|
|
|
293,158
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
292,952
|
|
|
Short-term investments
|
|
|
|
|
—
|
|
|
|
|
|
8,500
|
|
|
|
|
|
1,285
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
328,853
|
|
|
|
|
|
433,597
|
|
|
|
|
|
65,527
|
|
|
Amounts due from related parties
|
|
|
|
|
74,200
|
|
|
|
|
|
9,168
|
|
|
|
|
|
1,385
|
|
|
Total current assets
|
|
|
|
|
2,011,025
|
|
|
|
|
|
5,248,250
|
|
|
|
|
|
793,135
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
4,000
|
|
|
|
|
|
604
|
|
|
Long-term investments
|
|
|
|
|
13,333
|
|
|
|
|
|
359,333
|
|
|
|
|
|
54,304
|
|
|
Loans and advances, net
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
2,043
|
|
|
|
|
|
8,048
|
|
|
|
|
|
1,216
|
|
|
Property, equipment and software, net
|
|
|
|
|
45,410
|
|
|
|
|
|
99,433
|
|
|
|
|
|
15,027
|
|
|
Deferred tax assets
|
|
|
|
|
33,679
|
|
|
|
|
|
158,566
|
|
|
|
|
|
23,963
|
|
|
Total non-current assets
|
|
|
|
|
94,465
|
|
|
|
|
|
1,019,551
|
|
|
|
|
|
154,078
|
|
|
Total assets
|
|
|
|
|
2,105,490
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
947,213
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
|
|
—
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
94,663
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
267,592
|
|
|
Current account with online investors and borrowers
|
|
|
|
|
890,192
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
284,633
|
|
|
Income tax payable
|
|
|
|
|
111,450
|
|
|
|
|
|
243,338
|
|
|
|
|
|
36,774
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
189,514
|
|
|
|
|
|
461,295
|
|
|
|
|
|
69,713
|
|
|
Amounts due to related parties
|
|
|
|
|
61,548
|
|
|
|
|
|
62,900
|
|
|
|
|
|
9,506
|
|
|
Deferred revenue
|
|
|
|
|
13,196
|
|
|
|
|
|
12,330
|
|
|
|
|
|
1,862
|
|
|
Total current liabilities
|
|
|
|
|
1,360,563
|
|
|
|
|
|
4,633,990
|
|
|
|
|
|
700,305
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to institutional funding partners
|
|
|
|
|
—
|
|
|
|
|
|
416,118
|
|
|
|
|
|
62,885
|
|
|
Deferred revenue
|
|
|
|
|
1,100
|
|
|
|
|
|
887
|
|
|
|
|
|
134
|
|
|
Other non-current liabilities
|
|
|
|
|
8,333
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Total non-current liabilities
|
|
|
|
|
9,433
|
|
|
|
|
|
457,724
|
|
|
|
|
|
69,173
|
|
|
Total liabilities
|
|
|
|
|
1,369,996
|
|
|
|
|
|
5,091,714
|
|
|
|
|
|
769,478
|
|
|
|
The table sets forth the results of operations of the VIE and subsidiaries of VIE included in the Company’s consolidated statements of comprehensive income:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net revenues
|
|
|
|
|
1,761,380
|
|
|
|
|
|
3,545,430
|
|
|
|
|
|
535,798
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
The table sets forth the cash flows of the VIE and subsidiaries of VIE included in the Company’s consolidated statements of cash flows:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net cash provided by operating activities
|
|
|
|
|
924,388
|
|
|
|
|
|
2,284,077
|
|
|
|
|
|
345,178
|
|
|
Net cash used in investing activities
|
|
|
|
|
(337,051
)
|
|
|
|
|
|
(2,941,921
)
|
|
|
|
|
|
(444,594
)
|
|
|
Net cash provided by financing activities
|
|
|
|
|
458,614
|
|
|
|
|
|
2,205,523
|
|
|
|
|
|
333,307
|
|
|
As of December 31, 2016 and 2017, there was no pledge or collateralization of the assets of the VIE and its subsidiaries. The amount of the net assets of the VIE and subsidiaries of VIE was RMB 735,494 and RMB 1,176,087 (US$177,735) as of December 31, 2016 and 2017, respectively. The creditors of the VIE and subsidiaries of VIE’s third-party liabilities did not have recourse to the general credit of the primary beneficiary in the normal course of business. The Company did not provide nor intend to provide additional financial or other support not previously contractually required to the VIE and subsidiaries of VIE during the periods presented.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, VIE and VIE’s subsidiaries for which the Company is the primary beneficiary. All significant inter-company balances and transactions between the Company, its subsidiaries, VIE and VIE’s subsidiaries are eliminated upon consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, allowance for loans and advances, identification of separate accounting units and estimating the best estimate selling price of each deliverable in the Company’s revenue arrangements, guarantee liabilities, useful life of long-lived assets, share-based compensation, valuation allowance for deferred tax assets, uncertain tax positions, and fair value of preferred shares and short-term investments. Management bases these estimates on its historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
Foreign currency translation and transactions
The Company uses Renminbi (“RMB”) as its reporting currency. The functional currencies of the Company’s entities incorporated in the Cayman Islands and Hong Kong are US$. The functional currencies of the Company’s PRC subsidiary, VIE and VIE’s subsidiaries are the RMB. The determination of the respective functional currency is based on the criteria stated in ASC 830,
Foreign Currency Matters.
The financial statements of the Company and Weidai HK are translated from the functional currency to the reporting currency, RMB. Monetary assets and liabilities of the subsidiaries are translated into RMB using the exchange rate in effect at each balance sheet date. Income and expenses items are translated at the average exchange rate prevailing during the fiscal year. Translation gains and losses are accumulated in other comprehensive income, as a component of shareholders’ equity on the consolidated financial statements.
Transactions denominated in other than the functional currencies are remeasured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Financial assets and liabilities denominated in other than the functional currency are re-measured into the functional currency at the exchange rates prevailing at the balance sheet date. The foreign exchange differences are recorded in the consolidated statements of comprehensive income.
Convenience translation
Translations of amounts from RMB into US$ for the convenience of the readers have been calculated at the exchange rate of RMB6.6171 per US$1.00 on June 29, 2018, the last business day in June 2018, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
No representation is made that the RMB amounts could have been, or could be converted, realized or settled into US$ at such rate or at any other rate.
Cash and cash equivalents
Cash and cash equivalents primarily consist of cash and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase of three months or less to be cash equivalents.
Restricted cash
The Company’s restricted cash mainly represents (i) cash received but has not yet been disbursed, including idle funds due to investors whom recharge to the accounts on the platform but have not yet invested or fully funded the loans and funds due to borrowers that investors lend to borrowers but borrowers have not yet withdrawn. Such funds were processed through a designated bank account. As of December 31, 2016 and 2017, the restricted cash related to cash not yet disbursed amounted to nil and RMB1,083,421 (US$163,730), respectively; and (ii) cash held by banks as guarantee deposits paid on contracts and other restrictions amounted to nil and RMB13,500 (US$2,040) as at December 31, 2016 and 2017, respectively.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, which requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, the statement of cash flows will be required to present restricted cash and restricted cash equivalents as a part of the beginning and ending balances of cash and cash equivalents. The Company early adopted the updated guidance retrospectively and presented restricted cash within the ending cash, cash equivalents, and restricted cash balance on the Company’s consolidated statement of cash flows for the years ended December 31, 2016 and 2017.
Short-term investments
All highly liquid investments with original maturities of greater than three months, but less than twelve months, are classified as short-term investments.
Investments that are expected to be realized in cash during the next twelve months are also included in short-term investments. The Company accounts for short-term investments in accordance with ASC topic 320,
Investments — Debt and Equity Securities (“ASC 320”)
. The Company classifies the short-term investments as “held-to-maturity”, “trading” or “available-for-sale”, whose classification determines the respective accounting methods stipulated by ASC 320.
The securities that the Company has the positive intent and the ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost. The securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Unrealized holding gains and losses for trading securities are included in earnings. Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. Available-for-sale investments are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. Realized gains or losses are included in earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale securities is recognized in the consolidated statements of comprehensive income when the decline in value is determined to be other-than-temporary.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
Loans and advances, net
Loans and advances represent payments due from borrowers. Loans and advances are recorded at amortized cost (i.e. unpaid principal net of deferred origination costs), net of allowance for loans and advances. Deferred origination costs are netted against net financing income and amortized over the financing term using the effective interest method.
The Company does not accrue interest income on loan principals that are considered impaired or past due. A corresponding allowance is determined under ASC 450-20 and allocated accordingly. After an impaired loan has been placed on nonaccrual status, interest receivable will be recognized when cash is received by applying first to reduce loan principal and then to interest income thereafter. Interest income accrued but not received is generally reversed against interest income. Interest receivables may be returned to accrual status after all of the borrower’s delinquent balances of loan principal and interest have been settled and the borrower remains current for an appropriate period.
Allowance for loans and advances
The Company segregates the loans into secured and unsecured, and then into various portfolios, i.e.automobile and home equity, etc. and applies its credit risk management framework to the various portfolio of loans in accordance with ASC 450-20,
Loss Contingencies.
The allowance for loans and advances losses is calculated based on the Company’s historical loss experience using a roll rate-based model. The roll rate-based model stratifies the loan principal and interest receivables by delinquency stages (i.e., current, 1 – 30 days past due, and 31 – 60 days past due etc.) and projected forward in one-month increments using historical roll rates. In each month of the simulation, losses on the loans and advances types are captured, and the ending delinquency stratification serves as the beginning point of the next iteration. This process is repeated on a monthly rolling basis. The loss rate calculated for each delinquency stage is then applied to the respective loans and advances balance. The Company adjusts the allowance that is determined by the roll rate-based model for various Chinese macroeconomic factors i.e. gross-domestic product rates, per capita disposable income, interest rates and consumer price indexes. Each of these macroeconomic factors are equally weighted, and a score is applied to each factor based on year-on-year increases and decreases in that respective factor.
Loans are charged off when a settlement is reached for an amount that is less than the outstanding balance or when the Company has determined the balance is uncollectable. In general, unsecured loans are charged off when outstanding loans are 180 days past due. Secured loans may be charged off upon the death of the borrower, significant damage to the collateral, and when the Company considers the balance to be uncollectable.
Acquired non-performing loans
The Company records acquired non-performing loans in accordance with ASC310-30,
Loan and Debt Securities with Deteriorated Credit Quality
, when it voluntarily purchases a delinquent loan. Such acquired non-performing loans are expected to be recovered either through the sale of the loan collateral upon foreclosure or from the subsequent payments made by the borrowers and are initially recorded at their purchase price. As the cash flows expected to be collected cannot be estimated because the timing of the collection and the condition of the collateral are indeterminable, the acquired non-performing loans are placed on non-accrual status and impairment is measured based on the fair value of the collateral less the estimated selling costs.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
The Company derecognizes the acquired non-performing loan when the non-performing loan is settled through foreclosure or repayment by the borrower. Any difference between the proceeds from sale of the collateral or subsequent payments made by the borrowers, and the acquired non-performing loan balance is recognized in other revenues in the consolidated statements of comprehensive income.
Borrowings
For certain transactions with the borrowers, the Company may provide a loan to borrowers and then transfer the loan to investors at varying rates and tenures. Although the loan is transferred to the investors, the loan is not derecognized upon transfer, as the transaction does not represent a transfer of an entire financial asset or a participating interest and the loan is not legally isolated from the Company. Additionally, the terms of the transfer require the Company to guarantee the principal and interest in case of default by the borrowers. As a result, the arrangement is accounted for as a secured borrowing in accordance with ASC 860,
Transfers and Servicing
. The loan remains on the Company’s consolidated balance sheets and the funds received from the investors are recorded as payable to institutional funding partners and online investors in the Company’s consolidated balance sheets. Borrowings are initially recognized at fair value which is the cash received from investors, and measured subsequently at amortized cost using the effective interest method.
Guarantee liabilities
The Company provides guarantee to various institutional funding partners. The guarantee requires the Company to either make delinquent installment repayments or purchase the loans after a specified period on an individual loan basis. The guarantee liability is exempted from being accounted for as a derivative in accordance with ASC 815-10-15-58.
The guarantee liability consists of two components. The Company’s obligation to stand ready to make delinquent payments or to purchase the loan over the term of the arrangement (the non-contingent aspect) is accounted for in accordance with ASC 460,
Guarantees
(“ASC 460”). The contingent obligation relating to the contingent loss arising from the arrangement is accounted for in accordance with ASC 450,
Contingencies
(“ASC 450”). At inception, the Company recognizes the non-contingent aspect of the guarantee liability at fair value, which considers the premium required by a third party market participant to issue the same risk assurance in a standalone transaction.
Subsequent to the initial recognition, the non-contingent aspect of the risk assurance liability is reduced over the term of the arrangement as the Company is released from its stand ready obligation on a loan-by-loan basis based on the borrower’s repayment of the loan principal. The contingent loss arising from the obligation to make future payments is recognized when borrower default is probable and the amount of loss is estimable. The Company considers the underlying risk profile including delinquency status, overdue period, and historical loss experience when assessing the probability of contingent loss. Borrowers are grouped based on common risk characteristics, such as product type. The Company measured contingent loss based on the future payout of the arrangement estimated using the historical default rates of a portfolio of similar loans less the fair value of the recoverable collateral. The amount of contingent loss was not material for the years ended December 31, 2016 and 2017. The maximum potential undiscounted future payment which the Company would be required to make under its guarantee obligation is nil and RMB 551,170 (US$ 83,295) as of December 31, 2016 and 2017, respectively.
Long-term investments
The Company’s long-term investments consist of time deposits with stated maturities of greater than 365 days and cost method investments. In accordance with ASC subtopic 325-20 (“ASC 325-20”),
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
Investments-Other: Cost Method Investments
, for investments in an investee over which the Company does not have control or significant influence and for which there is no readily determinable fair value, the company carries the investment at cost and only adjusts for other-than-temporary decline in fair value and distributions of earnings that exceed the company’s share of earnings since its investment. The Company regularly evaluates the impairment of its investments based on the performance and the financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss recognized in earnings is equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. No impairment loss on the cost method investments was recognized for the years ended December 31, 2016 and 2017.
Fair value measurements of financial instruments
Financial instruments of the Company primarily consists of cash and cash equivalents, restricted cash, available-for-sale debt securities, long-term time deposits, amounts due from and due to related parties, loans and advances, cost method investments, short-term borrowings, payable to institutional funding partners and online investors and current account with online investors and borrowers. The carrying amounts of these financial instruments, except for long-term time deposit, long-term loans and advances, cost method investments and long-term payable to institutional funding partners approximate their fair values because of their generally short maturities.
The Company applies ASC topic 820 (“ASC 820”),
Fair Value Measurements and Disclosures
, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
•
Level 1 — Observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.
•
Level 3 — Unobservable inputs which are supported by little or no market activity.
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
In accordance with ASC 820, the Company measures available-for-sale investments at fair value on a recurring basis. The fair value of the Company’s available-for-sale debt securities are measured using the income approach, based on quoted market interest rates of similar instruments and other significant inputs derived from or corroborated by observable market data. The fair value of time deposits are determined based on the prevailing interest rates in the market. The fair values of the Company’s long-term loans and advances and long-term payable to institutional funding partners as disclosed are determined based on the discounted cash flow model using the discount curve of market interest rates. The Company did not disclose the fair value of its cost method investments since the fair value cannot be determined without undue cost and effort.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement or disclosure at
December 31, 2017 using
|
|
|
|
|
Total fair value at
December 31, 2017
|
|
|
Quoted prices
in active
markets for
identical
assets
(Level 1)
|
|
|
Significant
other
observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Fair value disclosure
|
|
|
|
|
|
|
Long-term time deposits
|
|
|
|
|
44,322
|
|
|
|
|
|
6,698
|
|
|
|
|
|
—
|
|
|
|
|
|
44,322
|
|
|
|
|
|
—
|
|
|
Loans and advances, net – non-current
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
—
|
|
|
Long-term payable to institutional funding partners
|
|
|
|
|
383,043
|
|
|
|
|
|
57,887
|
|
|
|
|
|
—
|
|
|
|
|
|
383,043
|
|
|
|
|
|
—
|
|
|
Fair value measurements
|
|
|
|
|
|
|
Recurring
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
Available-for-sale debt securities
|
|
|
|
|
8,500
|
|
|
|
|
|
1,285
|
|
|
|
|
|
—
|
|
|
|
|
|
8,500
|
|
|
|
|
|
—
|
|
|
The Group had no financial assets and liabilities measured and recorded at fair value on a non-recurring basis as of December 31, 2016 and 2017.
Property, equipment and software, net
Property, equipment and software are stated at cost less accumulated depreciation and amortization using the straight-line method with the residual value over the estimated useful lives of the assets, as follows:
Category:
|
|
|
Estimated Useful Life
|
|
|
Estimated
Residual Value
|
|
Computer and electronic equipment
|
|
|
3~5 years
|
|
|
|
|
5
%
|
|
|
Office furniture and equipment
|
|
|
3~5 years
|
|
|
|
|
5
%
|
|
|
Vehicles
|
|
|
4 years
|
|
|
|
|
5
%
|
|
|
Software
|
|
|
3~10 years
|
|
|
|
|
0
%
|
|
|
Leasehold improvement
|
|
|
Lesser of useful life or lease term
|
|
|
|
|
0
%
|
|
|
Costs associated with the repair and maintenance of property and equipment are expensed as incurred.
Impairment of long-lived assets
The Company evaluates its long-lived assets or asset group, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or a group of long-lived assets may not be recoverable. When these events occur, the Company evaluates for impairment by comparing the carrying amount of long-lived assets against the estimated undiscounted future cash flows associated with it. Impairment exists when the estimated undiscounted future cash flows are less than the carrying value of the asset being evaluated. Impairment loss is calculated based on the excess of carrying value of the asset over its fair value. No impairment loss was recognized for the years ended December 31, 2016 and 2017.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
Research and development expenses
Research and development expenses are primarily incurred in the development of new services, new features and general improvement of the Company’s technology infrastructure to support its business operations. Research and development costs are expensed as incurred unless such costs qualify for capitalization as software development costs. In order to qualify for capitalization, (i) the preliminary project should be completed, (ii) management has committed to funding the project and it is probable that the project will be completed and the software will be used to perform the function intended, and (iii) it will result in significant additional functionality in the Company’s services. No research and development costs were capitalized during the years ended December 31, 2016 and 2017. The Company recognized research and development expenses amounted to RMB56,142 and RMB100,966 (US$15,258) for the years ended December 31, 2016 and 2017, respectively.
Government subsidies
Government subsidies primarily consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. The government subsidies of non-operating nature with no further conditions to be met are recorded as non-operating income when received. The government subsidies with certain operating conditions are recorded as liabilities when received and will be recorded as operating income when the conditions are met.
Modification of equity-classified preferred shares
The Company assesses whether an amendment to the terms of its equity-classified preferred shares is an extinguishment or a modification based on the change in the fair value of the preferred shares. If the change in fair value of equity-classified preferred shares immediately after the amendment exceeds 10% from the fair value of the equity-classified preferred shares immediately before the amendment, the amendment is considered an extinguishment. An amendment that does not meet this criteria is a modification.
When equity-classified preferred shares are extinguished, the difference between the fair value of the consideration transferred to the equity-classified preferred shareholders and the carrying amount of the equity-classified preferred shares (net of issuance costs) is treated as a deemed dividend to the equity-classified preferred shareholders. When equity-classified preferred shares are modified, the increase of the fair value immediately after the amendment is treated as a deemed dividend to the equity-classified preferred shareholders. Modifications that result in a decrease in the fair value of the equity-classified preferred shares are not recognized.
Revenue recognition
The Company operates an online platform which matches borrowers with investors. The Company’s platform enables investors to directly invest in individual loans or subscribe to the Company’s investment programs which provide them with pre-specified investment returns while minimizing the time needed to manage their investments. For each successful loan facilitation, the Company earns a loan facilitation fee and a recurring service fee for post facilitation services, including provision of global positioning system (“GPS”) automobile tracking services, collection services and sending short-message-service (“SMS”)
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
payment reminder to borrowers throughout the term of the loans. Borrowers make repayments through the Company, and the Company will then remit the requisite returns to the investors on a periodic basis. The Company’s arrangements with investors can be broadly categorized into three types of arrangements.
In the first type of arrangement, the Company may advance funds to the borrowers while the loan is being listed on the online platform for online investors to subscribe to. However, the Company does not provide a guarantee to investors and is not the legal title holder of the underlying collateral. The Company determined that it is not the legal lender and legal borrower in the loan origination and repayment process, respectively, because when the loan is fully subscribed by investors, the investors’ funds will be used to settle the advance made by the Company to the borrowers. Therefore, the Company does not record loan receivables and payables arising from the loans between borrowers and investors on its consolidated balance sheets.
In the second type of arrangement, the Company does not advance funds to the borrowers prior to a loan subscribed by the institutional funding partners. Furthermore, the Company may provide a guarantee to the institutional funding partners which guarantees the contractual payments of the loan in the event the borrower defaults. The Company determined it is not the legal lender and legal borrower in the loan origination and repayment process, respectively. Therefore, the Company does not record loan receivables and payables arising from the loans between borrowers and the institutional funding partners on its consolidated balance sheets.
In the third type of arrangement, the Company advances funds to the borrowers prior to a loan being subscribed to by the investors. The Company provides a guarantee which guarantees the contractual payments of the loan in the event the borrower defaults. As the transaction does not represent a transfer of an entire financial asset or a participating interest and is not legally isolated from the Company, the arrangement is accounted for as loan origination by the Company and a secured borrowing in accordance with ASC 860,
Transfers and Servicing
.
The Company also generates revenue from other contingent fees, such as late payment penalties and loan collection fees.
Multiple element revenue recognition
In accordance with ASC 605,
Revenue recognition
(“ASC 605”), for arrangements where the Company is not originating the loan to the borrower, the Company recognizes loan facilitation services and post facilitation services, when the following four revenue recognition criteria are met:
(i)
Persuasive evidence of an arrangement exists;
(ii)
Services have been provided;
(iii)
The fee is fixed and determinable, and
(iv)
Collectability is reasonably assured.
The two deliverables provided by the Company are loan facilitation and post facilitation services. The Company considers the loan facilitation services and the post facilitation services as a multiple element revenue arrangement. The Company does not have vendor specific objective evidence (“VSOE”) of selling price for the loan facilitation services and post facilitation services because the Company does not provide loan facilitation services or post facilitation services on a standalone basis. There is also no third-party
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
evidence of the prices charged by third-party service providers when such services are sold separately. As a result, the Company uses its best estimate of selling prices of loan facilitation services and post facilitation services as the basis of revenue allocation.
The fee allocated to loan facilitation is recognized as revenue upon each successful loan facilitation, while the fee allocated to post facilitation services are deferred and amortized over the period of the loan on a straight line method as the post facilitation services are performed. If the fee is not received entirely upfront, the amount allocated to the delivered loan facilitation services is limited to the amount that is not contingent on the delivery of the undelivered post facilitation services and the borrower’s timely installment repayment in accordance with ASC 605-25. The remaining loan facilitation service income is recorded when the contingency is resolved when cash is received from the borrower. The loan facilitation services and post facilitation services are recorded as revenues in the consolidated statements of comprehensive income.
For certain arrangements, the Company provides an additional deliverable in the form of a guarantee to institutional funding partners which requires the Company to make either delinquent installment repayments and/or purchase the loans after a specified period on an individual loan basis. In accordance with ASC 605-25-30-4, the Company first allocates the consideration to the guarantee equaling to the fair value of the guarantee. The remaining consideration is then allocated to the loan facilitation services and the post facilitation services.
Customer incentives
For certain transactions with the investors, the Company, at its sole discretion may provide various incentives to investors when a loan is successfully matched during the relevant incentive program period. The cash incentive from the Company is either provided upfront or on a monthly basis over the term of the loan as additional interest.
For arrangements where the Company does not originate loans to borrowers, these cash incentives are accounted for as reduction of revenue in accordance with ASC 605-50. Cash incentives accounted for as reduction of revenue amounted to RMB52,374 and RMB65,915 (US$9,961) for the years ended December 31, 2016 and 2017, respectively. For arrangements where the Company originates loans to the borrowers and related loan payables to investors are recorded on the balance sheet, cash incentives paid upfront will reduce loan payables to investors and loan payables are effectively issued at a discount. If cash incentives are paid to investors over the loan period, the cash incentives are included as repayment to investors for the loan and considered in the effective interest rate of the loan payable to investors. Cash incentives accounted for as reduction of loan payables amounted to RMB7 and RMB7,453 (US$1,126) for the years ended December 31, 2016 and 2017, respectively.
Net financing income
The Company earns interest income arising from loans originated by the Company. The Company records interest income net of funding costs (i.e., interest paid to investors) over the life of the underlying loan principal using the effective interest method on unpaid principal amounts in accordance with ASC 310,
Receivables
. Customer incentives provided to certain investors are recorded as a reduction in loans receivables using the effective interest method.
Other revenues
The Company also receives various fees which are contingent on future events, such as borrower late payment penalties, loan collection fees, and net revenue from sale of collateral. These contingent fees are not recognized until the contingencies are resolved and the fees become fixed and determined, which also
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
coincide with when the services are performed and collectability is reasonably assured. These fees are classified within other revenues in the consolidated statements of comprehensive income.
Other revenues consist of:
|
|
|
Year Ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(in thousands)
|
|
Late payment penalties and loan collection fees
|
|
|
|
|
158,154
|
|
|
|
|
|
218,675
|
|
|
|
|
|
33,047
|
|
|
Others
|
|
|
|
|
46,799
|
|
|
|
|
|
86,362
|
|
|
|
|
|
13,051
|
|
|
Total
|
|
|
|
|
204,953
|
|
|
|
|
|
305,037
|
|
|
|
|
|
46,098
|
|
|
|
Revenue through service center operation partners
The Company collaborates with service center operation partners for the operation of partner-operated service centers under a revenue sharing model. The Company is acting as the primary obligor in the arrangement in accordance with ASC 605-45 and recognizes revenue on a gross basis when all the revenue recognition criteria set forth in ASC 605 are met. Pursuant to the one-year cooperation agreements with the service center operation partners, the Company records all of each partner-operated service center’s loan facilitation service fee and post facilitation service fee as revenue, and subsequently pay the service center operation partners an agreed percentage of such amounts as the partner-operated service center’s operating cost and expenses which are recorded as origination and servicing expenses. If loans facilitated by the partner-operated service centers become delinquent and are subsequently purchased by the Company, the relevant service center operation partners are obligated to compensate the Company for an agreed percentage of the purchase price of the delinquent loans.
Deferred revenue
Deferred revenue mainly consists of post-facilitation service fees which are non-contingent service fees collected at the inception of the loan, and deferred and amortized over the period of the loan.
Origination and servicing expense
Origination and servicing expenses primarily consist of customer acquisition costs, employee salaries and benefits for facilitating the loan origination, risk assessment cost, debt-collection cost, customer service cost, data processing and data analysis expense.
Advertising expenses
Advertising costs are expensed as incurred in accordance with ASC 720-35,
Other Expense-Advertising Costs
. The Company recognized advertising costs of RMB38,017 and RMB203,972 (US$30,825) for the years ended December 31, 2016 and 2017, respectively.
Employee benefits
Full-time employees of the Company in the PRC participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Company make contributions to the government for these
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
benefits based on a certain percentage of the employee’s salaries. The Company has no legal obligation for the benefits beyond the contributions. The Company recognized expenses for employee benefits of RMB46,491 and RMB137,902 (US$20,840) for the years ended December 31, 2016 and 2017, respectively.
Income taxes
The Company accounts for income taxes using the liability method in accordance with ASC 740,
Income Taxes
(“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in earnings. Deferred tax assets are reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The Company early adopted ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
, in January 1, 2016 and classifies the components of the deferred tax assets and liabilities as non-current.
The Company evaluates its uncertain tax positions using the provisions of ASC 740, which prescribes a recognition threshold that a tax position is required to meet before being recognized in the consolidated financial statements. The Company recognizes in the consolidated financial statements the benefit of a tax position which is “more likely than not” to be sustained under examination based solely on the technical merits of the position assuming a review by tax authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. It is the Company’s policy to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
Segment information
The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole. In accordance with ASC 280,
Segment Reporting
, the Company has only one reportable segment. As the Company generates substantially all of its revenues in the PRC and its long-lived assets are substantially located in PRC, no geographical segments are presented.
Leases
Leases are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: (a) ownership is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least 75% of the property’s estimated remaining economic life or (d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The company had no capital leases for the years presented.
All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective lease terms. The company leases office space under operating lease agreements. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease expense on a straight-line basis over the term of the lease.
Value added taxes (“VAT”), business related tax and surcharges
The Company is subject to VAT at the rate of 17%, 6% or 3%, depending on whether the entity is a general taxpayer or small-scale taxpayer, and related surcharges on revenue generated from providing services.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
VAT is reported as a deduction to revenue when incurred and amounted to RMB118,987 and RMB267,970 (US$40,497) for the years ended December 31, 2016 and 2017, respectively. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in accrued expenses and other current liabilities on the consolidated balance sheets.
The Company is also subject to certain government surcharges on the VAT payable in the PRC. In the consolidated statements of comprehensive income, these surcharges are included in the “business related tax and surcharges” balance, which is deducted from gross revenues to arrive at net revenues.
Share-based compensation
The Company applies ASC 718,
Compensation — Stock Compensatio
n (“ASC 718”), to account for restricted shares and stock appreciation right granted to certain directors, executives and employees. In accordance with ASC 718, the Company determines whether the ordinary shares and the stock appreciation rights should be classified and accounted for as an equity award or liability award. Restricted shares granted to directors and executives are classified as equity awards and are measured at fair value on grant date and are recognized as an expense, net of forfeitures, over the requisite service period. The cash-settled stock appreciation rights granted to employees are classified as liability awards and are remeasured to fair value at the end of each reporting period until the date of settlement with an adjustment for fair value recorded to the current period expenses. The Company has elected to recognize share-based compensation for all awards with graded vesting using the accelerated method. The Company early adopted ASU 2016-09,
Compensation Stock Compensation
(Topic 718):
Improvement to Employee Share Based Payment Accounting
, on January 1, 2016 using full retrospective method, and accounts for forfeitures in the period they occur as a reduction to expense.
A change in any of the terms or conditions of share-based payment awards is accounted for as a modification of awards. The Company measures the incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified, based on the share price and other pertinent factors at the modification date. For vested awards, the Company recognizes incremental compensation cost in the period the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.
Deferred initial public offering (“IPO”) costs
Direct and incremental costs incurred by the Company attributable to its proposed IPO of ordinary shares in the U.S. is deferred and recorded as deferred IPO costs in the consolidated balance sheets and will be charged against the gross proceeds received from such offering.
Comprehensive income
Comprehensive income is defined as the changes in equity of the company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. For each of the periods presented, the Company’s comprehensive income includes only net income, and is presented in the consolidated statements of comprehensive income.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
Earnings per share
In accordance with ASC topic 260,
Earnings per Share
, basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income is allocated between ordinary shares and participating securities based on dividends declared (or accumulated) and participating rights in undistributed earnings as if all the earnings for the reporting period had been distributed. The Company’s redeemable convertible preferred shares are participating securities because they are entitled to receive dividends or distributions on an as converted basis.
Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares include ordinary shares issuable upon the conversion of the redeemable convertible preferred shares using the if-converted method, and ordinary shares issuable upon the exercise of share options, using the treasury stock method. Ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects are anti-dilutive.
Pro forma information (unaudited)
Upon the completion of the Company’s initial public offering on the New York Stock Exchange, or the Nasdaq Stock Market or any other stock exchange (the ‘‘Qualified IPO’’), the outstanding preferred shares will automatically be converted into Class A ordinary shares on a 1:1 basis, the ordinary shares owned by Mr. Yao Hong will be converted into 701,428 Class B ordinary shares on a 1:1 basis and the remaining outstanding ordinary shares will be converted into 266,413 Class A ordinary shares on a 1:1 basis. Unaudited pro forma shareholders’ equity as of December 31, 2017, is adjusted for the abovementioned conversion of the ordinary shares and preferred shares, is set forth on the consolidated balance sheets.
The unaudited pro forma earnings per ordinary share is computed using the weighted-average number of ordinary shares outstanding as of December 31, 2017, and assumes the automatic conversion of all of the Company’s preferred shares into weighted-average shares of ordinary stock upon the closing of the Company’s Qualified IPO, as if it had occurred on January 1, 2017.
Recent accounting pronouncements
As a company with less than US$1,070,000 in revenue for the last fiscal year, the company qualifies as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include a provision that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. The Company will take advantage of the extended transition period.
In May 2014, the Financial Accounting Standard Board (“FASB”) issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. The guidance substantially converges final standards on revenue recognition between the FASB and the International Accounting Standards Board providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. GAAP.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
The core principle of the guidance is that an entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
In August 2015, the FASB issued its final standard formally amending the effective date of the new revenue recognition guidance. As an “emerging growth company,” or EGC, the Company has elected to take advantage of the extended transition period provided in the Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards applicable to private companies. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, including interim periods beginning after December 15, 2019. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments — Overall (Subtopic 825-10)
. The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instruments-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this ASU eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, including interim periods after December 15, 2019. The Company is in the process of evaluating the impact of the adoption of this guidance on its consolidated financial statements
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. This ASU modifies existing guidance for off-balance sheet treatment of a lessees’ operating leases by requiring lessees to recognize lease assets and lease liabilities, whilst, lessor accounting is largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of the Company’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
amounts recorded in the financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, including interim periods within fiscal years beginning after December 15, 2021. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
. This ASU reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principles in ASC 230, Statement of Cash Flows (“ASC 230”), including providing additional guidance on how and what an entity should consider in determining the classification of certain cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company has early adopted this guidance.
In February 2017, the FASB issued ASU No. 2017-05,
Other income — Gains and Losses from the Derecognition of Nonfinancial Assets
, which clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments in this update also clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
3. Concentration of risks
Currency convertibility risk
Substantially all of the Company’s business are transacted in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into United States dollars or other foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institution at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts.
Concentration of credit risk
Financial assets that potentially expose the company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, loans and advances, guarantee deposits and short-term investment.
The Company places its cash and cash equivalents, restricted cash and short-term investment, with reputable financial institutions that have high-credit ratings and quality. There has been no recent history of default in relation to these financial institutions.
The Company manages credit risk of loan principal by performing credit assessments on its borrowers and its ongoing monitoring of the outstanding balances. No individual borrower represented 10% or more of total revenue, and loan and advances for the years ended December 31, 2016 and 2017.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
3. Concentration of risks (continued)
Interest rate risk
The Company is exposed to interest rate risk on its interest-bearing assets and liabilities. As part of its asset and liability risk management, the company reviews and takes appropriate steps to manage its interest rate exposures on its interest-bearing assets and liabilities. The Company has not been exposed to material risks due to changes in market interest rates, and the company has not used any derivative financial instruments to manage the interest risk exposure during the period and year presented.
Business and economic risk
The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations or cash flows: changes in the overall demand for services and products; competitive pressures due to new entrants; advances and new trends in new technologies and industry standards; changes in certain strategic relationships; regulatory considerations and risks associated with the Company’s ability to attract employees necessary to support its growth. The Company’s operations could also be adversely affected by significant political, economic and social uncertainties in the PRC.
Foreign currency exchange rate risk
From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. For RMB against U.S. dollar, there was depreciation of approximately 6.4% in the year ended December 31, 2016 and appreciation 5.8% in the year end December 31, 2017. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.
To the extent that the Company needs to convert U.S. dollar into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company. In addition, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of the Company’s earnings or losses.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
4. Loans and advances, net
Loans and advances originated and retained by the Company consist of the following:
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current portion:
|
|
|
|
|
Loans receivable
(i)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
76,457
|
|
|
|
|
|
1,105,169
|
|
|
|
|
|
167,017
|
|
|
Other secured loans
|
|
|
|
|
18,206
|
|
|
|
|
|
104,292
|
|
|
|
|
|
15,761
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
512,616
|
|
|
|
|
|
77,468
|
|
|
Sub-total
|
|
|
|
|
94,663
|
|
|
|
|
|
1,722,077
|
|
|
|
|
|
260,246
|
|
|
Acquired non-performing loans
(ii)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
256,556
|
|
|
|
|
|
438,942
|
|
|
|
|
|
66,334
|
|
|
Other secured loans
|
|
|
|
|
—
|
|
|
|
|
|
58,961
|
|
|
|
|
|
8,910
|
|
|
Unsecured loans
|
|
|
|
|
762
|
|
|
|
|
|
120,955
|
|
|
|
|
|
18,280
|
|
|
Sub-total
|
|
|
|
|
257,318
|
|
|
|
|
|
618,858
|
|
|
|
|
|
93,524
|
|
|
Advances to borrowers
(iii)
|
|
|
|
|
8,705
|
|
|
|
|
|
2,487
|
|
|
|
|
|
376
|
|
|
Total current loans and advances
|
|
|
|
|
360,686
|
|
|
|
|
|
2,343,422
|
|
|
|
|
|
354,146
|
|
|
Allowance for loans and advances
|
|
|
|
|
(67,528
)
|
|
|
|
|
|
(404,930
)
|
|
|
|
|
|
(61,194
)
|
|
|
Loans and advances, net
|
|
|
|
|
293,158
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
292,952
|
|
|
Non-current portion:
|
|
|
|
|
Loans receivable
(i)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
—
|
|
|
|
|
|
230,634
|
|
|
|
|
|
34,854
|
|
|
Other secured loans
|
|
|
|
|
—
|
|
|
|
|
|
160,733
|
|
|
|
|
|
24,291
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
164
|
|
|
|
|
|
25
|
|
|
Total non-current loans and advances
|
|
|
|
|
—
|
|
|
|
|
|
391,531
|
|
|
|
|
|
59,170
|
|
|
Allowance for loans and advances
|
|
|
|
|
—
|
|
|
|
|
|
(1,360
)
|
|
|
|
|
|
(206
)
|
|
|
Loans and advances, net
|
|
|
|
|
—
|
|
|
|
|
|
390,171
|
|
|
|
|
|
58,964
|
|
|
|
(i)
Loans receivable represent loans originated by the Company with an original term up to four years and annual interest rate primarily ranging between 6%~36%;
(ii)
Acquired non-performing loans are overdue loans purchased by the Company from online investors.
(iii)
Advances to borrowers are advances provided to borrowers with urgent financing needs, before online investors fully fund the loans.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
4. Loans and advances, net (continued)
The following table sets forth the activities in the allowance for loans and advances for the years ended December 31, 2016 and 2017:
2016
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Beginning balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,705
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,705
)
|
|
|
Current year provision
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(142,715
)
|
|
|
|
|
|
(1,530
)
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(144,617
)
|
|
|
Recoveries of loans previously written off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,268
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(9,268
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
94,532
|
|
|
|
|
|
1,530
|
|
|
|
|
|
—
|
|
|
|
|
|
96,062
|
|
|
Ending balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(67,156
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(67,528
)
|
|
|
|
2017
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Beginning balance
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(67,156
)
|
|
|
|
|
|
—
|
|
|
|
|
|
(372
)
|
|
|
|
|
|
(67,528
)
|
|
|
|
|
|
(10,205
)
|
|
|
Current year provision
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(327,453
)
|
|
|
|
|
|
(4,832
)
|
|
|
|
|
|
(81,201
)
|
|
|
|
|
|
(484,063
)
|
|
|
|
|
|
(73,153
)
|
|
|
Recoveries of loans previously written off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(18,943
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(18,943
)
|
|
|
|
|
|
(2,863
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
161,378
|
|
|
|
|
|
1,077
|
|
|
|
|
|
1,789
|
|
|
|
|
|
164,244
|
|
|
|
|
|
24,821
|
|
|
Ending balance
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(252,174
)
|
|
|
|
|
|
(3,755
)
|
|
|
|
|
|
(79,784
)
|
|
|
|
|
|
(406,290
)
|
|
|
|
|
|
(61,400
)
|
|
|
|
The following table sets forth the aging of loans and advances as of December 31, 2016 and 2017:
As of December 31, 2016
|
|
|
Current
|
|
|
1 – 30
days
past
due
|
|
|
31 – 60
days
past
due
|
|
|
61 – 90
days
past
due
|
|
|
91 – 120
days
past
due
|
|
|
121 – 150
days
past
due
|
|
|
151 – 180
days
past
due
|
|
|
181 – 360
days
past
due
|
|
|
Over 360
days
past
due
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
76,457
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
76,457
|
|
|
Other secured loans
|
|
|
|
|
18,206
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
18,206
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
—
|
|
|
|
|
|
69,405
|
|
|
|
|
|
51,785
|
|
|
|
|
|
41,342
|
|
|
|
|
|
31,430
|
|
|
|
|
|
21,915
|
|
|
|
|
|
11,715
|
|
|
|
|
|
23,400
|
|
|
|
|
|
5,564
|
|
|
|
|
|
256,556
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
593
|
|
|
|
|
|
91
|
|
|
|
|
|
54
|
|
|
|
|
|
17
|
|
|
|
|
|
7
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
762
|
|
|
Total
|
|
|
|
|
94,663
|
|
|
|
|
|
69,998
|
|
|
|
|
|
51,876
|
|
|
|
|
|
41,396
|
|
|
|
|
|
31,447
|
|
|
|
|
|
21,922
|
|
|
|
|
|
11,715
|
|
|
|
|
|
23,400
|
|
|
|
|
|
5,564
|
|
|
|
|
|
351,981
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
4. Loans and advances, net (continued)
As of December 31, 2017
|
|
|
Current
|
|
|
1 – 30
days
past
due
|
|
|
31 – 60
days
past
due
|
|
|
61 – 90
days
past
due
|
|
|
91 – 120
days
past
due
|
|
|
121 – 150
days
past
due
|
|
|
151 – 180
days
past
due
|
|
|
181 – 360
days
past
due
|
|
|
Over 360
days
past
due
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
USD$
|
|
Loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,331,760
|
|
|
|
|
|
3,015
|
|
|
|
|
|
813
|
|
|
|
|
|
50
|
|
|
|
|
|
165
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,335,803
|
|
|
|
|
|
201,871
|
|
|
Other secured loans
|
|
|
|
|
265,025
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
265,025
|
|
|
|
|
|
40,052
|
|
|
Unsecured loans
|
|
|
|
|
496,726
|
|
|
|
|
|
14,050
|
|
|
|
|
|
1,614
|
|
|
|
|
|
226
|
|
|
|
|
|
118
|
|
|
|
|
|
46
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
512,780
|
|
|
|
|
|
77,493
|
|
|
Acquired non-performing
loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
—
|
|
|
|
|
|
73,463
|
|
|
|
|
|
46,542
|
|
|
|
|
|
39,968
|
|
|
|
|
|
38,558
|
|
|
|
|
|
26,354
|
|
|
|
|
|
26,887
|
|
|
|
|
|
134,994
|
|
|
|
|
|
52,176
|
|
|
|
|
|
438,942
|
|
|
|
|
|
66,334
|
|
|
Other secured loans
|
|
|
|
|
—
|
|
|
|
|
|
8,599
|
|
|
|
|
|
21,419
|
|
|
|
|
|
12,117
|
|
|
|
|
|
9,205
|
|
|
|
|
|
257
|
|
|
|
|
|
177
|
|
|
|
|
|
7,145
|
|
|
|
|
|
42
|
|
|
|
|
|
58,961
|
|
|
|
|
|
8,910
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
84,612
|
|
|
|
|
|
30,507
|
|
|
|
|
|
3,638
|
|
|
|
|
|
1,558
|
|
|
|
|
|
356
|
|
|
|
|
|
232
|
|
|
|
|
|
2
|
|
|
|
|
|
50
|
|
|
|
|
|
120,955
|
|
|
|
|
|
18,280
|
|
|
Total
|
|
|
|
|
2,093,511
|
|
|
|
|
|
183,739
|
|
|
|
|
|
100,895
|
|
|
|
|
|
55,999
|
|
|
|
|
|
49,604
|
|
|
|
|
|
27,013
|
|
|
|
|
|
27,296
|
|
|
|
|
|
142,141
|
|
|
|
|
|
52,268
|
|
|
|
|
|
2,732,466
|
|
|
|
|
|
412,940
|
|
|
|
5. Short-term investments
As of December 31, 2017, the Company’s short-term investments consist of available-for-sale debt securities with maturities of less than one year purchased from commercial banks. During the years ended December 31, 2016 and 2017, the Company recorded interest income from short-term investments of RMB9,552 and RMB17,202 (US$2,600) in the consolidated statements of comprehensive income, respectively.
6. Prepaid expenses and other assets
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from third-party payment platforms
(i)
|
|
|
|
|
231,721
|
|
|
|
|
|
204,231
|
|
|
|
|
|
30,864
|
|
|
Prepaid rental and deposits
|
|
|
|
|
40,495
|
|
|
|
|
|
72,186
|
|
|
|
|
|
10,909
|
|
|
Others
|
|
|
|
|
56,637
|
|
|
|
|
|
157,180
|
|
|
|
|
|
23,754
|
|
|
Total
|
|
|
|
|
328,853
|
|
|
|
|
|
433,597
|
|
|
|
|
|
65,527
|
|
|
Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid rental and deposits
|
|
|
|
|
2,043
|
|
|
|
|
|
8,048
|
|
|
|
|
|
1,216
|
|
|
Total
|
|
|
|
|
2,043
|
|
|
|
|
|
8,048
|
|
|
|
|
|
1,216
|
|
|
|
(i)
Amounts due from third-party payment platforms are restricted cash held by third-party payment platforms that belong to the borrowers and online investors as of December 31, 2016 and 2017.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
7. Long-term investments
Long-term investments consist of the following:
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Cost method investments
|
|
|
|
|
13,333
|
|
|
|
|
|
309,333
|
|
|
|
|
|
46,748
|
|
|
Time deposits
|
|
|
|
|
—
|
|
|
|
|
|
50,000
|
|
|
|
|
|
7,556
|
|
|
|
|
|
|
|
13,333
|
|
|
|
|
|
359,333
|
|
|
|
|
|
54,304
|
|
|
|
8. Property, equipment and software, net
Property, equipment and software, net consist of the following:
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Computer and electronic equipment
|
|
|
|
|
14,198
|
|
|
|
|
|
38,298
|
|
|
|
|
|
5,788
|
|
|
Leasehold improvement
|
|
|
|
|
13,483
|
|
|
|
|
|
38,900
|
|
|
|
|
|
5,879
|
|
|
Vehicles
|
|
|
|
|
11,359
|
|
|
|
|
|
20,985
|
|
|
|
|
|
3,171
|
|
|
Office furniture and equipment
|
|
|
|
|
2,124
|
|
|
|
|
|
6,094
|
|
|
|
|
|
921
|
|
|
Software
|
|
|
|
|
7,585
|
|
|
|
|
|
11,053
|
|
|
|
|
|
1,670
|
|
|
Total
|
|
|
|
|
48,749
|
|
|
|
|
|
115,330
|
|
|
|
|
|
17,429
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
|
(3,339
)
|
|
|
|
|
|
(15,897
)
|
|
|
|
|
|
(2,402
)
|
|
|
Property, equipment and software, net
|
|
|
|
|
45,410
|
|
|
|
|
|
99,433
|
|
|
|
|
|
15,027
|
|
|
|
Depreciation and amortization expenses of the property, equipment and software, were RMB3,294 and RMB12,747 (US$1,926) for the years ended December 31, 2016 and 2017, respectively.
9. Short-term borrowings
In July 2017, the subsidiaries of the VIE entered into loan agreements with Yangquan Commercial Bank Co. LTD. (“Yangquan”), pursuant to which the subsidiaries obtained loans with an aggregate amount of RMB200,000 (US$30,225) denominated in RMB with a term of one year and fixed annual interest rate at 5.22%.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
10. Payable to institutional funding partners and online investors
The following table presents payable to institutional funding partners and online investors as of December 31, 2016 and 2017:
|
|
|
Fixed annual Rate
(%)
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
Term
|
|
|
2016
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current:
|
|
|
|
|
|
|
Institutional funding partners
|
|
|
3% to 9%
|
|
|
1 to 12 months
|
|
|
|
|
—
|
|
|
|
|
|
523,328
|
|
|
|
|
|
79,087
|
|
|
Online investors
|
|
|
5% to 11%
|
|
|
3 days to 12 months
|
|
|
|
|
94,663
|
|
|
|
|
|
1,247,353
|
|
|
|
|
|
188,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,663
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
267,592
|
|
|
Non-current:
|
|
|
|
|
|
|
Institutional funding partners
|
|
|
3% to 9%
|
|
|
13 to 36 months
|
|
|
|
|
—
|
|
|
|
|
|
416,118
|
|
|
|
|
|
62,885
|
|
|
|
The following table sets forth the contractual obligations which has not included the impact of discount of time value as of December 31, 2016 and 2017:
|
|
|
Payment due by period
|
|
Long-term borrowings and interest payable:
|
|
|
Less than
1 year
|
|
|
1 – 2 years
|
|
|
Greater than
2 years
|
|
|
Total
|
|
As of December 31, 2016 (RMB)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
As of December 31, 2017 (RMB)
|
|
|
|
|
259,356
|
|
|
|
|
|
256,945
|
|
|
|
|
|
189,971
|
|
|
|
|
|
706,272
|
|
|
As of December 31, 2017 (US$)
|
|
|
|
|
39,195
|
|
|
|
|
|
38,830
|
|
|
|
|
|
28,709
|
|
|
|
|
|
106,734
|
|
|
|
11. Current account with online investors and borrowers
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Investor deposits
|
|
|
|
|
298,444
|
|
|
|
|
|
1,097,259
|
|
|
|
|
|
165,822
|
|
|
Undrawn borrower funds and deposits
|
|
|
|
|
591,748
|
|
|
|
|
|
786,187
|
|
|
|
|
|
118,811
|
|
|
Total
|
|
|
|
|
890,192
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
284,633
|
|
|
|
12. Accrued expenses and other liabilities
Accrued expenses and other liabilities consist of the following:
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Payroll and welfare payable
|
|
|
|
|
87,074
|
|
|
|
|
|
254,509
|
|
|
|
|
|
38,462
|
|
|
Accrued marketing expenses
|
|
|
|
|
6,442
|
|
|
|
|
|
50,163
|
|
|
|
|
|
7,581
|
|
|
Other taxes payable
|
|
|
|
|
23,895
|
|
|
|
|
|
25,862
|
|
|
|
|
|
3,908
|
|
|
Others
|
|
|
|
|
72,103
|
|
|
|
|
|
130,761
|
|
|
|
|
|
19,762
|
|
|
Total
|
|
|
|
|
189,514
|
|
|
|
|
|
461,295
|
|
|
|
|
|
69,713
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
13. Interest income, net
Interest income, net, consists of the following:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Interest income
|
|
|
|
|
13,793
|
|
|
|
|
|
35,742
|
|
|
|
|
|
5,401
|
|
|
Interest expenses
|
|
|
|
|
—
|
|
|
|
|
|
(4,949
)
|
|
|
|
|
|
(748
)
|
|
|
Bank charges
|
|
|
|
|
(145
)
|
|
|
|
|
|
(490
)
|
|
|
|
|
|
(74
)
|
|
|
Total
|
|
|
|
|
13,648
|
|
|
|
|
|
30,303
|
|
|
|
|
|
4,579
|
|
|
|
14. Income taxes
Enterprise income tax
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no withholding tax is imposed.
Hong Kong
The subsidiary incorporated in Hong Kong is subject to income tax at the rate of 16.5% on the estimated assessable profits arising in Hong Kong. For the years ended December 31, 2016 and 2017, the Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong for any of the periods presented. Under the Hong Kong tax law, Weidai HK is exempted from income tax on its foreign-derived income and there is no withholding taxes in Hong Kong on remittance of dividends.
China
The Company’s subsidiary, VIE and VIE’s subsidiaries domiciled in the PRC were subject to 25% statutory income tax rate in the periods presented.
The Enterprise Income Tax Law (the “EIT Law”) of the PRC includes a provision specifying that legal entities organized outside PRC will be considered residents for Chinese income tax purposes if their place of effective management or control is within the PRC. If legal entities organized outside PRC were considered residents for Chinese income tax purpose, they would become subject to the EIT Law on their worldwide income. This would cause any income from legal entities organized outside PRC earned to be subject to PRC’s 25% EIT. The Implementation Rules to the EIT Law provides that non-resident legal entities will be considered as PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, and properties, etc. reside within the PRC.
Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Company does not believe that the legal entities organized outside PRC should be characterized as PRC residents for EIT Law purposes.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
14. Income taxes (continued)
Withholding tax on undistributed dividends
The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise (“FIE”) to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. According to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income in August 2006, dividends paid by an FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the FIE).
The Company did not provide for foreign withholding taxes on the undistributed earnings of foreign subsidiaries during the years presented on the basis of its intent to permanently reinvest its foreign subsidiaries’ earnings. As of December 31, 2017, the total amount of undistributed earnings from the PRC subsidiaries for which no withholding tax has been accrued was RMB318,824 (US$48,182).
Super deduction on
research and development (“
R&D”) expenses
Under the EIT law of the PRC, qualified enterprises can enjoy a 150% super deduction for eligible R&D expenses. During the years ended December 31, 2016 and 2017, RMB40,271 and RMB95,295 (US$14,401) of R&D expense was eligible for the super deduction, which accounts for an RMB5,034 and RMB11,912 (US$1,800) decrease in tax expense, respectively.
The current and deferred components of income tax expenses appearing in the consolidated statements of comprehensive income are as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current income tax
|
|
|
|
|
136,400
|
|
|
|
|
|
318,090
|
|
|
|
|
|
48,071
|
|
|
Deferred income tax
|
|
|
|
|
(31,270
)
|
|
|
|
|
|
(124,887
)
|
|
|
|
|
|
(18,874
)
|
|
|
|
|
|
|
|
105,130
|
|
|
|
|
|
193,203
|
|
|
|
|
|
29,197
|
|
|
|
The principal components of the deferred tax assets are as follows:
|
|
|
As at December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loans and advances
|
|
|
|
|
32,325
|
|
|
|
|
|
128,885
|
|
|
|
|
|
19,478
|
|
|
Net operating loss carry forwards
|
|
|
|
|
9,062
|
|
|
|
|
|
41,875
|
|
|
|
|
|
6,328
|
|
|
Accruals for share-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
10,180
|
|
|
|
|
|
1,538
|
|
|
Accruals for payroll and other costs
|
|
|
|
|
2,511
|
|
|
|
|
|
24,455
|
|
|
|
|
|
3,696
|
|
|
Less: valuation allowance
|
|
|
|
|
(10,219
)
|
|
|
|
|
|
(46,829
)
|
|
|
|
|
|
(7,077
)
|
|
|
Balance at end of the year
|
|
|
|
|
33,679
|
|
|
|
|
|
158,566
|
|
|
|
|
|
23,963
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
14. Income taxes (continued)
The Company operates through its subsidiaries, VIE and subsidiaries of the VIE. The valuation allowance is considered on an individual entity basis. As of December 31, 2016 and 2017, valuation allowances on deferred tax assets are mainly arising from tax loss carry forwards because the Company believes that it is more-likely-than-not that certain of the subsidiaries, VIE and subsidiaries of the VIE registered in the PRC will not be able to generate sufficient taxable income in the near future, to utilize the tax loss carry forwards.
A reconciliation of the differences between the PRC statutory tax rate and the company’s effective tax rate for enterprise income tax is as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Income before provision of income tax
|
|
|
|
|
396,159
|
|
|
|
|
|
668,024
|
|
|
|
|
|
100,954
|
|
|
PRC statutory income tax rate
|
|
|
|
|
25
%
|
|
|
|
|
|
25
%
|
|
|
|
|
|
25
%
|
|
|
Income tax computed at statutory tax rate
|
|
|
|
|
99,039
|
|
|
|
|
|
167,006
|
|
|
|
|
|
25,239
|
|
|
Research and development super-deduction
|
|
|
|
|
(5,034
)
|
|
|
|
|
|
(11,912
)
|
|
|
|
|
|
(1,800
)
|
|
|
Non-deductible expenses
|
|
|
|
|
942
|
|
|
|
|
|
1,499
|
|
|
|
|
|
227
|
|
|
Changes in valuation allowance
|
|
|
|
|
10,183
|
|
|
|
|
|
36,610
|
|
|
|
|
|
5,531
|
|
|
Income tax expenses
|
|
|
|
|
105,130
|
|
|
|
|
|
193,203
|
|
|
|
|
|
29,197
|
|
|
|
The Company did not identify significant unrecognized tax benefits for the years ended December 31, 2016 and 2017. The Company did not incur any interest and penalties related to potential underpaid income tax expenses.
In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings. Accordingly, the PRC subsidiaries’ and VIE and subsidiaries of the VIE’s tax years 2014 through 2017 remain open to examination by the taxing jurisdictions.
15. Earnings per share
Basic earnings per share for each of the years presented are calculated as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ordinary shareholders
|
|
|
|
|
170,168
|
|
|
|
|
|
466,217
|
|
|
|
|
|
70,456
|
|
|
Allocation of net income attributable to preferred shareholders
|
|
|
|
|
(44,428
)
|
|
|
|
|
|
(121,723
)
|
|
|
|
|
|
(18,395
)
|
|
|
Numerator for computing basic earnings per share
|
|
|
|
|
125,740
|
|
|
|
|
|
344,494
|
|
|
|
|
|
52,061
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Earnings per share – basic
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
15. Earnings per share (continued)
Diluted earnings per share for each of the years presented are calculated as follows:
|
|
|
Years ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for computing basic earnings per share
|
|
|
|
|
125,740
|
|
|
|
|
|
344,494
|
|
|
|
|
|
52,061
|
|
|
Allocation of net income attributable to Series C redeemable
convertible preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
21,886
|
|
|
|
|
|
3,308
|
|
|
Numerator for computing diluted earnings per share
|
|
|
|
|
125,740
|
|
|
|
|
|
366,380
|
|
|
|
|
|
55,369
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Conversion of Series C redeemable convertible preferred shares to ordinary shares
|
|
|
|
|
—
|
|
|
|
|
|
61,488
|
|
|
|
|
|
61,488
|
|
|
Weighted average number of ordinary shares outstanding – diluted
|
|
|
|
|
967,841
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,029,329
|
|
|
Earnings per share – diluted
|
|
|
|
|
129.92
|
|
|
|
|
|
355.94
|
|
|
|
|
|
53.79
|
|
|
|
The effects of all the outstanding Series C redeemable convertible preferred shares were excluded from the computation of diluted earnings per share for the years ended December 31, 2016, as their effects would be anti-dilutive.
The unaudited pro forma earnings per share is computed using the weighted-average number of ordinary shares outstanding and assumes the automatic conversion of all of the Company’s Preferred Shares into 341,974 weighted-average shares of ordinary shares upon the closing of an IPO, and all the outstanding ordinary shares are re-designated into 266,413 Class A ordinary shares and 701,428 Class B ordinary shares, respectively, as if it had occurred on January 1, 2017.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
15. Earnings per share (continued)
Unaudited basic and diluted pro forma earnings per share is calculated as follows:
|
|
|
For the year ended December 31, 2017
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Weidai Ltd.
|
|
|
|
|
220,546
|
|
|
|
|
|
33,330
|
|
|
|
|
|
254,275
|
|
|
|
|
|
38,427
|
|
|
Numerator for pro forma basic and diluted earnings per share
|
|
|
|
|
220,546
|
|
|
|
|
|
33,330
|
|
|
|
|
|
254,275
|
|
|
|
|
|
38,427
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
266,413
|
|
|
|
|
|
266,413
|
|
|
|
|
|
701,428
|
|
|
|
|
|
701,428
|
|
|
Add: adjustment to reflect assumed effect of
automatic conversion of preference
shares
|
|
|
|
|
341,974
|
|
|
|
|
|
341,974
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Weighted average number of shares used in
calculating pro forma basic and diluted
earnings per share
|
|
|
|
|
608,387
|
|
|
|
|
|
608,387
|
|
|
|
|
|
701,428
|
|
|
|
|
|
701,428
|
|
|
Pro forma earnings per share – basic and diluted (unaudited)
|
|
|
|
|
362.51
|
|
|
|
|
|
54.78
|
|
|
|
|
|
362.51
|
|
|
|
|
|
54.78
|
|
|
|
16. Share capital
Ordinary shares
On January 26, 2018, the Company issued 967,841 ordinary shares with par value of US$0.0001 to its shareholders in connection with the incorporation of the Company (Note 1). As of December 31, 2017, 499,658,026 ordinary shares were authorized and 967,841 ordinary shares were issued and outstanding, on a retrospective basis.
Dividends
On April 14, 2017, the VIE’s Board of Directors declared dividends of RMB32,228 (US$4,870) which was 10% of distributable net income of the year ended December 31, 2016 to all the holders of ordinary shares and preferred shares outstanding as of December 31, 2016 proportionately. The dividends per share was RMB25.16 and the aggregate dividends declared for the ordinary shares, Series A, A+, B and C preferred shares was RMB23,624 (US$3,570), RMB4,602 (US$695), RMB920 (US$139), RMB1,534 (US$232) and RMB1,548 (US$234), respectively. The dividends were paid in 2017. No dividend was declared for the year ended December 31, 2016.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
17. Related party balances and transactions
a)
Related parties
Name of related parties
|
|
|
Relationship with the Company
|
|
Mr. Hong Yao
|
|
|
Founder, chief executive officer and principal shareholder of the Company
|
|
Hangzhou Ruituo Technology Co., Ltd.
|
|
|
Entity controlled by Founder
|
|
Zhejiang Ruituo Information Technology Co., Ltd.
|
|
|
Entity controlled by Founder
|
|
Shanghai Zaohui Finance Lease Co., Ltd.
|
|
|
Entity controlled by Director
|
|
Zhejiang Qunshuo Electronics Co., Ltd
|
|
|
Entity significantly influenced by Founder
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
Entity significantly influenced by Founder
|
|
Hangzhou Qiandaohuyaodage Trading Company
|
|
|
Entity controlled by immediate family members of Founder
|
|
Zhejiang Hongrui Investment Management Co., Ltd.
|
|
|
Entity controlled by immediate family members of Founder
|
|
Weiyi (Hangzhou) Internet Financial Information Service Co., Ltd.
|
|
|
Entity controlled by immediate family members of Founder
|
|
Chunan Wencai Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Founder
|
|
Chunan Yuntong Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Director
|
|
Chunan Wangcai Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Director
|
|
Suzhou Weixin Zhonghua Venture Capital Partnership
|
|
|
Company shareholder
|
|
Key management and their immediate family members
|
|
|
The Company’s key management and their immediate family members
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
17. Related party balances and transactions (continued)
b)
The Company had the following related party transactions:
|
|
|
For the year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Financing income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key management and their immediate family members
|
|
|
|
|
833
|
|
|
|
|
|
851
|
|
|
|
|
|
129
|
|
|
Other revenues:
|
|
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
2,179
|
|
|
|
|
|
3,740
|
|
|
|
|
|
565
|
|
|
Origination and servicing expenses:
|
|
|
|
|
Customer acquisition costs to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chunan Wencai Information Advisory Services Company
|
|
|
|
|
87,356
|
|
|
|
|
|
99,601
|
|
|
|
|
|
15,052
|
|
|
Chunan Wangcai Information Advisory Services Company
|
|
|
|
|
57,833
|
|
|
|
|
|
62,496
|
|
|
|
|
|
9,445
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
5,578
|
|
|
|
|
|
49,377
|
|
|
|
|
|
7,462
|
|
|
Chunan Yuntong Information Advisory Services Company
|
|
|
|
|
3,155
|
|
|
|
|
|
2,793
|
|
|
|
|
|
422
|
|
|
GPS costs to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhejiang Qunshuo Electronics Co., Ltd
|
|
|
|
|
10,067
|
|
|
|
|
|
25,290
|
|
|
|
|
|
3,822
|
|
|
Collecting costs to:
|
|
|
|
|
Zhejiang Hongrui Investment Management Co., Ltd.
|
|
|
|
|
13,221
|
|
|
|
|
|
20,469
|
|
|
|
|
|
3,093
|
|
|
Total
|
|
|
|
|
177,210
|
|
|
|
|
|
260,026
|
|
|
|
|
|
39,296
|
|
|
General and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting expenses to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzhou Weixin Zhonghua Venture Capital Partnership (LLP)
|
|
|
|
|
—
|
|
|
|
|
|
20,000
|
|
|
|
|
|
3,022
|
|
|
Welfare expenses to:
|
|
|
|
|
Hangzhou Qiandaohuyaodage trading company
|
|
|
|
|
179
|
|
|
|
|
|
1,387
|
|
|
|
|
|
210
|
|
|
Total
|
|
|
|
|
179
|
|
|
|
|
|
21,387
|
|
|
|
|
|
3,232
|
|
|
Sales and marketing expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promotion expenses to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weiyi (Hangzhou) Internet Financial Information Service
Co., Ltd.
|
|
|
|
|
3,264
|
|
|
|
|
|
7,916
|
|
|
|
|
|
1,196
|
|
|
Trademark expenses to:
|
|
|
|
|
Zhejiang Ruituo Information Technology Co., Ltd.
|
|
|
|
|
—
|
|
|
|
|
|
62
|
|
|
|
|
|
10
|
|
|
Total
|
|
|
|
|
3,264
|
|
|
|
|
|
7,978
|
|
|
|
|
|
1,206
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
17. Related party balances and transactions (continued)
c)
The Company had the following related party balances:
Amounts due from related parties
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Hangzhou Ruituo Technology Co., Ltd.
|
|
|
|
|
3,051
|
|
|
|
|
|
4,497
|
|
|
|
|
|
680
|
|
|
Shanghai Zaohui Finance Lease Co., Ltd.
(i)
|
|
|
|
|
270
|
|
|
|
|
|
3,993
|
|
|
|
|
|
603
|
|
|
Mr. Hong Yao
|
|
|
|
|
64,687
|
|
|
|
|
|
161
|
|
|
|
|
|
24
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
5,311
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Others
|
|
|
|
|
881
|
|
|
|
|
|
517
|
|
|
|
|
|
78
|
|
|
Total
|
|
|
|
|
74,200
|
|
|
|
|
|
9,168
|
|
|
|
|
|
1,385
|
|
|
|
(i)
The balance mainly represents receivable for collection of over-due loans from Shanghai Zaohui Finance Lease Co., Ltd., as mortgage of these loans were registered by Shanghai Zaohui Finance Lease Co., Ltd..
Amounts due to related parties
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Key management and their immediate family members
(i)
|
|
|
|
|
15,010
|
|
|
|
|
|
30,701
|
|
|
|
|
|
4,640
|
|
|
Hangzhou Ruituo Technology Co., Ltd.
(ii)
|
|
|
|
|
853
|
|
|
|
|
|
10,139
|
|
|
|
|
|
1,532
|
|
|
Chunan Wangcai Information Advisory Services Company
|
|
|
|
|
9,489
|
|
|
|
|
|
6,233
|
|
|
|
|
|
942
|
|
|
Chunan Wencai Information Advisory Services Company
|
|
|
|
|
8,448
|
|
|
|
|
|
5,718
|
|
|
|
|
|
864
|
|
|
Mr. Hong Yao
(i)
|
|
|
|
|
21,307
|
|
|
|
|
|
4,335
|
|
|
|
|
|
655
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
5,577
|
|
|
|
|
|
2,921
|
|
|
|
|
|
441
|
|
|
Others
|
|
|
|
|
864
|
|
|
|
|
|
2,853
|
|
|
|
|
|
432
|
|
|
Total
|
|
|
|
|
61,548
|
|
|
|
|
|
62,900
|
|
|
|
|
|
9,506
|
|
|
|
(i)
The balance mainly represents investment balance due to related parties who are also investors on the platform;
(ii)
The balance mainly represents investment balance from institutional funding partners, as these institutional funding partners invest on the platform through Hangzhou Ruituo Technology Co., Ltd.
.
18. Share-based compensation
Restricted shares
On June 1, 2016 and September 1, 2016, the Company granted 9,168 restricted shares in aggregate for nil consideration to certain directors and executives. The restricted shares granted are immediately vested. The Company calculated the estimated fair value of the shares on the respective grant dates using the
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
18. Share-based compensation (continued)
income approach with assistance from an independent valuation firm. The fair value of the granted shares was RMB3,525.90 per share on both June 1, 2016 and September 1, 2016. The share-based compensation of RMB32,326 in total was charged to the consolidated statement of comprehensive income for the year ended December 31, 2016.
Stock appreciation rights
On December 18, 2015, the Board of Directors of the Company approved the plan to issue stock appreciation rights (the “Weimi Share Plan”) for the purpose of providing incentives and rewards to employees and executives who contribute to the success of VIE’s operations. During 2017, the Company issued a total of 2.72% of the equity interest of the Company under the Weimi Share Plan. These stock appreciation rights have no exercise price and will be settled in cash at the amount of the fair value of the respective equity interest percentages of the Company on the exercise date over their fair value at the grant date. These stock appreciation rights are exercisable prior to the Company’s successful IPO and are classified as liability awards. Also, at the discretion of the Company, each grantee may receive a certain percentage of annual attributable net profit as annual dividend which is settled in cash. In addition, the grantee has the option to purchase the Company’s shares when the grantee’s accumulated stock appreciation rights granted exceed 0.1% of the Company’s total paid-in-capital (the purchase price will be determined by the Company at the time when such event occurs).
These stock appreciation rights are subject to vesting of 33%, 33% and 34% on the second, third and fourth anniversary of the vest commencement date, respectively. The vested stock appreciation rights are exercisable within five years from the grant date.
During the year ended December 31, 2017, no dividend was declared to the grantee and none of the grantee’s accumulated stock appreciation rights granted exceeded 0.1% of the Company’s total paid-in-capital. The share-based compensation of RMB 40,719 (US$6,154) was charged to the consolidated statement of comprehensive income for the year ended December 31, 2017.
The Company calculated the estimated fair value of the stock appreciation rights on the balance sheet date using the Black-Scholes option pricing model with assistance from independent valuation firm. Assumptions used to determine the fair value of virtual share options granted as of December 31, 2017 are summarized as follows:
|
|
|
December 31, 2017
|
|
Fair value per ordinary share
|
|
|
6,721
|
|
Risk-free interest rate
|
|
|
4.35%
|
|
Dividend yield
|
|
|
nil
|
|
Expected volatility
|
|
|
61.00%
|
|
Weighted average expected life range (years)
|
|
|
2.92 – 3.75
|
|
The estimated fair value of the Company’s enterprise value at balance date was determined with the assistance of an independent third party valuation firm using the Income Approach. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with the contractual term of the awards. Expected volatility is estimated based on the historical volatility ordinary shares of serval comparable companies in the same industry. The dividend yield is estimated based on our expected dividend policy over the expected term of the options. The weighted average expected life was estimated using simplified method for “plain-vanilla” options as the Company considers the options granted to have “plain-vanilla” characteristics.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
18. Share-based compensation (continued)
For the years ended December 31, 2016 and 2017, the Company allocated share-based compensation expenses as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Origination and servicing
|
|
|
|
|
18,473
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
General and administrative
|
|
|
|
|
—
|
|
|
|
|
|
35,223
|
|
|
|
|
|
5,323
|
|
|
Research and development
|
|
|
|
|
13,853
|
|
|
|
|
|
5,496
|
|
|
|
|
|
831
|
|
|
Total
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
|
19. Commitments and contingencies
Operating lease commitments
The Company leases certain office premises under non-cancelable leases. Rental expenses under operating leases for the years ended December 31, 2016 and 2017 were RMB 23,401 and RMB 107,911 (US$16,308), respectively.
Future minimum lease payments under non-cancelable operating leases agreements consist of the following as of December 31, 2017:
|
|
|
RMB
|
|
|
US$
|
|
2018
|
|
|
|
|
91,347
|
|
|
|
|
|
13,805
|
|
|
2019
|
|
|
|
|
72,363
|
|
|
|
|
|
10,936
|
|
|
2020
|
|
|
|
|
26,634
|
|
|
|
|
|
4,025
|
|
|
2021
|
|
|
|
|
9,577
|
|
|
|
|
|
1,447
|
|
|
2022 and thereafter
|
|
|
|
|
124
|
|
|
|
|
|
19
|
|
|
Total
|
|
|
|
|
200,045
|
|
|
|
|
|
30,232
|
|
|
|
Capital and other commitments
Future minimum capital commitments, mainly representing renovating expense under non-cancellable agreements, consist of the following as of December 31, 2017:
|
|
|
RMB
|
|
|
US$
|
|
2018
|
|
|
|
|
3,692
|
|
|
|
|
|
558
|
|
|
2019
|
|
|
|
|
1,015
|
|
|
|
|
|
153
|
|
|
2020 and thereafter
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total
|
|
|
|
|
4,707
|
|
|
|
|
|
711
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
20. Preferred shares
On September 6, 2015, the Company issued 182,925 Series A preferred shares to Hangzhou Handing Yuyou Share Investment Partnership (LLP) for a total cash consideration of RMB18,293.
On October 15, 2015, the Company issued 36,585 Series A+ preferred shares to Zhejiang Zheshang Lihai Venture Capital Partnership (LLP) and Hangzhou Lihai Hulian Venture Capital Partnership (LLP) for a total cash consideration of RMB3,658.
On March 16, 2016, 60,976 ordinary shares which were originally issued for a total cash consideration of RMB6,098 were transferred to Zhejiang Handing Yuyou Financial Service Co., Ltd. and redesignated as Series B preferred shares.
On October 24, 2016, the Company issued a total of 61,488 Series C redeemable convertible preferred shares to Hefei Zhongan Runxin Fund Investment Partnership (LLP), Suzhou Weixin Zhonghua Investment Partnership (LLP) and Wenjing Yisheng Investment Co., Ltd. for a total cash consideration of RMB 240,000. The Series A, A+, B and C preferred shares issued by the Company are collectively referred to as the “Preferred Shares”.
The key terms of the Preferred Shares are summarized below:
Dividends
No dividends may be declared or paid on the ordinary shares or any future series of preferred shares, unless and until a dividend in like amount is declared and paid on each outstanding preferred share on an as-if converted basis. The holders of preferred shares is entitled to receive on a pari passu basis, when as and if declared at the sole discretion of the Board, but only out of funds that are legally available therefor, cash dividends at the rate or in the amount as the Board considers appropriate.
For the year ended December 31, 2016, no dividends were declared for the Preferred Shares. For the year ended December 31, 2017, dividends of RMB8,604 (US$1,300) have been declared for the Preferred Shares.
Voting Rights
Each preferred shareholder is entitled to the number of votes equal to the number of ordinary shares into which such holder’s preferred shares could be converted. Unless otherwise disclosed elsewhere, preferred shareholders will vote together with ordinary shareholders, and not as a separate class or series, on all matters put before the shareholders.
Redemption
The Series A, A+ and B preferred shares are not entitled to any redemption rights.
The Series C redeemable convertible preferred shares become redeemable at the holders’ option if the following event is triggered:
(i)
the Company fails to complete a qualified IPO before a specified date;
(ii)
the Company fails to be acquired by an listed company with a price or valuation exceeding predetermined valuation amount;
(iii)
the occurrence of a material breach of the Transaction Documents by any of the Founder or the Company,
(iv)
the Company fails to meet certain performance target in the each year of 2015, 2016 and 2017;
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
20. Preferred shares (continued)
(v)
the Company fails to follow the custody requirement as discussed in the investment agreement or misuses the proceeds.
In the event that the Series C preferred shares are redeemable, the holders of Series C preferred shares can request the founder to purchase or redeem all or portion of its shares subscribed, or request the founder or the Company to redeem all or portion of its shares subscribed by deregistering the share capital at the following redemption price, which is the greater of:
(i)
100% of Series C preferred shares original issuance price, together with a 15% annual simple return plus all declared but unpaid dividends, and minus all dividends that have been paid on such shares;
(ii)
Series C preferred shares original issuance price x (150%)N;
(iii)
Series C shareholders’ portion of the net assets of the VIE (as indicated in the audited financial statements ending on the last month immediately prior to the above redeemable trigger event).
N = a fraction, the numerator of which is the number of calendar days between the date the holder of the preferred share acquired the preferred share and the date on which such preferred share is redeemed and the denominator of which is 365.
Liquidation Preference
The holders of Series A, A+ and B preferred shares are not entitled to any liquidation preference upon the initial issuance and are subsequently modified to be entitled to liquidation preference upon the issuance of Series C preferred shares on September 9, 2016.
In the event of liquidation, dissolution or winding up of the Company or any deemed liquidation event as defined in the preferred shares agreements, the assets of the Company available for distribution will be made as follows:
The holders of Series C preferred shares are entitled to receive an amount equal to the greater of (a) original issuance price together with an annual simple return rate of fifteen percent (15%) plus all declared but unpaid dividends and distributions, (b) original issuance price x (150%)N, and (c) the holder of Series C preferred shares’ portion of net assets of the Company, in preference to all other classes or series of Preferred Shares and the ordinary shareholders of the Company.
N = a fraction, the numerator of which is the number of calendar days between the date the holder of the preferred share acquired the preferred share and the date on which such preferred share is redeemed and the denominator of which is 365.
After distribution or payment in full to the holders of Series C preferred shares, the holders of Series A, A+ and B shares are entitled to receive, on a pari passu basis, for each outstanding share held, an amount equal to each share’s original issuance price plus all declared but unpaid dividends and distributions, in preference to any distribution to the ordinary shareholders of the Company.
After payment has been made to the holders of the Preferred Shares in accordance with the above, the remaining assets of the Company available for distribution to shareholders shall be distributed ratably among the holders of ordinary shares and Preferred Shares based on the number of ordinary shares into which such Preferred Shares are convertible.
The liquidation preference amount for Series A, A+, B and C preferred shares was RMB18,293 (US$2,765), RMB3,658 (US$553), RMB6,098 (US$922) and RMB360,000 (US$54,404), respectively, as of
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
20. Preferred shares (continued)
December 31, 2017. On April 10, 2018, holders of Series A are further modified to be not entitled to liquidation preference. After payment has been made to the holders of Series A+, B and C preferred shares in accordance with the liquidation preference amount mentioned above, the remaining asset of the Company available for distribution to shareholders shall be distributed ratably among the holders of ordinary shares and the Preferred Shares (including Series A preferred shares) based on the number of ordinary shares into which such Preferred Shares are convertible.
Conversion rights
The Series A, A+ and B preferred shares are not entitled to any conversion rights at their initial issuance. The holders of Series C preferred shares have the rights, at each holder’s discretion, to convert at any time and from time to time, all or any portion of the Series C preferred shares into ordinary shares. The initial conversion ratio shall be on a one for one basis, subject to certain anti-dilution adjustments. During the years ended December 31, 2016 and 2017, no such adjustment was triggered.
Starting April 10, 2018, the holders of the Series A, A+ and B preferred shares are given the rights, at each holder’s discretion, to convert at any time and from time to time, all or any portion of the Series A, A+ and B preferred shares into ordinary share, at the initial conversion ratio on a one for one basis, subject to certain general anti-dilution adjustments.
In addition, all the Preferred Shares are automatically converted into ordinary shares on the then-effective conversion price applicable to such Preferred Shares upon the earlier of (i) election in writing by the holders of at least a majority of the then issued and outstanding Preferred Shares with respect to the conversion of the respective class; or (ii) the closing of an initial public offering.
Accounting for Preferred Shares
Series A, A+ and B preferred shares
The Series A, A+ and B preferred shares are initially classified as permanent equity and measured at fair value as they are not redeemable. On September 9, 2016, when Series C preferred shares are issued, Series A, A+ and B preferred shareholders are entitled to the liquidation preference upon deemed liquidation events as mentioned above. The Company concluded that the amendment is accounted for as a modification as the fair value of each related series of preferred share immediately after the amendment is not significantly different from its fair value immediately before the amendment and an RMB861 was recorded as deemed dividend to the preferred shareholders for the year ended December 31, 2016. Upon the modification, Series A, A+ and B preferred shares are classified as mezzanine equity as they may be redeemed at the option of the holders upon a deemed liquidation event.
Series C preferred shares
The Series C preferred shares are classified as mezzanine equity as they may be redeemed at the option of the holders on or after an agreed upon date outside the sole control of the Company or upon a deemed liquidation event. The Series C preferred shares are initially measured at fair value. The holders of the Series C preferred shares have the ability to convert the instrument into the Company’s ordinary shares. The Company evaluated the embedded conversion option in the Series C preferred shares to determine if there were any embedded derivatives requiring bifurcation and to determine if there were any beneficial conversion features. There were no embedded derivatives that are required to be bifurcated. The conversion option of the Series C preferred shares is not bifurcated because the conversion option is clearly and closely
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
20. Preferred shares (continued)
related to the host equity instrument. The contingent redemption options of the Series C preferred shares is not bifurcated because the underlying ordinary shares are not settable since they were neither publicly traded nor readily convertible into cash.
Beneficial conversion features (“BCF”) exist when the conversion price of the Preferred Shares is lower than the fair value of the ordinary shares at the commitment date, which is the issuance date of the respective series of Preferred Shares. When a BCF exists as of the commitment date, its intrinsic value is bifurcated from the carrying value of the Preferred Shares as a contribution to additional paid-in capital. On the commitment date of the Series C preferred shares, the most favorable conversion price used to measure the beneficial conversion feature was RMB3,956. No beneficial conversion feature was recognized for the Series C preferred shares as the fair value per ordinary share at the commitment date were RMB3,689.9, which was less than the most favorable conversion price. The Company determined the fair value of ordinary shares with the assistance of an independent third party valuation firm.
The contingent conversion price adjustment is accounted for as a contingent BCF. In accordance with ASC paragraph 470-20-35-1, changes to the conversion terms that would be triggered by future events not controlled by the issuer should be accounted as contingent conversions, and the intrinsic value of such conversion options would not be recognized until and unless a triggering event occurred. No contingent BCF was recognized for any of the Preferred Shares for the years ended December 31, 2016 and 2017.
The Company concluded that the Series C preferred shares are not currently redeemable, but it is probable that they will become redeemable. The Company chose to recognize changes in the redemption value immediately as they occur and adjusted the carrying value of the Series C preferred shares to equal the redemption value at the end of each reporting period. An accretion charge of RMB120,000 and nil related to Series C preferred shares was recorded as an decrease to the net income attributable to ordinary shareholders for the years ended December 31, 2016 and 2017, respectively.
The movement in the carrying value of the Preferred Shares is as follows:
|
|
|
Series A
|
|
|
Series A+
|
|
|
Series B
|
|
|
Series C
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Balance as of January 1, 2016
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Capital injection for Series A, A+ and B preferred
shares
|
|
|
|
|
18,293
|
|
|
|
|
|
3,658
|
|
|
|
|
|
6,098
|
|
|
|
|
|
—
|
|
|
|
|
|
28,049
|
|
|
Issuance of Series C redeemable convertible preferred shares (net of nil issuance costs)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
240,000
|
|
|
|
|
|
240,000
|
|
|
Modification of Series A, A+ and B preferred shares
|
|
|
|
|
563
|
|
|
|
|
|
113
|
|
|
|
|
|
185
|
|
|
|
|
|
—
|
|
|
|
|
|
861
|
|
|
Accretion of Series C redeemable convertible preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
120,000
|
|
|
|
|
|
120,000
|
|
|
Balance as of December 31, 2016
|
|
|
|
|
18,856
|
|
|
|
|
|
3,771
|
|
|
|
|
|
6,283
|
|
|
|
|
|
360,000
|
|
|
|
|
|
388,910
|
|
|
Dividends declared
|
|
|
|
|
4,602
|
|
|
|
|
|
920
|
|
|
|
|
|
1,534
|
|
|
|
|
|
1,548
|
|
|
|
|
|
8,604
|
|
|
Dividends paid
|
|
|
|
|
(4,602
)
|
|
|
|
|
|
(920
)
|
|
|
|
|
|
(1,534
)
|
|
|
|
|
|
(1,548
)
|
|
|
|
|
|
(8,604
)
|
|
|
Balance as of December 31, 2017
|
|
|
|
|
18,856
|
|
|
|
|
|
3,771
|
|
|
|
|
|
6,283
|
|
|
|
|
|
360,000
|
|
|
|
|
|
388,910
|
|
|
Balance as of December 31, 2017 (US$)
|
|
|
|
|
2,850
|
|
|
|
|
|
570
|
|
|
|
|
|
950
|
|
|
|
|
|
54,403
|
|
|
|
|
|
58,773
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
21. Restricted net assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the VIE and subsidiaries of the VIE incorporated in PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The consolidated results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s subsidiaries.
Under PRC law, the Company’s subsidiaries, VIE and the subsidiaries of the VIE located in the PRC (collectively referred as the “PRC entities”) are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fund and a staff welfare and bonus fund. The PRC entities are required to allocate at least 10% of their after tax profits on an individual company basis as determined under PRC accounting standards to the statutory reserve and has the right to discontinue allocations to the statutory reserve if such reserve has reached 50% of registered capital on an individual company basis. In addition, the registered capital of the PRC entities is also restricted.
Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the Board of Directors of the subsidiary. The PRC entities are also subject to similar statutory reserve requirements. These reserves can only be used for specific purposes and are not transferable to the Company in the form of loans, advances or cash dividends. Amounts restricted that include paid-in capital and statutory reserve funds, as determined pursuant to PRC GAAP, were RMB161,563 and RMB202,558 (US$30,611) as of December 31, 2016 and 2017, respectively.
22. Subsequent events
The Company has evaluated the impact of any events that have occurred subsequent to December 31, 2017, through August 10, 2018, which is the date these consolidated financial statements were issued.
On May 24, 2018, the Company entered into an agreement with an executive officer of the Company to acquire 70% of equity interest in Hangzhou Jiujiu Financial Information Service Limited, which is engaged in the provision of financial information services, for cash consideration of RMB4,500 (US$680). The acquisition is accounted for as a business combination.
On June 6, 2018, the Company entered into agreements with two executive officers of the Company and a third party individual to acquire a total of 100% of equity interest in Rymo Technology Industry Limited, which is engaged in the provision of collateral registration services through its wholly owned subsidiary, Shanghai Zaohui Finance Lease Co., Ltd., for nil consideration. The acquisition is accounted for as a business combination.
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
23. Condensed financial information of the parent company
The following is the condensed financial information of the Company on a parent company only basis.
Condensed balance sheets
|
|
|
As of December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries, VIE and VIE’s subsidiaries
|
|
|
|
|
733,494
|
|
|
|
|
|
1,216,806
|
|
|
|
|
|
183,889
|
|
|
Total non-current assets
|
|
|
|
|
733,494
|
|
|
|
|
|
1,216,806
|
|
|
|
|
|
183,889
|
|
|
Total assets
|
|
|
|
|
733,494
|
|
|
|
|
|
1,216,806
|
|
|
|
|
|
183,889
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based liability awards
|
|
|
|
|
—
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Total non-current liabilities
|
|
|
|
|
—
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Total liabilities
|
|
|
|
|
—
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Mezzanine equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred shares (par value of US$0.0001 per share; 182,925 shares authorized, issued and outstanding as of December 31, 2016 and 2017)
|
|
|
|
|
18,856
|
|
|
|
|
|
18,856
|
|
|
|
|
|
2,850
|
|
|
Series A+ preferred shares (par value of US$0.0001 per share; 36,585 shares authorized, issued and outstanding as of December 31, 2016 and 2017)
|
|
|
|
|
3,771
|
|
|
|
|
|
3,771
|
|
|
|
|
|
570
|
|
|
Series B preferred shares (par value of US$0.0001 per share; 60,976 shares authorized, issued and outstanding as of December 31, 2016 and 2017)
|
|
|
|
|
6,283
|
|
|
|
|
|
6,283
|
|
|
|
|
|
950
|
|
|
Series C redeemable convertible preferred shares (par value of US$0.0001 per share; 61,488 shares authorized, issued and outstanding as of December 31, 2016 and 2017)
|
|
|
|
|
360,000
|
|
|
|
|
|
360,000
|
|
|
|
|
|
54,403
|
|
|
Total mezzanine equity
|
|
|
|
|
388,910
|
|
|
|
|
|
388,910
|
|
|
|
|
|
58,773
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares (par value of US$0.0001 per share; 499,658,026 shares
authorized, 967,841 shares issued and outstanding as of
December 31, 2016 and 2017)
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
Class A ordinary shares (par value of US$0.0001 per share; 608,387 shares issued and outstanding as of December 31, 2016 and 2017, pro forma)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Class B ordinary shares (par value of US$0.0001 per share; 701,428 shares issued and outstanding, as of December 31, 2016 and 2017, pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
468,352
|
|
|
|
|
|
468,352
|
|
|
|
|
|
70,779
|
|
|
(Accumulated deficit)/Retained earnings
|
|
|
|
|
(123,769
)
|
|
|
|
|
|
318,824
|
|
|
|
|
|
48,183
|
|
|
Total shareholders’ equity
|
|
|
|
|
344,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
118,962
|
|
|
Total liabilities and shareholders’ equity
|
|
|
|
|
344,584
|
|
|
|
|
|
787,177
|
|
|
|
|
|
125,116
|
|
|
Total liabilities, mezzanine equity and shareholders’ equity
|
|
|
|
|
733,494
|
|
|
|
|
|
1,216,806
|
|
|
|
|
|
183,889
|
|
|
|
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
23. Condensed financial information of the parent company (continued)
Condensed statements of comprehensive income
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Income from equity method investments
|
|
|
|
|
323,355
|
|
|
|
|
|
515,540
|
|
|
|
|
|
77,911
|
|
|
Share-based compensation expenses
|
|
|
|
|
(32,326
)
|
|
|
|
|
|
(40,719
)
|
|
|
|
|
|
(6,154
)
|
|
|
Net income before income taxes
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Income tax expenses
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Other comprehensive income, net of tax
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total comprehensive income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
|
Condensed statements of cash flow
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net income
|
|
|
|
|
291,029
|
|
|
|
|
|
474,821
|
|
|
|
|
|
71,757
|
|
|
Share of profit in subsidiaries, VIE and VIE’s
subsidiaries
|
|
|
|
|
(323,355
)
|
|
|
|
|
|
(515,540
)
|
|
|
|
|
|
(77,911
)
|
|
|
Share-based compensation expenses
|
|
|
|
|
32,326
|
|
|
|
|
|
40,719
|
|
|
|
|
|
6,154
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Cash, cash equivalents and restricted cash at beginning of the year
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Cash, cash equivalents and restricted cash at end of the
year
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Basis of presentation
Condensed financial information is used for the presentation of the parent company. The condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the equity method to account for investment in its subsidiaries, VIE and VIE’s subsidiaries.
The parent company records its investment in its subsidiaries, VIE and VIE’s subsidiaries under the equity method of accounting as prescribed in ASC 323,
Investments — Equity Method and Joint Ventures
. Such investments are presented on the condensed balance sheets as “Investment in subsidiaries, VIE and
WEIDAI LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
23. Condensed financial information of the parent company (continued)
VIE’s subsidiaries” and their respective profit or loss as “Equity in profits of subsidiaries, VIE and VIE’s subsidiaries” on the condensed statements of comprehensive income. Equity method accounting ceases when the carrying amount of the investment, including any additional financial support, in a subsidiary, VIE or a subsidiary of VIE is reduced to zero unless the parent company has guaranteed obligations of the subsidiary, VIE or a subsidiary of VIE or is otherwise committed to provide further financial support. If the subsidiary, VIE or a subsidiary of VIE subsequently reports net income, the parent company shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method is suspended.
The parent company’s condensed financial statements should be read in conjunction with the Company’s consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2017 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
Note
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
1,765,572
|
|
|
|
|
|
1,823,295
|
|
|
|
|
|
275,543
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
1,092,921
|
|
|
|
|
|
911,796
|
|
|
|
|
|
137,794
|
|
|
Loans and advances, net (net of allowance of RMB404,930
and RMB414,374 (US$62,622) as of December 31, 2017 and
June 30, 2018, respectively)
|
|
|
|
|
3
|
|
|
|
|
|
1,938,492
|
|
|
|
|
|
1,725,015
|
|
|
|
|
|
260,690
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
|
|
|
|
3,560
|
|
|
|
|
|
538
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
4
|
|
|
|
|
|
433,597
|
|
|
|
|
|
628,063
|
|
|
|
|
|
94,916
|
|
|
Amounts due from related parties
|
|
|
|
|
14
|
|
|
|
|
|
9,168
|
|
|
|
|
|
45,692
|
|
|
|
|
|
6,905
|
|
|
Total current assets
|
|
|
|
|
|
|
|
|
|
|
5,248,250
|
|
|
|
|
|
5,137,421
|
|
|
|
|
|
776,386
|
|
|
Non-current assets:
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
8,000
|
|
|
|
|
|
1,209
|
|
|
Long-term investments
|
|
|
|
|
5
|
|
|
|
|
|
359,333
|
|
|
|
|
|
13,333
|
|
|
|
|
|
2,015
|
|
|
Loans and advances, net (net of allowance of RMB1,360 and
RMB1,211 (US$183) as of December 31, 2017 and June 30,
2018, respectively)
|
|
|
|
|
3
|
|
|
|
|
|
390,171
|
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
4
|
|
|
|
|
|
8,048
|
|
|
|
|
|
4,602
|
|
|
|
|
|
696
|
|
|
Property, equipment and software, net
|
|
|
|
|
6
|
|
|
|
|
|
99,433
|
|
|
|
|
|
103,744
|
|
|
|
|
|
15,678
|
|
|
Goodwill
|
|
|
|
|
18
|
|
|
|
|
|
—
|
|
|
|
|
|
5,812
|
|
|
|
|
|
878
|
|
|
Deferred tax assets
|
|
|
|
|
12
|
|
|
|
|
|
158,566
|
|
|
|
|
|
178,174
|
|
|
|
|
|
26,926
|
|
|
Total non-current assets
|
|
|
|
|
|
|
|
|
|
|
1,019,551
|
|
|
|
|
|
808,115
|
|
|
|
|
|
122,125
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
5,945,536
|
|
|
|
|
|
898,511
|
|
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2017 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2018 (continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
Note
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
Current liabilities
(including current liabilities of the consolidated VIE and subsidiaries without recourse to the primary beneficiary of RMB4,633,990 and RMB3,768,943 (US$569,576) as of December 31, 2017 and June 30, 2018, respectively):
|
|
|
|
|
|
Short-term borrowings
|
|
|
|
|
7
|
|
|
|
|
|
200,000
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
8
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
1,341,677
|
|
|
|
|
|
202,759
|
|
|
Current account with online investors and borrowers
|
|
|
|
|
9
|
|
|
|
|
|
1,883,446
|
|
|
|
|
|
1,774,143
|
|
|
|
|
|
268,115
|
|
|
Income tax payable
|
|
|
|
|
|
|
|
|
|
|
243,338
|
|
|
|
|
|
61,329
|
|
|
|
|
|
9,269
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
10
|
|
|
|
|
|
461,295
|
|
|
|
|
|
418,005
|
|
|
|
|
|
63,170
|
|
|
Amounts due to related parties
|
|
|
|
|
14
|
|
|
|
|
|
62,900
|
|
|
|
|
|
35,755
|
|
|
|
|
|
5,403
|
|
|
Deferred revenue
|
|
|
|
|
|
|
|
|
|
|
12,330
|
|
|
|
|
|
8,299
|
|
|
|
|
|
1,254
|
|
|
Total current liabilities
|
|
|
|
|
|
|
|
|
|
|
4,633,990
|
|
|
|
|
|
3,839,208
|
|
|
|
|
|
580,195
|
|
|
Non-current liabilities
(including non-current liabilities of the consolidated VIE and subsidiaries without recourse to the primary beneficiary of RMB457,724 and RMB599,765 (US$90,638) as of December 31, 2017 and June 30, 2018, respectively):
|
|
|
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
8
|
|
|
|
|
|
416,118
|
|
|
|
|
|
536,774
|
|
|
|
|
|
81,119
|
|
|
Deferred revenue
|
|
|
|
|
|
|
|
|
|
|
887
|
|
|
|
|
|
2,473
|
|
|
|
|
|
374
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
40,719
|
|
|
|
|
|
60,518
|
|
|
|
|
|
9,145
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
457,724
|
|
|
|
|
|
599,765
|
|
|
|
|
|
90,638
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
5,091,714
|
|
|
|
|
|
4,438,973
|
|
|
|
|
|
670,833
|
|
|
Commitments and contingencies
|
|
|
|
|
16
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2017 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2018 (continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
As of
|
|
|
Pro forma shareholders’
equity as of
|
|
|
|
|
Note
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
Mezzanine equity:
|
|
|
|
|
17
|
|
|
|
|
|
|
|
Series A preferred shares (par value of
US$0.0001 per share; 182,925 shares
authorized, issued and outstanding as
of December 31, 2017 and June 30,
2018)
|
|
|
|
|
|
|
|
|
|
|
18,856
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series A+ preferred shares (par value of
US$0.0001 per share; 36,585 shares
authorized, issued and outstanding as
of December 31, 2017 and June 30,
2018)
|
|
|
|
|
|
|
|
|
|
|
3,771
|
|
|
|
|
|
3,771
|
|
|
|
|
|
570
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series B preferred shares (par value of
US$0.0001 per share; 60,976 shares
authorized, issued and outstanding as
of December 31, 2017 and June 30,
2018)
|
|
|
|
|
|
|
|
|
|
|
6,283
|
|
|
|
|
|
6,283
|
|
|
|
|
|
950
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series C preferred shares (par value of
US$0.0001 per share; 61,488 shares
authorized, issued and outstanding as
of December 31, 2017 and June 30,
2018)
|
|
|
|
|
|
|
|
|
|
|
360,000
|
|
|
|
|
|
240,000
|
|
|
|
|
|
36,270
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total mezzanine equity
|
|
|
|
|
|
|
|
|
|
|
388,910
|
|
|
|
|
|
250,054
|
|
|
|
|
|
37,790
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2017 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2018 (continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
As of
|
|
|
Pro forma shareholders’
equity as of
|
|
|
|
|
Note
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
Ordinary shares (par value of US$0.0001 per share; 499,658,026 shares authorized, 967,841 shares issued and outstanding as of December 31, 2017 and June 30, 2018)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Series A preferred shares (par value of
US$0.0001 per share; 182,925 shares
authorized, issued and outstanding
as of December 31, 2017 and
June 30, 2018)
|
|
|
|
|
17
|
|
|
|
|
|
—
|
|
|
|
|
|
18,856
|
|
|
|
|
|
2,850
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Class A ordinary shares ( par value of
US$0.0001 per share; 608,387 shares
issued and outstanding as of
December 31, 2017 and June 30,
2018, pro forma)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Class B ordinary shares (par value of
US$0.0001 per share; 701,488 shares
issued and outstanding, as of
December 31, 2017 and June 30,
2018, pro forma)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
468,352
|
|
|
|
|
|
485,962
|
|
|
|
|
|
73,440
|
|
|
|
|
|
754,873
|
|
|
|
|
|
114,080
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
318,824
|
|
|
|
|
|
746,920
|
|
|
|
|
|
112,877
|
|
|
|
|
|
746,920
|
|
|
|
|
|
112,877
|
|
|
Total Weidai Ltd.
shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
787,177
|
|
|
|
|
|
1,251,739
|
|
|
|
|
|
189,167
|
|
|
|
|
|
1,501,793
|
|
|
|
|
|
226,957
|
|
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
4,770
|
|
|
|
|
|
721
|
|
|
|
|
|
4,770
|
|
|
|
|
|
721
|
|
|
Total shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
787,177
|
|
|
|
|
|
1,256,509
|
|
|
|
|
|
189,888
|
|
|
|
|
|
1,506,563
|
|
|
|
|
|
227,678
|
|
|
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
6,267,801
|
|
|
|
|
|
5,945,536
|
|
|
|
|
|
898,511
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
Note
|
|
|
2017
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
RMB
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
Net revenues:
|
|
|
|
|
|
Loan facilitation services (including related party amounts of RMB498 and RMB470 (US$71) for the six months ended June 30, 2017 and 2018, respectively)
|
|
|
|
|
|
|
|
|
|
|
1,269,759
|
|
|
|
|
|
1,466,519
|
|
|
|
|
|
221,626
|
Post facilitation services
|
|
|
|
|
|
|
|
|
|
|
141,707
|
|
|
|
|
|
165,391
|
|
|
|
|
|
24,994
|
Other revenues (including related party amounts of RMB2,377
and nil for the six months ended June 30, 2017 and 2018,
respectively)
|
|
|
|
|
|
|
|
|
|
|
152,936
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
Financing income
|
|
|
|
|
|
|
|
|
|
|
15,425
|
|
|
|
|
|
234,607
|
|
|
|
|
|
35,455
|
Less: Funding costs
|
|
|
|
|
|
|
|
|
|
|
(4,628
)
|
|
|
|
|
|
(78,202
)
|
|
|
|
|
|
(11,818
)
|
Net financing income
|
|
|
|
|
|
|
|
|
|
|
10,797
|
|
|
|
|
|
156,405
|
|
|
|
|
|
23,637
|
Business related taxes and surcharges
|
|
|
|
|
|
|
|
|
|
|
(6,614
)
|
|
|
|
|
|
(10,093
)
|
|
|
|
|
|
(1,524
)
|
Total net revenues
|
|
|
|
|
|
|
|
|
|
|
1,568,585
|
|
|
|
|
|
1,883,270
|
|
|
|
|
|
284,608
|
Provision for loans and advances
|
|
|
|
|
|
|
|
|
|
|
(159,677
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
Net revenues after provision for loans and advances
|
|
|
|
|
|
|
|
|
|
|
1,408,908
|
|
|
|
|
|
1,644,412
|
|
|
|
|
|
248,511
|
Operating costs and expenses:
|
|
|
|
|
|
Origination and servicing (including related party amounts of RMB121,814 and RMB78,421 (US$11,851) for the six months ended June 30, 2017 and 2018, respectively)
|
|
|
|
|
|
|
|
|
|
|
(820,784
)
|
|
|
|
|
|
(916,160
)
|
|
|
|
|
|
(138,453
)
|
Sales and marketing (including related party amounts of RMB
3,425 and RMB 6,945 (US$1,050) for the six months ended
June 30, 2017 and 2018, respectively)
|
|
|
|
|
|
|
|
|
|
|
(72,111
)
|
|
|
|
|
|
(104,994
)
|
|
|
|
|
|
(15,867
)
|
General and administrative (including related party amounts of RMB21,140 and RMB276 (US$42) for the six months ended June 30, 2017 and 2018, respectively)
|
|
|
|
|
|
|
|
|
|
|
(133,378
)
|
|
|
|
|
|
(165,148
)
|
|
|
|
|
|
(24,959
)
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
(34,081
)
|
|
|
|
|
|
(67,214
)
|
|
|
|
|
|
(10,158
)
|
Total operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
(1,060,354
)
|
|
|
|
|
|
(1,253,516
)
|
|
|
|
|
|
(189,437
)
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
348,554
|
|
|
|
|
|
390,896
|
|
|
|
|
|
59,074
|
Interest income, net
|
|
|
|
|
11
|
|
|
|
|
|
18,590
|
|
|
|
|
|
26,888
|
|
|
|
|
|
4,063
|
Government subsidies
|
|
|
|
|
|
|
|
|
|
|
2,849
|
|
|
|
|
|
905
|
|
|
|
|
|
137
|
Other expenses, net
|
|
|
|
|
|
|
|
|
|
|
(67
)
|
|
|
|
|
|
(9,324
)
|
|
|
|
|
|
(1,409
)
|
Net income before income taxes
|
|
|
|
|
|
|
|
|
|
|
369,926
|
|
|
|
|
|
409,365
|
|
|
|
|
|
61,865
|
Income tax expenses
|
|
|
|
|
12
|
|
|
|
|
|
(101,691
)
|
|
|
|
|
|
(102,014
)
|
|
|
|
|
|
(15,417
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
Net loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
745
|
|
|
|
|
|
113
|
Net income and comprehensive income attributable to Weidai Ltd.’s shareholders
|
|
|
|
|
|
|
|
|
|
|
268,235
|
|
|
|
|
|
308,096
|
|
|
|
|
|
46,561
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018 (CONTINUED)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
Note
|
|
|
2017
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
RMB
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
|
|
|
|
|
|
|
Reversal of accretion on Series C preferred shares
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
120,000
|
|
|
|
|
|
18,135
|
|
|
Net income and comprehensive income attributable to Weidai Ltd.’s ordinary shareholders
|
|
|
|
|
|
|
|
|
|
|
268,235
|
|
|
|
|
|
428,096
|
|
|
|
|
|
64,696
|
|
|
Earnings per share:
|
|
|
|
|
|
Basic
|
|
|
|
|
13
|
|
|
|
|
|
204.79
|
|
|
|
|
|
326.84
|
|
|
|
|
|
49.39
|
|
|
Diluted
|
|
|
|
|
13
|
|
|
|
|
|
204.79
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
Shares used in earnings per share computation:
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
Pro forma earnings per share for Class A and Class B ordinary shareholders:
|
|
|
|
|
|
Basic (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
Diluted (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
Class A and Class B ordinary shares used in pro forma earnings per share computation:
|
|
|
|
|
|
Basic (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
Diluted (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018 (continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Six months ended June 30,
|
|
|
|
2017
|
|
|
2018
|
|
|
|
RMB
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
|
|
|
268,235
|
|
|
|
|
|
307,351
|
|
|
|
|
|
46,448
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
Provision for loans and advances
|
|
|
|
|
159,677
|
|
|
|
|
|
238,858
|
|
|
|
|
|
36,097
|
Depreciation and amortization
|
|
|
|
|
5,278
|
|
|
|
|
|
12,509
|
|
|
|
|
|
1,890
|
Share-based compensation expenses
|
|
|
|
|
18,836
|
|
|
|
|
|
55,595
|
|
|
|
|
|
8,402
|
Loss on disposals of cost method investments
|
|
|
|
|
—
|
|
|
|
|
|
964
|
|
|
|
|
|
146
|
Changes in operating assets and liabilities:
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
(211,698
)
|
|
|
|
|
|
(137,835
)
|
|
|
|
|
|
(20,830
)
|
Amounts due from related parties
|
|
|
|
|
57,473
|
|
|
|
|
|
(36,524
)
|
|
|
|
|
|
(5,520
)
|
Deferred tax assets
|
|
|
|
|
(31,476
)
|
|
|
|
|
|
(19,608
)
|
|
|
|
|
|
(2,963
)
|
Current account with online investors and borrowers
|
|
|
|
|
209,987
|
|
|
|
|
|
(109,303
)
|
|
|
|
|
|
(16,518
)
|
Income tax payable
|
|
|
|
|
11,333
|
|
|
|
|
|
(182,009
)
|
|
|
|
|
|
(27,506
)
|
Accrued expenses and other liabilities
|
|
|
|
|
72,733
|
|
|
|
|
|
(68,951
)
|
|
|
|
|
|
(10,420
)
|
Amounts due to related parties
|
|
|
|
|
(30,068
)
|
|
|
|
|
|
(31,645
)
|
|
|
|
|
|
(4,782
)
|
Deferred revenue
|
|
|
|
|
1,423
|
|
|
|
|
|
(5,806
)
|
|
|
|
|
|
(878
)
|
Net cash provided by operating activities
|
|
|
|
|
531,733
|
|
|
|
|
|
23,596
|
|
|
|
|
|
3,566
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of short-term investments
|
|
|
|
|
(5,101,270
)
|
|
|
|
|
|
(2,674,670
)
|
|
|
|
|
|
(404,206
)
|
Redemption of short-term investments
|
|
|
|
|
5,101,270
|
|
|
|
|
|
2,679,610
|
|
|
|
|
|
404,952
|
Payments to originate loans and advances
|
|
|
|
|
(1,744,034
)
|
|
|
|
|
|
(4,152,188
)
|
|
|
|
|
|
(627,494
)
|
Proceeds from collection of loans and advances
|
|
|
|
|
1,358,277
|
|
|
|
|
|
4,022,528
|
|
|
|
|
|
607,899
|
Addition of long-term investments
|
|
|
|
|
(296,000
)
|
|
|
|
|
|
(1,093,040
)
|
|
|
|
|
|
(165,184
)
|
Redemption of long-term investments
|
|
|
|
|
—
|
|
|
|
|
|
1,143,040
|
|
|
|
|
|
172,740
|
Disposals of cost method investments
|
|
|
|
|
—
|
|
|
|
|
|
295,037
|
|
|
|
|
|
44,587
|
Cash and cash equivalents acquired from business combinations
|
|
|
|
|
—
|
|
|
|
|
|
8,045
|
|
|
|
|
|
1,216
|
Purchase of property, equipment and software
|
|
|
|
|
(25,906
)
|
|
|
|
|
|
(12,302
)
|
|
|
|
|
|
(1,859
)
|
Net cash (used in) provided by investing activities
|
|
|
|
|
(707,663
)
|
|
|
|
|
|
216,060
|
|
|
|
|
|
32,651
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from institutional funding partners and online investors
|
|
|
|
|
273,413
|
|
|
|
|
|
2,017,605
|
|
|
|
|
|
304,908
|
Payments to institutional funding partners and online investors
|
|
|
|
|
(92,453
)
|
|
|
|
|
|
(2,381,563
)
|
|
|
|
|
|
(359,910
)
|
Contribution from noncontrolling interest holder
|
|
|
|
|
—
|
|
|
|
|
|
4,900
|
|
|
|
|
|
741
|
Distribution to noncontrolling interest holder
|
|
|
|
|
(2,000
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
Payments of dividends to shareholders
|
|
|
|
|
(15,498
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018 (continued)
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
|
|
|
Six months ended June 30,
|
|
|
|
2017
|
|
|
2018
|
|
|
|
RMB
(unaudited)
|
|
|
RMB
(unaudited)
|
|
|
US$
(unaudited)
|
Net cash provided by (used in) financing activities
|
|
|
|
|
163,462
|
|
|
|
|
|
(359,058
)
|
|
|
|
|
|
(54,261
)
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
Net decrease in cash, cash equivalents and restricted cash
|
|
|
|
|
(12,468
)
|
|
|
|
|
|
(119,402
)
|
|
|
|
|
|
(18,044
)
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
|
|
1,314,814
|
|
|
|
|
|
2,862,493
|
|
|
|
|
|
432,590
|
Cash, cash equivalents and restricted cash at end of period
|
|
|
|
|
1,302,346
|
|
|
|
|
|
2,743,091
|
|
|
|
|
|
414,546
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
Interest paid
|
|
|
|
|
4,628
|
|
|
|
|
|
83,068
|
|
|
|
|
|
12,554
|
Income taxes paid
|
|
|
|
|
130,622
|
|
|
|
|
|
437,036
|
|
|
|
|
|
66,046
|
Non-cash activities:
|
|
|
|
|
Reversal of accretion on Series C preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
120,000
|
|
|
|
|
|
18,135
|
Purchase consideration for business combination included in amounts due to related parties
|
|
|
|
|
—
|
|
|
|
|
|
4,500
|
|
|
|
|
|
680
|
Reconciliation of cash, cash equivalents and restricted cash:
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,107,492
|
|
|
|
|
|
1,823,295
|
|
|
|
|
|
275,543
|
Restricted cash – current
|
|
|
|
|
192,854
|
|
|
|
|
|
911,796
|
|
|
|
|
|
137,794
|
Restricted cash – non-current
|
|
|
|
|
2,000
|
|
|
|
|
|
8,000
|
|
|
|
|
|
1,209
|
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
|
|
|
|
|
1,302,346
|
|
|
|
|
|
2,743,091
|
|
|
|
|
|
414,546
|
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization
Weidai Ltd. (the “Company”) was incorporated as a limited company under the law of Cayman Islands on January 26, 2018. The Company does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries, variable interest entity (“VIE”) and subsidiaries of the VIE. The Company, its subsidiaries, VIE and subsidiaries of the VIE are hereinafter collectively referred to as the “Group”. The Company is principally engaged in the online finance marketplace business in the People’s Republic of China (the “PRC”). As described below, the Company, through a series of transactions which is accounted for as a reorganization of entities under common control (the “Reorganization”), became the ultimate parent entity of its subsidiaries, VIE and subsidiaries of VIE. Accordingly, these consolidated financial statements reflect the historical operations of the Company as if the current organization structure had been in existence throughout the periods presented.
Reorganization transactions
In preparation of its initial public offering in the United States (“IPO”), the following transactions were undertaken to reorganize the legal structure of the Company. On February 5, 2018, the Company set up a wholly-owned subsidiary, Weidai HK Limited (“Weidai HK”) in Hong Kong. On March 15, 2018, Weidai HK set up a wholly-owned subsidiary, Weidai Co., Ltd (“Weidai Co.”) in the PRC. On April 10, 2018, the Company, through Weidai Co., entered into a series of contractual agreements with Weidai (Hangzhou) Financial Information Service Ltd (“Weidai (Hangzhou), or the “VIE”) and its shareholders (the “VIE Agreements”) to transfer the business operations of the VIE to the Company. In return, the Company issued 967,841 of ordinary shares to YAOH WDAI LTD, an entity controlled by Mr. Yao Hong (“the Founder”) and the other ordinary shareholders of the VIE, as well as 182,925 of Series A preferred shares, 36,585 of Series A+ preferred shares, 60,976 of Series B preferred shares, 61,488 of Series C preferred shares to the respective series of preferred shareholders of the VIE.
As all the entities involved in the process of the Reorganization are under common control before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling-of-interest with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts.
As PRC laws and regulations prohibit and restrict foreign ownership of internet value-added businesses, the Company operates its websites and primarily conducts its business in the PRC through the VIE and the subsidiaries of the VIE. On April 10, 2018, the Company entered into share pledge agreements with the nominee shareholders of the VIE through its wholly-owned subsidiary in the PRC, for the equity interests in the VIE held by the shareholders of the VIE. In addition, the Company entered into a power of attorney and an exclusive call option agreement with the VIE and nominee shareholders of the VIE through its wholly-owned subsidiaries in the PRC, which provide its wholly-owned subsidiary the power to direct the activities that most significantly affect the economic performance of the VIE and to acquire the equity interests in the VIE when permitted by the PRC laws, respectively. The Company agreed to provide unlimited financial support to the VIE for its operations which obligated the Company to absorb losses of the VIE that could potentially be significant to the VIE. In addition, pursuant to the resolution of all shareholders of the Company and the resolution of the board of directors of the Company on April 10, 2018 (the “Resolutions”), the rights under the aforementioned power of attorney and the exclusive call option agreement were assigned to the board of directors of the Company (the “Board”) or any officer authorized by the Board, which entitle the Company or its wholly-owned subsidiary to receive economic benefits from the VIE that potentially could be significant to the VIE.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
Despite the lack of technical majority ownership, the Company has effective control of the VIE through a series of VIE Agreements and a parent-subsidiary relationship exists between the Company and the VIE. Through the VIE Arrangements, the shareholders of the VIE effectively assigned all of their voting rights underlying their equity interest in the VIE to the Company. In addition, through the exclusive business operation agreement, the Company, through its wholly-owned subsidiary in the PRC, have the right to receive economic benefits from the VIE that potentially could be significant to the VIE. Lastly, through the financial support undertaking letter, the Company has the obligation to absorb losses of the VIE that could potentially be significant to the VIE. Therefore, the Company is considered the primary beneficiary of the VIE and consolidates the VIE and its subsidiaries as required by SEC Regulation S-X Rule 3A-02 and ASC topic 810 (“ASC 810”),
Consolidation
.
The following table sets forth the assets and liabilities of the VIE and subsidiaries of VIE included in the Company’s unaudited interim condensed consolidated balance sheets:
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
1,765,572
|
|
|
|
|
|
1,819,585
|
|
|
|
|
|
274,982
|
|
|
Restricted cash
|
|
|
|
|
1,092,921
|
|
|
|
|
|
911,796
|
|
|
|
|
|
137,794
|
|
|
Loans and advances, net
|
|
|
|
|
1,938,492
|
|
|
|
|
|
1,725,015
|
|
|
|
|
|
260,690
|
|
|
Short-term investments
|
|
|
|
|
8,500
|
|
|
|
|
|
3,560
|
|
|
|
|
|
538
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
433,597
|
|
|
|
|
|
642,218
|
|
|
|
|
|
97,054
|
|
|
Amounts due from related parties
|
|
|
|
|
9,168
|
|
|
|
|
|
45,692
|
|
|
|
|
|
6,905
|
|
|
Total current assets
|
|
|
|
|
5,248,250
|
|
|
|
|
|
5,147,866
|
|
|
|
|
|
777,963
|
|
|
Non-current assets:
|
|
|
|
|
Restricted cash
|
|
|
|
|
4,000
|
|
|
|
|
|
8,000
|
|
|
|
|
|
1,209
|
|
|
Long-term investments
|
|
|
|
|
359,333
|
|
|
|
|
|
13,333
|
|
|
|
|
|
2,015
|
|
|
Loans and advances, net
|
|
|
|
|
390,171
|
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
8,048
|
|
|
|
|
|
4,602
|
|
|
|
|
|
696
|
|
|
Property, equipment and software, net
|
|
|
|
|
99,433
|
|
|
|
|
|
103,744
|
|
|
|
|
|
15,678
|
|
|
Goodwill
|
|
|
|
|
—
|
|
|
|
|
|
3,067
|
|
|
|
|
|
463
|
|
|
Deferred tax assets
|
|
|
|
|
158,566
|
|
|
|
|
|
178,174
|
|
|
|
|
|
26,926
|
|
|
Total non-current assets
|
|
|
|
|
1,019,551
|
|
|
|
|
|
805,370
|
|
|
|
|
|
121,710
|
|
|
Total assets
|
|
|
|
|
6,267,801
|
|
|
|
|
|
5,953,236
|
|
|
|
|
|
899,673
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Current liabilities:
|
|
|
|
|
Short-term borrowings
|
|
|
|
|
200,000
|
|
|
|
|
|
200,000
|
|
|
|
|
|
30,225
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
1,770,681
|
|
|
|
|
|
1,341,677
|
|
|
|
|
|
202,759
|
|
|
Current account with online investors and borrowers
|
|
|
|
|
1,883,446
|
|
|
|
|
|
1,774,143
|
|
|
|
|
|
268,115
|
|
|
Income tax payable
|
|
|
|
|
243,338
|
|
|
|
|
|
6,100
|
|
|
|
|
|
922
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
461,295
|
|
|
|
|
|
645,590
|
|
|
|
|
|
97,564
|
|
|
Amounts due to related parties
|
|
|
|
|
62,900
|
|
|
|
|
|
35,755
|
|
|
|
|
|
5,403
|
|
|
Deferred revenue
|
|
|
|
|
12,330
|
|
|
|
|
|
8,299
|
|
|
|
|
|
1,254
|
|
|
Total current liabilities
|
|
|
|
|
4,633,990
|
|
|
|
|
|
4,011,564
|
|
|
|
|
|
606,242
|
|
|
Non-current liabilities:
|
|
|
|
|
Payable to institutional funding partners and online investors
|
|
|
|
|
416,118
|
|
|
|
|
|
536,774
|
|
|
|
|
|
81,119
|
|
|
Deferred revenue
|
|
|
|
|
887
|
|
|
|
|
|
2,473
|
|
|
|
|
|
374
|
|
|
Other non-current liabilities
|
|
|
|
|
40,719
|
|
|
|
|
|
60,518
|
|
|
|
|
|
9,145
|
|
|
Total non-current liabilities
|
|
|
|
|
457,724
|
|
|
|
|
|
599,765
|
|
|
|
|
|
90,638
|
|
|
Total liabilities
|
|
|
|
|
5,091,714
|
|
|
|
|
|
4,611,329
|
|
|
|
|
|
696,880
|
|
|
|
The table sets forth the results of operations of the VIE and subsidiaries of VIE included in the Company’s unaudited interim condensed consolidated statements of comprehensive income:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Net revenues
|
|
|
|
|
1,568,585
|
|
|
|
|
|
1,884,913
|
|
|
|
|
|
284,855
|
|
|
Net income
|
|
|
|
|
268,235
|
|
|
|
|
|
142,693
|
|
|
|
|
|
21,564
|
|
|
The table sets forth the cash flows of the VIE and subsidiaries of VIE included in the Company’s unaudited interim condensed consolidated statements of cash flows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Net cash provided by operating activities
|
|
|
|
|
531,733
|
|
|
|
|
|
23,334
|
|
|
|
|
|
3,526
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
(707,663
)
|
|
|
|
|
|
212,612
|
|
|
|
|
|
32,131
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
163,462
|
|
|
|
|
|
(359,058
)
|
|
|
|
|
|
(54,262
)
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
1. Organization (continued)
As of December 31, 2017 and June 30, 2018, there was no pledge or collateralization of the assets of the VIE and its subsidiaries. The amount of the net assets of the VIE and subsidiaries of VIE was RMB1,176,087 and RMB1,341,907 (US$202,793) as of December 31, 2017 and June 30, 2018, respectively. The creditors of the VIE and subsidiaries of VIE’s third-party liabilities did not have recourse to the general credit of the primary beneficiary in the normal course of business. The Company did not provide nor intend to provide additional financial or other support not previously contractually required to the VIE and subsidiaries of VIE during the periods presented.
2. Summary of Significant Accounting Policies
Basis of presentation
The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, VIE and VIE’s subsidiaries for which the Company is the primary beneficiary. All significant inter-company balances and transactions between the Company, its subsidiaries, VIE and VIE’s subsidiaries are eliminated upon consolidation.
Unaudited interim condensed consolidated financial statements
The accompanying unaudited interim condensed consolidated balance sheet as of June 30, 2018, the unaudited interim condensed consolidated statements of comprehensive income and cash flows for the six months ended June 30, 2017 and 2018, and the related footnote disclosures are unaudited. These unaudited interim condensed consolidated financial statements of the Company are prepared in accordance with U.S. GAAP for interim financial statements using accounting policies that are consistent with those used in the preparation of the Company’s audited consolidated financial statements for the year ended December 31, 2017. Accordingly, these unaudited interim condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. These financial statements should be read in conjunction with the Company’s consolidated financial statements and related footnotes for the year ended December 31, 2017.
The unaudited interim condensed consolidated financial statements are prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all normal recurring adjustments, necessary to present a fair statement of the results for the interim periods presented. Results of the operations for the six months ended June 30, 2017 and 2018 are not necessarily indicative of the results expected for the full fiscal year or for any future annual or interim period.
As disclosed in Note 1 of the Company’s audited consolidated financial statements for the year ended December 31, 2017, the Company was restructured on April 10, 2018 in order to establish the Company as the parent company. As the Company and the VIE were under common control immediately before and after the restructuring, the transaction was accounted for under common control, in a manner similar to a pooling of interests. Accordingly, the unaudited interim condensed financial statements for the six months ended June 30, 2017 and 2018 were retrospectively adjusted to reflect the historical results and assets and
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
liabilities of the Company’s business. Such basis of preparation is consistent with that adopted in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2017.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, allowance for loans and advances, identification of separate accounting units and estimating the best estimate selling price of each deliverable in the Company’s revenue arrangements, guarantee liabilities, useful life of long-lived assets, share-based compensation, valuation allowance for deferred tax assets, uncertain tax positions, fair value of preferred shares and short-term investments, the purchase price allocation with respect to business combinations and impairment of goodwill. Management bases these estimates on its historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
Restricted cash
The Company’s restricted cash mainly represents (i) cash received but has not yet been disbursed, including idle funds due to investors whom recharge to the accounts on the platform but have not yet invested or fully funded the loans and funds due to borrowers that investors lend to borrowers but borrowers have not yet withdrawn. Such funds were processed through a designated bank account. As of December 31, 2017 and June 30, 2018, the restricted cash related to cash not yet disbursed amounted to RMB1,083,421 and RMB892,508 (US$134,879), respectively; and (ii) cash held by banks as guarantee deposits paid on contracts and other restrictions amounted to RMB13,500 and RMB27,288 (US$4,124) as at December 31, 2017 and June 30, 2018, respectively.
Guarantee liabilities
The Company provides guarantee to various institutional funding partners. The guarantee requires the Company to either make delinquent installment repayments or purchase the loans after a specified period on an individual loan basis. The guarantee liability is exempted from being accounted for as a derivative in accordance with ASC 815-10-15-58.
The guarantee liability consists of two components. The Company’s obligation to stand ready to make delinquent payments or to purchase the loan over the term of the arrangement (the non-contingent aspect) is accounted for in accordance with ASC 460,
Guarantees
(“ASC 460”). The contingent obligation relating to the contingent loss arising from the arrangement is accounted for in accordance with ASC 450,
Contingencies
(“ASC 450”). At inception, the Company recognizes the non-contingent aspect of the guarantee liability at fair value, which considers the premium required by a third party market participant to issue the same risk assurance in a standalone transaction.
Subsequent to the initial recognition, the non-contingent aspect of the risk assurance liability is reduced over the term of the arrangement as the Company is released from its stand ready obligation on a loan-by-loan basis based on the borrower’s repayment of the loan principal. The contingent loss arising
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
from the obligation to make future payments is recognized when borrower default is probable and the amount of loss is estimable. The Company considers the underlying risk profile including delinquency status, overdue period, and historical loss experience when assessing the probability of contingent loss. Borrowers are grouped based on common risk characteristics, such as product type. The Company measured contingent loss based on the future payout of the arrangement estimated using the historical default rates of a portfolio of similar loans less the fair value of the recoverable collateral. The amount of contingent loss was not material for the six months ended June 30, 2017 and 2018. The maximum potential undiscounted future payment which the Company would be required to make under its guarantee obligation is RMB 551,170 (US$ 83,295) and RMB 1,164,238 (US$ 175,944) as of December 31, 2017 and June 30, 2018, respectively.
Other revenues
The Company also receives various fees which are contingent on future events, such as borrower late payment penalties, loan collection fees, and net revenue from sale of collateral. These contingent fees are not recognized until the contingencies are resolved and the fees become fixed and determined, which also coincide with when the services are performed and collectability is reasonably assured. These fees are classified within other revenues in the consolidated statements of comprehensive income.
Other revenues consist of:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Late payment penalties and loan collection fees
|
|
|
|
|
110,716
|
|
|
|
|
|
71,150
|
|
|
|
|
|
10,752
|
|
|
Others
|
|
|
|
|
42,220
|
|
|
|
|
|
33,898
|
|
|
|
|
|
5,123
|
|
|
Total
|
|
|
|
|
152,936
|
|
|
|
|
|
105,048
|
|
|
|
|
|
15,875
|
|
|
Convenience translation
Translations of amounts from RMB into US$ for the convenience of the readers have been calculated at the exchange rate of RMB6.6171 per US$1.00 on June 29, 2018, the last business day in June 2018, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be converted, realized or settled into US$ at such rate or at any other rate.
Business combinations
The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC 805,
Business Combinations
(“ASC 805”). The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities the Group acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings. The Company early adopted ASU No. 2017-01,
Business Combinations (Topic 802): Clarifying the Definition of a Business
, in determining whether it has acquired a business.
The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and non-controlling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.
Goodwill
The Company assesses goodwill for impairment in accordance with ASC 350-20,
Intangibles — Goodwill and Other: Goodwill (“ASC 350-20”)
, which requires that goodwill be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certain events, as defined by ASC 350-20.
The Company has determined that it has one reporting unit. The Company has the option to assess qualitative factors first to determine whether it is necessary to perform the quantitative impairment test in accordance with ASC 350-20. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. In the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations.
The Company early adopted ASU No. 2017-04,
Simplifying the Test for Goodwill Impairment
, which simplifies the accounting for goodwill impairment by eliminating Step two from the goodwill quantitative impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. Fair value is primarily determined by computing the future discounted cash flows expected to be generated by the reporting unit.
Fair value measurements of financial instruments
Financial instruments of the Company primarily consists of cash and cash equivalents, restricted cash, available-for-sale debt securities, long-term time deposits, amounts due from and due to related parties, loans and advances, cost method investments, short-term borrowings, payable to institutional funding partners and online investors and current account with online investors and borrowers. The carrying amounts of these financial instruments, except for long-term time deposits, long-term loans and advances, cost method investments and long-term payable to institutional funding partners approximate their fair values because of their generally short maturities.
The Company applies ASC topic 820 (“ASC 820”),
Fair Value Measurements and Disclosures
, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
•
Level 1 — Observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.
•
Level 3 — Unobservable inputs which are supported by little or no market activity.
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
In accordance with ASC 820, the Company measures available-for-sale investments at fair value on a recurring basis. The fair value of the Company’s available-for-sale debt securities are measured using the income approach, based on quoted market interest rates of similar instruments and other significant inputs derived from or corroborated by observable market data. The fair value of time deposits are determined based on the prevailing interest rates in the market. The fair values of the Company’s long-term loans and advances and long-term payable to institutional funding partners as disclosed are determined based on the discounted cash flow model using the discount curve of market interest rates. The Company did not disclose the fair value of its cost method investments since the fair value cannot be determined without undue cost and effort.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement or disclosure at
June 30, 2018 using
|
|
|
|
|
Total fair value at
June 30, 2018
|
|
|
Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Fair value disclosure
|
|
|
|
|
|
|
Loans and advances, net – non-current
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
|
|
|
—
|
|
|
|
|
|
494,450
|
|
|
|
|
|
—
|
|
|
Long-term payable to institutional funding partners and online investors
|
|
|
|
|
494,038
|
|
|
|
|
|
74,661
|
|
|
|
|
|
—
|
|
|
|
|
|
494,038
|
|
|
|
|
|
—
|
|
|
Fair value measurements
|
|
|
|
|
|
|
Recurring Short-term investments
Available-for-sale debt securities
|
|
|
|
|
3,560
|
|
|
|
|
|
538
|
|
|
|
|
|
—
|
|
|
|
|
|
3,560
|
|
|
|
|
|
—
|
|
|
The Group had no financial assets and liabilities measured and recorded at fair value on a non-recurring basis as of December 31, 2017 and June 30, 2018.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
Pro forma information (unaudited)
Upon the completion of the Company’s initial public offering on the New York Stock Exchange, or the Nasdaq Stock Market or any other stock exchange (the ‘‘Qualified IPO’’), the outstanding preferred shares will automatically be converted into Class A ordinary shares on a 1:1 basis, the ordinary shares owned by Mr. Yao Hong will be converted into 701,428 Class B ordinary shares on a 1:1 basis and the remaining outstanding ordinary shares will be converted into 266,413 Class A ordinary shares on a 1:1 basis. Unaudited pro forma shareholders’ equity as of June 30, 2018, is adjusted for the abovementioned conversion of the ordinary shares and preferred shares, is set forth on the consolidated balance sheets.
The unaudited pro forma earnings per ordinary share is computed using the weighted-average number of ordinary shares outstanding as of June 30, 2018, and assumes the automatic conversion of all of the Company’s preferred shares into weighted-average shares of ordinary stock upon the closing of the Company’s Qualified IPO, as if it had occurred on January 1, 2018.
Recent accounting pronouncements
In February 2018, the FASB issued ASU 2018-02,
Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
(“ASU 2018-02”), which amends ASC 220 to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires entities to provide certain disclosures regarding stranded tax effects. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2018. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
In February 2018, the FASB issued ASU 2018-03,
Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10)
: Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments provide targeted improvements to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Specifically, the amendments include clarifications related to: measurement elections, transition requirements, and adjustments associated with equity securities without readily determinable fair values; fair value measurement requirements for forward contracts and purchased options on equity securities; presentation requirements for hybrid financial liabilities for which the fair value option has been elected; and measurement requirements for liabilities denominated in a foreign currency for which the fair value option has been elected. The amendments are effective for fiscal years beginning after 15 December 2018, and interim periods within fiscal years beginning after 15 December 2019. Early adoption is not permitted unless the entity has early adopted the amendments in ASU 2016-01. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07,
Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
, which aligns the measurement and classification guidance for share based payments to nonemployees with that for employees, with certain exceptions. It expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in the entity’s own operations and supersedes the guidance in ASC 505-50. The ASU retains the existing cost attribution guidance, which requires entities to recognize compensation cost for nonemployee awards in the same period and in the same manner (i.e., capitalize or expense) they would if they paid cash for the goods or services, but it moves the guidance to
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
2. Summary of Significant Accounting Policies (continued)
ASC 718. This standard is effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Early adoption is permitted, including in an interim period for which financial statements have not been issued (or made available for issuance), but not before an entity adopts ASC 606. The Company is in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements.
3. Loans and advances, net
Loans and advances originated and retained by the Company consist of the following:
|
|
|
As of
December 31,
2017
|
|
|
As of June 30,
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Current portion:
|
|
|
|
|
Loans receivable
(i)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,105,169
|
|
|
|
|
|
611,488
|
|
|
|
|
|
92,410
|
|
|
Other secured loans
|
|
|
|
|
104,292
|
|
|
|
|
|
173,747
|
|
|
|
|
|
26,257
|
|
|
Unsecured loans
|
|
|
|
|
512,616
|
|
|
|
|
|
613,388
|
|
|
|
|
|
92,697
|
|
|
Sub-total
|
|
|
|
|
1,722,077
|
|
|
|
|
|
1,398,623
|
|
|
|
|
|
211,364
|
|
|
Acquired non-performing loans
(ii)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
438,942
|
|
|
|
|
|
477,672
|
|
|
|
|
|
72,188
|
|
|
Other secured loans
|
|
|
|
|
58,961
|
|
|
|
|
|
173,618
|
|
|
|
|
|
26,238
|
|
|
Unsecured loans
|
|
|
|
|
120,955
|
|
|
|
|
|
83,827
|
|
|
|
|
|
12,668
|
|
|
Sub-total
|
|
|
|
|
618,858
|
|
|
|
|
|
735,117
|
|
|
|
|
|
111,094
|
|
|
Advances to borrowers
(iii)
|
|
|
|
|
2,487
|
|
|
|
|
|
5,649
|
|
|
|
|
|
854
|
|
|
Total current loans and advances
|
|
|
|
|
2,343,422
|
|
|
|
|
|
2,139,389
|
|
|
|
|
|
323,312
|
|
|
Allowance for loans and advances
|
|
|
|
|
(404,930
)
|
|
|
|
|
|
(414,374
)
|
|
|
|
|
|
(62,622
)
|
|
|
Loans and advances, net
|
|
|
|
|
1,938,492
|
|
|
|
|
|
1,725,015
|
|
|
|
|
|
260,690
|
|
|
Non-current portion:
|
|
|
|
|
Loans receivable
(i)
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
230,634
|
|
|
|
|
|
253,658
|
|
|
|
|
|
38,334
|
|
|
Other secured loans
|
|
|
|
|
160,733
|
|
|
|
|
|
240,654
|
|
|
|
|
|
36,368
|
|
|
Unsecured loans
|
|
|
|
|
164
|
|
|
|
|
|
1,349
|
|
|
|
|
|
204
|
|
|
Total non-current loans and advances
|
|
|
|
|
391,531
|
|
|
|
|
|
495,661
|
|
|
|
|
|
74,906
|
|
|
Allowance for loans and advances
|
|
|
|
|
(1,360
)
|
|
|
|
|
|
(1,211
)
|
|
|
|
|
|
(183
)
|
|
|
Loans and advances, net
|
|
|
|
|
390,171
|
|
|
|
|
|
494,450
|
|
|
|
|
|
74,723
|
|
|
|
(i)
Loans receivable represent loans originated by the Company with an original term up to four years and annual interest rate primarily ranging between 6%~36%;
(ii)
Acquired non-performing loans are overdue loans purchased by the Company from online investors;
(iii)
Advances to borrowers are advances provided to borrowers with urgent financing needs, before online investors fully fund the loans.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
3. Loans and advances, net (continued)
The following table sets forth the activities in the allowance for loans and advances for the six months ended June 30, 2018:
As of June 30, 2018
|
|
|
Loans receivable
|
|
|
Acquired non-performing loans
|
|
|
|
|
Auto-
backed
loans
|
|
|
Other
secured
loans
|
|
|
Unsecured
loans
|
|
|
Auto-
backed
loans
|
|
|
Other secured
loans
|
|
|
Unsecured
loans
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Beginning balance
|
|
|
|
|
(5,149
)
|
|
|
|
|
|
(913
)
|
|
|
|
|
|
(64,515
)
|
|
|
|
|
|
(252,174
)
|
|
|
|
|
|
(3,755
)
|
|
|
|
|
|
(79,784
)
|
|
|
|
|
|
(406,290
)
|
|
|
|
|
|
(61,400
)
|
|
|
Current period provision
|
|
|
|
|
2,330
|
|
|
|
|
|
(92
)
|
|
|
|
|
|
22,375
|
|
|
|
|
|
(123,551
)
|
|
|
|
|
|
(9,934
)
|
|
|
|
|
|
(129,986
)
|
|
|
|
|
|
(238,858
)
|
|
|
|
|
|
(36,097
)
|
|
|
Recoveries of loans previously written off
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(12,338
)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(12,338
)
|
|
|
|
|
|
(1,866
)
|
|
|
Write-offs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
93,246
|
|
|
|
|
|
1,413
|
|
|
|
|
|
147,242
|
|
|
|
|
|
241,901
|
|
|
|
|
|
36,558
|
|
|
Ending balance
|
|
|
|
|
(2,819
)
|
|
|
|
|
|
(1,005
)
|
|
|
|
|
|
(42,140
)
|
|
|
|
|
|
(294,817
)
|
|
|
|
|
|
(12,276
)
|
|
|
|
|
|
(62,528
)
|
|
|
|
|
|
(415,585
)
|
|
|
|
|
|
(62,805
)
|
|
|
|
The following table sets forth the aging of loans and advances as of December 31, 2017 and June 30, 2018:
As of December 31, 2017
|
|
|
Current
|
|
|
1 – 30
days
past due
|
|
|
31 – 60
days
past due
|
|
|
61 – 90
days
past due
|
|
|
91 – 120
days
past due
|
|
|
121 – 150
days
past due
|
|
|
151 – 180
days
past due
|
|
|
181 – 360
days
past due
|
|
|
Over 360
days
past due
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
1,331,760
|
|
|
|
|
|
3,015
|
|
|
|
|
|
813
|
|
|
|
|
|
50
|
|
|
|
|
|
165
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,335,803
|
|
|
Other secured loans
|
|
|
|
|
265,025
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
265,025
|
|
|
Unsecured loans
|
|
|
|
|
496,726
|
|
|
|
|
|
14,050
|
|
|
|
|
|
1,614
|
|
|
|
|
|
226
|
|
|
|
|
|
118
|
|
|
|
|
|
46
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
512,780
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
—
|
|
|
|
|
|
73,463
|
|
|
|
|
|
46,542
|
|
|
|
|
|
39,968
|
|
|
|
|
|
38,558
|
|
|
|
|
|
26,354
|
|
|
|
|
|
26,887
|
|
|
|
|
|
134,994
|
|
|
|
|
|
52,176
|
|
|
|
|
|
438,942
|
|
|
Other secured loans
|
|
|
|
|
—
|
|
|
|
|
|
8,599
|
|
|
|
|
|
21,419
|
|
|
|
|
|
12,117
|
|
|
|
|
|
9,205
|
|
|
|
|
|
257
|
|
|
|
|
|
177
|
|
|
|
|
|
7,145
|
|
|
|
|
|
42
|
|
|
|
|
|
58,961
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
84,612
|
|
|
|
|
|
30,507
|
|
|
|
|
|
3,638
|
|
|
|
|
|
1,558
|
|
|
|
|
|
356
|
|
|
|
|
|
232
|
|
|
|
|
|
2
|
|
|
|
|
|
50
|
|
|
|
|
|
120,955
|
|
|
Total
|
|
|
|
|
2,093,511
|
|
|
|
|
|
183,739
|
|
|
|
|
|
100,895
|
|
|
|
|
|
55,999
|
|
|
|
|
|
49,604
|
|
|
|
|
|
27,013
|
|
|
|
|
|
27,296
|
|
|
|
|
|
142,141
|
|
|
|
|
|
52,268
|
|
|
|
|
|
2,732,466
|
|
|
|
As of June 30, 2018
|
|
|
Current
|
|
|
1 – 30
days
past due
|
|
|
31 – 60
days
past due
|
|
|
61 – 90
days
past due
|
|
|
91 – 120
days
past due
|
|
|
121 – 150
days
past due
|
|
|
151 – 180
days
past due
|
|
|
181 – 360
days
past due
|
|
|
Over 360
days
past due
|
|
|
Total
|
|
|
Total
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
862,971
|
|
|
|
|
|
1,659
|
|
|
|
|
|
296
|
|
|
|
|
|
20
|
|
|
|
|
|
—
|
|
|
|
|
|
200
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
865,146
|
|
|
|
|
|
130,744
|
|
|
Other secured loans
|
|
|
|
|
414,396
|
|
|
|
|
|
—
|
|
|
|
|
|
5
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
414,401
|
|
|
|
|
|
62,625
|
|
|
Unsecured loans
|
|
|
|
|
559,121
|
|
|
|
|
|
25,958
|
|
|
|
|
|
9,026
|
|
|
|
|
|
6,826
|
|
|
|
|
|
3,888
|
|
|
|
|
|
4,026
|
|
|
|
|
|
2,715
|
|
|
|
|
|
3,177
|
|
|
|
|
|
—
|
|
|
|
|
|
614,737
|
|
|
|
|
|
92,901
|
|
|
Acquired non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto-backed loans
|
|
|
|
|
—
|
|
|
|
|
|
106,405
|
|
|
|
|
|
44,578
|
|
|
|
|
|
26,805
|
|
|
|
|
|
28,949
|
|
|
|
|
|
40,413
|
|
|
|
|
|
25,836
|
|
|
|
|
|
98,813
|
|
|
|
|
|
105,873
|
|
|
|
|
|
477,672
|
|
|
|
|
|
72,188
|
|
|
Other secured loans
|
|
|
|
|
—
|
|
|
|
|
|
53,468
|
|
|
|
|
|
21,884
|
|
|
|
|
|
18,084
|
|
|
|
|
|
12,856
|
|
|
|
|
|
16,396
|
|
|
|
|
|
11,612
|
|
|
|
|
|
34,996
|
|
|
|
|
|
4,322
|
|
|
|
|
|
173,618
|
|
|
|
|
|
26,238
|
|
|
Unsecured loans
|
|
|
|
|
—
|
|
|
|
|
|
17,220
|
|
|
|
|
|
13,162
|
|
|
|
|
|
10,606
|
|
|
|
|
|
10,383
|
|
|
|
|
|
8,168
|
|
|
|
|
|
20,075
|
|
|
|
|
|
4,161
|
|
|
|
|
|
52
|
|
|
|
|
|
83,827
|
|
|
|
|
|
12,668
|
|
|
Total
|
|
|
|
|
1,836,488
|
|
|
|
|
|
204,710
|
|
|
|
|
|
88,951
|
|
|
|
|
|
62,341
|
|
|
|
|
|
56,076
|
|
|
|
|
|
69,203
|
|
|
|
|
|
60,238
|
|
|
|
|
|
141,147
|
|
|
|
|
|
110,247
|
|
|
|
|
|
2,629,401
|
|
|
|
|
|
397,364
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
4 . Prepaid expenses and other assets
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Current:
|
|
|
|
|
Amounts due from third-party payment platforms
(i)
|
|
|
|
|
204,231
|
|
|
|
|
|
305,349
|
|
|
|
|
|
46,145
|
|
|
Guarantee deposits
|
|
|
|
|
52,385
|
|
|
|
|
|
107,995
|
|
|
|
|
|
16,321
|
|
|
Prepaid rental and deposits
|
|
|
|
|
72,186
|
|
|
|
|
|
64,828
|
|
|
|
|
|
9,797
|
|
|
Others
|
|
|
|
|
104,795
|
|
|
|
|
|
149,891
|
|
|
|
|
|
22,653
|
|
|
Total
|
|
|
|
|
433,597
|
|
|
|
|
|
628,063
|
|
|
|
|
|
94,916
|
|
|
Non-current:
|
|
|
|
|
Prepaid rental and deposits
|
|
|
|
|
8,048
|
|
|
|
|
|
4,602
|
|
|
|
|
|
696
|
|
|
Total
|
|
|
|
|
8,048
|
|
|
|
|
|
4,602
|
|
|
|
|
|
696
|
|
|
|
(i)
Amounts due from third-party payment platforms are restricted cash held by third-party payment platforms that belong to the borrowers and online investors as of December 31, 2017 and June 30, 2018.
5. Long-term investments
Long-term investments consist of the following:
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cost method investments
|
|
|
|
|
309,333
|
|
|
|
|
|
13,333
|
|
|
|
|
|
2,015
|
|
|
Time deposits
|
|
|
|
|
50,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
359,333
|
|
|
|
|
|
13,333
|
|
|
|
|
|
2,015
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
6. Property, equipment and software, net
Property, equipment and software, net consist of the following:
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Computer and electronic equipment
|
|
|
|
|
38,298
|
|
|
|
|
|
52,483
|
|
|
|
|
|
7,931
|
|
|
Leasehold improvement
|
|
|
|
|
38,900
|
|
|
|
|
|
35,939
|
|
|
|
|
|
5,431
|
|
|
Vehicles
|
|
|
|
|
20,985
|
|
|
|
|
|
22,075
|
|
|
|
|
|
3,336
|
|
|
Office furniture and equipment
|
|
|
|
|
6,094
|
|
|
|
|
|
7,637
|
|
|
|
|
|
1,154
|
|
|
Software
|
|
|
|
|
11,054
|
|
|
|
|
|
11,267
|
|
|
|
|
|
1,703
|
|
|
Total
|
|
|
|
|
115,330
|
|
|
|
|
|
129,401
|
|
|
|
|
|
19,555
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
|
(15,897
)
|
|
|
|
|
|
(25,657
)
|
|
|
|
|
|
(3,877
)
|
|
|
Property, equipment and software, net
|
|
|
|
|
99,433
|
|
|
|
|
|
103,744
|
|
|
|
|
|
15,678
|
|
|
|
Depreciation and amortization expenses of the property, equipment and software, were RMB5,278 and RMB12,509 (US$1,890) for the six months ended June 30, 2017 and 2018.
7. Short-term borrowings
In July 2017, the subsidiaries of the VIE entered into loan agreements with Yangquan Commercial Bank Co. LTD. (“Yangquan”), pursuant to which the subsidiaries obtained loans with an aggregate amount of RMB200,000 (US$30,225) denominated in RMB with a term of one year and fixed annual interest rate at 5.22%.
8. Payable to institutional funding partners and online investors
The following table presents payable to institutional funding partners and online investors as of December 31, 2017 and June 30, 2018:
|
|
|
Fixed annual rate
|
|
|
Term
|
|
|
As of
|
|
|
|
|
(%)
|
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Current portion:
|
|
|
|
|
|
|
Institutional funding partners
|
|
|
3% to 9%
|
|
|
1 to 12 months
|
|
|
|
|
523,328
|
|
|
|
|
|
481,182
|
|
|
|
|
|
72,718
|
|
|
Online investors
|
|
|
4% to 11%
|
|
|
3 days to 12 months
|
|
|
|
|
1,247,353
|
|
|
|
|
|
860,495
|
|
|
|
|
|
130,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,770,681
|
|
|
|
|
|
1,341,677
|
|
|
|
|
|
202,759
|
|
|
Non-current portion:
|
|
|
|
|
|
|
Institutional funding partners
|
|
|
3% to 9%
|
|
|
13 to 36 months
|
|
|
|
|
416,118
|
|
|
|
|
|
535,425
|
|
|
|
|
|
80,915
|
|
|
Online investors
|
|
|
6% to 10%
|
|
|
13 to 24 months
|
|
|
|
|
—
|
|
|
|
|
|
1,349
|
|
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416,118
|
|
|
|
|
|
536,774
|
|
|
|
|
|
81,119
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
8. Payable to institutional funding partners and online investors (continued)
The following table sets forth the contractual obligations which has not included the impact of discount of time value as of December 31, 2017 and June 30, 2018:
|
|
|
Payment due by period
|
|
Long-term borrowings and interest payable:
|
|
|
Less than
1 year
|
|
|
1 – 2 years
|
|
|
Greater than
2 years
|
|
|
Total
|
|
As of December 31, 2017 (RMB)
|
|
|
|
|
259,356
|
|
|
|
|
|
256,945
|
|
|
|
|
|
189,971
|
|
|
|
|
|
706,272
|
|
|
As of June 30, 2018 (RMB) (unaudited)
|
|
|
|
|
365,013
|
|
|
|
|
|
363,518
|
|
|
|
|
|
182,401
|
|
|
|
|
|
910,932
|
|
|
As of June 30, 2018 (US$) (unaudited)
|
|
|
|
|
55,163
|
|
|
|
|
|
54,936
|
|
|
|
|
|
27,564
|
|
|
|
|
|
137,663
|
|
|
|
9. Current account with online investors and borrowers
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Investor deposits
|
|
|
|
|
1,097,259
|
|
|
|
|
|
1,044,676
|
|
|
|
|
|
157,875
|
|
|
Undrawn borrower funds and deposits
|
|
|
|
|
786,187
|
|
|
|
|
|
729,467
|
|
|
|
|
|
110,240
|
|
|
Total
|
|
|
|
|
1,883,446
|
|
|
|
|
|
1,774,143
|
|
|
|
|
|
268,115
|
|
|
|
10. Accrued expenses and other liabilities
Accrued expenses and other liabilities consist of the following:
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Payroll and welfare payable
|
|
|
|
|
254,509
|
|
|
|
|
|
233,165
|
|
|
|
|
|
35,237
|
|
|
Accrued marketing expense
|
|
|
|
|
50,163
|
|
|
|
|
|
21,308
|
|
|
|
|
|
3,220
|
|
|
Other taxes payable
|
|
|
|
|
25,862
|
|
|
|
|
|
27,574
|
|
|
|
|
|
4,167
|
|
|
Others
|
|
|
|
|
130,761
|
|
|
|
|
|
135,958
|
|
|
|
|
|
20,546
|
|
|
Total
|
|
|
|
|
461,295
|
|
|
|
|
|
418,005
|
|
|
|
|
|
63,170
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
11. Interest income, net
Interest income, net, consists of the following:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Interest income
|
|
|
|
|
18,882
|
|
|
|
|
|
32,353
|
|
|
|
|
|
4,888
|
|
|
Interest expenses
|
|
|
|
|
—
|
|
|
|
|
|
(5,278
)
|
|
|
|
|
|
(798
)
|
|
|
Bank charges
|
|
|
|
|
(292
)
|
|
|
|
|
|
(187
)
|
|
|
|
|
|
(27
)
|
|
|
Total
|
|
|
|
|
18,590
|
|
|
|
|
|
26,888
|
|
|
|
|
|
4,063
|
|
|
|
12. Income tax expenses
On a quarterly basis, the Company evaluates the realizability of deferred tax assets and assesses the need for a valuation allowance. In assessing the realizability of deferred tax assets, the Company considers historical profitability, evaluation of scheduled reversals of deferred tax liabilities, projected future taxable income and tax-planning strategies. Valuation allowances have been provided on deferred tax assets where, based on all available evidence, it was considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. After consideration of all positive and negative evidence, the Company believes that as of June 30, 2018, deferred tax assets can be realized for some of the Company’s subsidiaries in China.
The Company did not identify significant unrecognized tax benefits as of December 31, 2017 and June 30, 2018. The Company did not incur any interest and penalties related to potential underpaid income tax expenses. In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings.
In accordance with relevant PRC tax administration laws, the tax for the six months ended June 30, 2017 and 2018 of the Company’s PRC subsidiaries, VIE and subsidiaries of the VIE remain subject to tax audits by the relevant tax authorities as of June 30, 2018.
The current and deferred components of income tax expenses are as follows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Current income tax expense
|
|
|
|
|
101,691
|
|
|
|
|
|
118,695
|
|
|
|
|
|
17,938
|
|
|
Deferred income tax benefit
|
|
|
|
|
—
|
|
|
|
|
|
(16,681
)
|
|
|
|
|
|
(2,521
)
|
|
|
Total income tax expense
|
|
|
|
|
101,691
|
|
|
|
|
|
102,014
|
|
|
|
|
|
15,417
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
13. Earnings per share
Basic earnings per share for each of the periods presented are calculated as follows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
Net income attributable to ordinary shareholders
|
|
|
|
|
268,235
|
|
|
|
|
|
428,096
|
|
|
|
|
|
64,696
|
|
|
Allocation of net income attributable to preferred shareholders
|
|
|
|
|
(70,032
)
|
|
|
|
|
|
(111,769
)
|
|
|
|
|
|
(16,891
)
|
|
|
Numerator for computing basic earnings per share
|
|
|
|
|
198,203
|
|
|
|
|
|
316,327
|
|
|
|
|
|
47,805
|
|
|
Denominator:
|
|
|
|
|
Weighted average number of ordinary shares
outstanding
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Earnings per share – basic
|
|
|
|
|
204.79
|
|
|
|
|
|
326.84
|
|
|
|
|
|
49.39
|
|
|
|
Diluted earnings per share for each of the periods presented are calculated as follows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
Numerator for computing basic earnings per share
|
|
|
|
|
198,203
|
|
|
|
|
|
316,327
|
|
|
|
|
|
47,805
|
|
|
Allocation of net income attributable to Series C preferred
shares for six months ended June 30, 2017 and allocation
of net income attributable to Series A, A+, B and C
preferred shares for six months ended June 30, 2018
|
|
|
|
|
12,592
|
|
|
|
|
|
(8,230
)
|
|
|
|
|
|
(1,244
)
|
|
|
Numerator for computing diluted earnings per share
|
|
|
|
|
210,795
|
|
|
|
|
|
308,097
|
|
|
|
|
|
46,561
|
|
|
Denominator:
|
|
|
|
|
Weighted average number of ordinary shares
outstanding
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
|
|
|
967,841
|
|
|
Conversion of Series C preferred shares to ordinary shares for six months ended June 30, 2017 and conversion of Series A, A+, B and C preferred shares to ordinary shares for six months ended June 30, 2018
|
|
|
|
|
61,488
|
|
|
|
|
|
341,974
|
|
|
|
|
|
341,974
|
|
|
Weighted average number of ordinary shares outstanding –
diluted
|
|
|
|
|
1,029,329
|
|
|
|
|
|
1,309,815
|
|
|
|
|
|
1,309,815
|
|
|
Earnings per share – diluted
|
|
|
|
|
204.79
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
13. Earnings per share (continued)
The unaudited pro forma earnings per share is computed using the weighted-average number of ordinary shares outstanding and assumes the automatic conversion of all of the Company’s Preferred Shares into 341,974 weighted-average shares of ordinary shares upon the closing of an IPO, and all the outstanding ordinary shares are re-designated into 266,413 Class A ordinary shares and 701,428 Class B ordinary shares, respectively, as if it had occurred on January 1, 2018.
Unaudited basic and diluted pro forma earnings per share is calculated as follows:
|
|
|
For the six months ended June 30, 2018
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
Net income attributable to Weidai Ltd.
|
|
|
|
|
143,106
|
|
|
|
|
|
21,627
|
|
|
|
|
|
164,990
|
|
|
|
|
|
24,934
|
|
|
Numerator for pro forma basic and diluted
earnings per share
|
|
|
|
|
143,106
|
|
|
|
|
|
21,627
|
|
|
|
|
|
164,990
|
|
|
|
|
|
24,934
|
|
|
Denominator:
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
266,413
|
|
|
|
|
|
266,413
|
|
|
|
|
|
701,428
|
|
|
|
|
|
701,428
|
|
|
Add: adjustment to reflect assumed effect of
automatic conversion of preferred shares
|
|
|
|
|
341,974
|
|
|
|
|
|
341,974
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Weighted average number of shares used in
calculating pro forma basic and diluted
earnings per share
|
|
|
|
|
608,387
|
|
|
|
|
|
608,387
|
|
|
|
|
|
701,428
|
|
|
|
|
|
701,428
|
|
|
Pro forma earnings per share – basic and diluted (unaudited)
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
|
|
|
235.22
|
|
|
|
|
|
35.55
|
|
|
|
14. Related party balances and transactions
a)
Related parties
Name of related parties
|
|
|
Relationship with the Company
|
|
Mr. Hong Yao
|
|
|
Founder, chief executive officer and principal shareholder of the Company
|
|
Hangzhou Ruituo Information Technology Co., Ltd.
|
|
|
Entity controlled by Founder
|
|
Zhejiang Ruituo Information Technology Co., Ltd.
|
|
|
Entity controlled by Founder
|
|
Shanghai Zaohui Finance Lease Co., Ltd.
|
|
|
Entity controlled by Director prior to June 6, 2018
|
|
Zhejiang Qunshuo Electronics Co., Ltd
|
|
|
Entity significantly influenced by Founder prior to October 10, 2017
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
Entity significantly influenced by Founder
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
14. Related party balances and transactions (continued)
Name of related parties
|
|
|
Relationship with the Company
|
|
Hangzhou Qiandaohuyaodage Trading Company
|
|
|
Entity controlled by immediate family members of Founder
|
|
Zhejiang Hongrui Investment Mangement Co., Ltd.
|
|
|
Entity controlled by immediate family members of Founder
|
|
Weiyi (Hangzhou) Internet Financial Information Service Co., Ltd.
|
|
|
Entity controlled by immediate family members of Founder
|
|
Chunan Wencai Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Founder
|
|
Chunan Yuntong Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Director
|
|
Chunan Wangcai Information Advisory Services Company
|
|
|
Entity controlled by immediate family members of Director
|
|
Suzhou Weixin Zhonghua Venture Capital Partnership
|
|
|
Company’s shareholder
|
|
Key management and their immediate family members
|
|
|
The Company’s key management and their immediate family members
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
14. Related party balances and transactions (continued)
b) The Company had the following related party transactions:
|
|
|
For the six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Financing income from:
|
|
|
|
|
Key management and their immediate family members
|
|
|
|
|
498
|
|
|
|
|
|
470
|
|
|
|
|
|
71
|
|
|
Other revenues:
|
|
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
2,377
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Origination and servicing expenses:
|
|
|
|
|
Chunan Wencai Information Advisory Services
Company
|
|
|
|
|
50,250
|
|
|
|
|
|
44,423
|
|
|
|
|
|
6,713
|
|
|
Chunan Wangcai Information Advisory Services Company
|
|
|
|
|
32,613
|
|
|
|
|
|
13,686
|
|
|
|
|
|
2,068
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
23,080
|
|
|
|
|
|
8,621
|
|
|
|
|
|
1,303
|
|
|
Chunan Yuntong Information Advisory Services Company
|
|
|
|
|
1,436
|
|
|
|
|
|
998
|
|
|
|
|
|
151
|
|
|
Collecting costs to:
|
|
|
|
|
Zhejiang Hongrui Investment Management Co., Ltd.
|
|
|
|
|
8,969
|
|
|
|
|
|
6,193
|
|
|
|
|
|
936
|
|
|
Zhejiang Ruituo Information Technology Co., Ltd.
|
|
|
|
|
—
|
|
|
|
|
|
4,500
|
|
|
|
|
|
680
|
|
|
GPS costs to:
Zhejiang Qunshuo Electronics Co., Ltd
|
|
|
|
|
5,466
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total
|
|
|
|
|
121,814
|
|
|
|
|
|
78,421
|
|
|
|
|
|
11,851
|
|
|
General and administrative expenses:
|
|
|
|
|
Welfare expenses to:
Hangzhou Qiandaohuyaodage trading company
|
|
|
|
|
1,140
|
|
|
|
|
|
276
|
|
|
|
|
|
42
|
|
|
Consulting expenses to:
|
|
|
|
|
Suzhou Weixin Zhonghua Venture Capital Partnership (LLP)
|
|
|
|
|
20,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total
|
|
|
|
|
21,140
|
|
|
|
|
|
276
|
|
|
|
|
|
42
|
|
|
Sales and marketing expenses:
|
|
|
|
|
Promotion expenses to:
Weiyi (Hangzhou) Internet Financial Information Service Co., Ltd.
|
|
|
|
|
3,425
|
|
|
|
|
|
6,945
|
|
|
|
|
|
1,050
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
14. Related party balances and transactions (continued)
c) The Company had the following related party balances:
Amounts due from related parties
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Directors of VIE
(i)
|
|
|
|
|
—
|
|
|
|
|
|
38,500
|
|
|
|
|
|
5,818
|
|
|
Hangzhou Ruituo Technology Co., Ltd.
(ii)
|
|
|
|
|
4,497
|
|
|
|
|
|
5,555
|
|
|
|
|
|
840
|
|
|
Shanghai Zaohui Finance Lease Co., Ltd.
|
|
|
|
|
3,993
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Mr. Hong Yao
|
|
|
|
|
161
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Others
|
|
|
|
|
517
|
|
|
|
|
|
1,637
|
|
|
|
|
|
247
|
|
|
Total
|
|
|
|
|
9,168
|
|
|
|
|
|
45,692
|
|
|
|
|
|
6,905
|
|
|
|
(i)
The balance represents short-term loans provided to the directors of VIE.
(ii)
The balance represents receivable from Hangzhou Ruituo Technology Co., Ltd from the disposal of vehicle collaterals for overdue loans.
Amounts due to related parties
|
|
|
As of
|
|
|
|
|
December 31,
2017
|
|
|
June 30, 2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Key management and their immediate family members
(i)
|
|
|
|
|
30,700
|
|
|
|
|
|
21,497
|
|
|
|
|
|
3,249
|
|
|
Mr. Hong Yao
(i)
|
|
|
|
|
4,335
|
|
|
|
|
|
5,991
|
|
|
|
|
|
905
|
|
|
Chunan Wencai Information Advisory Services
Company
|
|
|
|
|
5,718
|
|
|
|
|
|
4,224
|
|
|
|
|
|
638
|
|
|
Chunan Wangcai Information Advisory Services
Company
|
|
|
|
|
6,233
|
|
|
|
|
|
1,583
|
|
|
|
|
|
239
|
|
|
Beijing Lezhihui Technology Co., Ltd.
|
|
|
|
|
2,920
|
|
|
|
|
|
1,261
|
|
|
|
|
|
191
|
|
|
Hangzhou Ruituo Technology Co., Ltd.
(ii)
|
|
|
|
|
10,139
|
|
|
|
|
|
1,083
|
|
|
|
|
|
164
|
|
|
Chunan Yuntong Information Advisory Services
Company
|
|
|
|
|
—
|
|
|
|
|
|
18
|
|
|
|
|
|
3
|
|
|
Others
|
|
|
|
|
2,855
|
|
|
|
|
|
98
|
|
|
|
|
|
14
|
|
|
Total
|
|
|
|
|
62,900
|
|
|
|
|
|
35,755
|
|
|
|
|
|
5,403
|
|
|
|
(i)
The balance mainly represents investment balance due to related parties who are also investors on the platform.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
15. Share-based compensation
Restricted shares
On January 16, 2018, the Company granted 2,620 restricted shares in aggregate for nil consideration to certain directors and executives. The restricted shares granted are immediately vested. The Company calculated the estimated fair value of the shares on the respective grant dates using the income approach with assistance from an independent valuation firm. The fair value of the granted shares was RMB6,721 per share as at the grant date. The share-based compensation of RMB17,609 (US$2,661) in total was charged to the unaudited interim condensed consolidated statement of comprehensive income for the six months ended June 30, 2018.
Stock appreciation rights
On December 18, 2015, the Board of Directors of the Company approved the plan to issue stock appreciation rights (the “Weimi Share Plan”) for the purpose of providing incentives and rewards to employees and executives who contribute to the success of VIE’s operations. During the six months ended June 30, 2017 and 2018, the Company issued 2.03% and 2.00% of the equity interest of the Company under the Weimi Share Plan. As of June 30, 2018, the total issued stock appreciation rights was 4.72% of the equity interest of the Company. These stock appreciation rights have no exercise price and will be settled in cash at the amount of the fair value of the respective equity interest percentages of the Company on the exercise date over their fair value at the grant date. These stock appreciation rights are exercisable prior to the Company’s successful IPO and are classified as liability awards. Also, at the discretion of the Company, each grantee may receive a certain percentage of annual attributable net profit as annual dividend which is settled in cash. In addition, the grantee has the option to purchase the Company’s shares when the grantee’s accumulated stock appreciation rights granted exceed 0.1% of the Company’s total paid-in-capital (the purchase price will be determined by the Company at the time when such event occurs).
These stock appreciation rights are subject to vesting of 33%, 33% and 34% on the second, third and fourth anniversary of the vest commencement date, respectively. The vested stock appreciation rights are exercisable within five years from the grant date.
During the six months ended June 30, 2018, no dividend was declared to the grantee and none of the grantee’s accumulated stock appreciation rights granted exceeded 0.1% of the Company’s total paid-in-capital. The share-based compensation of RMB37,986 (US$5,741) was charged to the unaudited interim condensed consolidated statement of comprehensive income for the six months ended June 30, 2018.
The Company calculated the estimated fair value of the stock appreciation rights on the balance sheet date using the Black-Scholes option pricing model with assistance from independent valuation firm. Assumptions used to determine the fair value of virtual share options granted as of June 30, 2018 are summarized as follows:
|
|
|
As of June 30, 2018
|
|
|
|
|
(Unaudited)
|
|
Fair value per ordinary share
|
|
|
7,127
|
|
Risk-free interest rate
|
|
|
4.35%
|
|
Dividend yield
|
|
|
nil
|
|
Expected volatility
|
|
|
61.00%
|
|
Weighted average expected life range (years)
|
|
|
2.67 – 3.67
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
15. Share-based compensation (continued)
The estimated fair value of the Company’s enterprise value at balance date was determined with the assistance of an independent third party valuation firm using the Income Approach. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with the contractual term of the awards. Expected volatility is estimated based on the historical volatility ordinary shares of serval comparable companies in the same industry. The dividend yield is estimated based on our expected dividend policy over the expected term of the options. The weighted average expected life was estimated using simplified method for “plain-vanilla” options as the Company considers the options granted to have “plain-vanilla” characteristics.
For the six months ended June 30, 2017 and 2018, the Company allocated share-based compensation expenses as follows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
2018
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
General and administrative
|
|
|
|
|
17,145
|
|
|
|
|
|
29,637
|
|
|
|
|
|
4,479
|
|
|
Origination and servicing
|
|
|
|
|
—
|
|
|
|
|
|
20,592
|
|
|
|
|
|
3,112
|
|
|
Research and development
|
|
|
|
|
1,691
|
|
|
|
|
|
5,366
|
|
|
|
|
|
811
|
|
|
Total
|
|
|
|
|
18,836
|
|
|
|
|
|
55,595
|
|
|
|
|
|
8,402
|
|
|
|
16. Commitments and contingencies
Operating lease commitments
The Company leases certain office premises under non-cancelable leases. Rental expenses under operating leases for the six months ended June 30, 2017 and 2018 were RMB44,759 and RMB69,429 (US$10,492), respectively.
Future minimum lease payments under non-cancelable operating leases agreements consist of the following as of June 30, 2018:
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Six months ended December 31, 2018
|
|
|
|
|
35,868
|
|
|
|
|
|
5,421
|
|
|
2019
|
|
|
|
|
58,209
|
|
|
|
|
|
8,797
|
|
|
2020
|
|
|
|
|
28,181
|
|
|
|
|
|
4,259
|
|
|
2021
|
|
|
|
|
11,086
|
|
|
|
|
|
1,675
|
|
|
2022 and thereafter
|
|
|
|
|
5,576
|
|
|
|
|
|
843
|
|
|
Total
|
|
|
|
|
138,920
|
|
|
|
|
|
20,995
|
|
|
|
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
16. Commitments and contingencies (continued)
Capital and other commitments
Future minimum capital commitments, mainly representing renovating expense under non-cancellable agreements, consist of the following as of June 30, 2018:
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Six months ended December 31, 2018
|
|
|
|
|
2,509
|
|
|
|
|
|
379
|
|
|
2019
|
|
|
|
|
173
|
|
|
|
|
|
26
|
|
|
2020 and thereafter .
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Total
|
|
|
|
|
2,682
|
|
|
|
|
|
405
|
|
|
|
17. Preferred shares
Modification of Series C preferred shares on March 23, 2018
On March 23, 2018, the terms of Series C preferred shares were amended such that upon certain redemption trigger events, the Series C preferred shares will be redeemable by the founder and will no longer be redeemable by the Company. The Series C preferred shares continued to be classified as mezzanine equity subsequent to the modification due to its deemed liquidation rights. However, the previously recorded accretion charge to the redemption value of Series C preferred shares of RMB 120,000 (US$18,135) was reversed during the six months ended June 30, 2018 due to the amendments to the contingent redemption provisions. The amendment is accounted for as a modification as the fair value of Series C preferred share immediately after the amendment is decreased, but not significantly different from its fair value immediately before the amendment. Modifications that result in a decrease in the fair value are not recognized.
Modification of Series A, A+, and B Shares on April 10, 2018
On April 10, 2018, the Series A, A+, and B preferred shares were modified. The key modified terms of the Preferred Shares are summarized below:
Liquidation preference
On April 10, 2018, Series A preferred shares are modified and are no longer entitled to liquidation preference. After payment is made to the holders of Series A+, B and C preferred shares in accordance with the liquidation preference amount mentioned in the 2017 audited financial statements, the Company’s remaining assets available for distribution to shareholders will be distributed ratably amongst the ordinary shares and the Preferred Shares holders (including Series A preferred shares) based on the number of ordinary shares the Preferred Shares are convertible into. As a result, the Series A preferred shares were reclassified from mezzanine equity to permanent equity after the amendment.
Conversion rights
On April 10, 2018, the Series A, A+ and B preferred shareholders may convert the Series A, A+ and B preferred shares into ordinary shares at any time on a one for one basis, subject to certain general anti-dilution adjustments.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
17. Preferred shares (continued)
In addition, all the Preferred Shares are automatically converted into ordinary shares at the then-effective conversion price upon the earlier of: (i) election in writing by the holders of at least a majority of the then issued and outstanding Preferred Shares with respect to the conversion of the respective class; or (ii) the closing of an initial public offering.
The Series A, A+ and B preferred shares amendments are accounted for as modifications as the fair values of Series A, A+, and B preferred shares immediately after the amendment are not significantly different from their respective fair values immediately before the amendment. The Series A preferred shares fair value decreased subsequent to the amendment and are not recognized. The incremental fair values of Series A+ and B preferred shares as a result of the modification are immaterial.
The movement in the carrying value of the Preferred Shares is as follows:
|
|
|
Series A
|
|
|
Series A+
|
|
|
Series B
|
|
|
Series C
|
|
|
T otal
|
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Balance as of January 1, 2018
|
|
|
|
|
18,856
|
|
|
|
|
|
3,771
|
|
|
|
|
|
6,283
|
|
|
|
|
|
360,000
|
|
|
|
|
|
388,910
|
|
|
Reversal of accretion on Series C preferred shares
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(120,000
)
|
|
|
|
|
|
(120,000
)
|
|
|
Balance as of June 30, 2018
|
|
|
|
|
18,856
|
|
|
|
|
|
3,771
|
|
|
|
|
|
6,283
|
|
|
|
|
|
240,000
|
|
|
|
|
|
268,910
|
|
|
Balance as of June 30, 2018 (US$)
|
|
|
|
|
2,850
|
|
|
|
|
|
570
|
|
|
|
|
|
950
|
|
|
|
|
|
36,270
|
|
|
|
|
|
40,640
|
|
|
|
18. Business combination
On May 24, 2018, the Company acquired a 70% equity interest in Hangzhou Jiujiu Financial Information Services Limited for the expansion into the finance information service market for a total consideration of RMB4,500 (US$680). The acquisition was accounted for as a business combination. Goodwill representing the expected synergies from the acquisition of RMB3,067 (US$463) was recognized which is not tax deductible.
On June 6, 2018, the Company acquired 100% equity interest in Rymo Technology Industry Limited which is engaged in the provision of collateral registration services through its wholly owned subsidiary, Shanghai Zaohui Finance Lease Co., Ltd., for nil consideration. The acquisition was accounted for as a business combination. Goodwill representing the expected synergies from the acquisition of RMB2,745 (US$415) was recognized which is not tax deductible.
The preliminary results of the purchase price allocation for these acquisitions are based on valuation determined by the Company with the assistance of an independent third party valuation firm. The purchase price allocations and the actual results of operations after the acquisition date and pro-forma results of operations for these acquisitions have not been presented because the effects of these acquisitions were insignificant, either individually or in aggregate.
19. Restricted net assets
As a result of PRC laws and regulations, the Company’s PRC subsidiaries, VIE and VIE’s subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. As of December 31, 2017 and June 30, 2018, amounts restricted that include paid-in capital and statutory reserve funds, as determined pursuant to PRC GAAP, were RMB202,558 and RMB202,558 (US$30,611), respectively.
WEIDAI LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018
(Amounts in thousands of Renminbi (“RMB”) and US dollar (“US$”),
except for number of shares and per share data)
20. Subsequent events
The Company has evaluated the impact of any events that have occurred subsequent to June 30, 2018, through August 10, 2018.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
The post-offering memorandum and articles of association that we expect to adopt and to become effective immediately prior to the completion of this offering provide that we shall indemnify our directors and officers (each an indemnified person) against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such indemnified person, other than by reason of such person’s own dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such indemnified person in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.
Pursuant to the indemnification agreements, the form of which is filed as Exhibit 10.1 to this registration statement, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer.
The underwriting agreement, the form of which will be filed as Exhibit 1.1 to this registration statement, will also provide indemnification for us and our officers and directors for certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 7.
RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were involved in these issuances of securities.
Recent Sale of Unregistered Securities of Weidai Financial Information
|
|
|
Securities/Purchaser
|
|
|
Date of Issuance
|
|
|
Amount of Registered
Capital
(1)
|
|
|
Percentage of
Registered Capital
(2)
|
|
|
Consideration
|
|
|
Deqing Jinxiu Management Consulting Partnership
|
|
|
August 27, 2015
|
|
|
RMB15,870,000
|
|
|
13.2%
|
|
|
RMB15,870,000
|
|
|
Hangzhou Hakim Unique Investment Partnership
|
|
|
September 6, 2015
|
|
|
RMB18,292,500
|
|
|
14.3%
|
|
|
RMB18,292,500
|
|
|
Certain minority shareholders
|
|
|
October 15, 2015
|
|
|
RMB3,658,500
|
|
|
2.9%
|
|
|
RMB3,658,500
|
|
|
|
|
|
October 24, 2016
|
|
|
RMB6,148,790
|
|
|
4.8%
|
|
|
RMB240,000,000
|
|
|
|
|
(1)
In accordance with the Company Law in China, Weidai Financial Information does not issue shares, and shareholders of Weidai Financial Information subscribe to its registered capital, which represents its equity interest.
(2)
Calculated by dividing the amount of registered capital by the total current registered capital of Weidai (Hangzhou) Financial Information Service Ltd.
Recent Sale of Unregistered Securities of Weidai Ltd.
|
|
Securities/Purchaser
|
|
|
Date of Issuance
|
|
|
Number of Securities
|
|
|
Percentage of
Securities
(2)
|
|
|
Consideration
|
|
Sertus Nominees (Cayman) Limited
(1)
|
|
|
January 26, 2018
|
|
|
1 ordinary share
|
|
|
—
|
|
|
US$0.0001
|
|
YAOH WDAI LTD
(1)
|
|
|
January 26, 2018
|
|
|
1 ordinary share
|
|
|
—
|
|
|
US$0.0001
|
|
YAOH WDAI LTD
|
|
|
January 26, 2018
|
|
|
98,299 ordinary shares
|
|
|
7.5%
|
|
|
US$0.0001 per share
|
|
|
|
|
April 10, 2018
|
|
|
603,128 ordinary shares
|
|
|
46.0%
|
|
|
US$0.0001 per share
|
|
Certain minority shareholders and
employees
|
|
|
January 26, 2018
|
|
|
1,700 ordinary shares
|
|
|
0.1%
|
|
|
US$0.0001 per share
|
|
|
April 10, 2018
|
|
|
266,413 ordinary shares
|
|
|
20.3%
|
|
|
US$0.0001 per share
|
|
Hakim Unique Technology Limited
|
|
|
April 10, 2018
|
|
|
182,925 series A preferred shares
|
|
|
14.0%
|
|
|
US$0.0001 per share
|
|
|
April 10, 2018
|
|
|
16,141 series B preferred shares
|
|
|
1.2%
|
|
|
US$0.0001 per share
|
|
A minority shareholder
|
|
|
April 10, 2018
|
|
|
36,585 series A+ preferred shares
|
|
|
2.8%
|
|
|
US$0.0001 per share
|
|
Certain minority shareholders
|
|
|
April 10, 2018
|
|
|
44,835 series B preferred shares
|
|
|
3.4%
|
|
|
US$0.0001 per share
|
|
Certain minority shareholders
|
|
|
April 10, 2018
|
|
|
61,488 series C preferred shares
|
|
|
4.7%
|
|
|
US$0.0001 per share
|
|
(1)
Such shares were transferred from Sertus Nominees (Cayman) Limited to YAOH WDAI LTD on January 26, 2018.
(2)
Calculated by dividing the number of securities by the total current outstanding securities of Wendai Ltd.
ITEM 8.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
See Exhibit Index beginning on page
II-4
of this registration statement.
The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosure that was made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosure of material information regarding material contractual provisions is required to make the statements in this registration statement not misleading.
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.
ITEM 9.
UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(4)
For the purpose of determining any liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(ii)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(iii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iv)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(v)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Weidai Ltd.
Exhibit Index
Exhibit
Number
|
|
|
Description of Document
|
|
1.1*
|
|
|
Form of Underwriting Agreement
|
|
3.1
|
|
|
Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect
|
|
3.2
|
|
|
Form of Second Amended and Restated Memorandum and Articles of Association of the Registrant, effective immediately prior to the completion of this offering
|
|
4.1*
|
|
|
Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3)
|
|
4.2
|
|
|
Registrant’s Specimen Certificate for Ordinary Shares
|
|
4.3*
|
|
|
Form of Deposit Agreement, among the Registrant, the depositary and all holders and beneficial owners of American Depositary Shares issued thereunder
|
|
4.4
|
|
|
Shareholders Agreement between the Registrant and other parties thereto dated April 10, 2018
|
|
5.1
|
|
|
|
|
8.1
|
|
|
Opinion of Conyers Dill & Pearman regarding certain Cayman Islands tax matters
|
|
8.2
|
|
|
Opinion of Grandall Law Firm (Shanghai) regarding certain PRC tax matters (included in Exhibit 99.2)
|
|
10.1
|
|
|
Form of Indemnification Agreement between the Registrant and its directors and executive officers
|
|
10.2
|
|
|
Form of Employment Agreement between the Registrant and its executive officers
|
|
10.3
|
|
|
English translation of the Power of Attorney executed by shareholders of Weidai Financial Information dated April 10, 2018
|
|
10.4
|
|
|
English translation of the form Share Pledge Agreement among Weidai Co., Ltd., Weidai Financial Information and each shareholder of Weidai Financial Information dated April 10, 2018
|
|
10.5
|
|
|
English translation of the Exclusive Business Cooperation Agreement among Weidai Co., Ltd. and Weidai Financial Information dated April 10, 2018
|
|
10.6
|
|
|
English translation of the Exclusive Call Option Agreement among Weidai Co., Ltd., Weidai Financial Information and shareholders of Weidai Financial Information dated April 10, 2018
|
|
10.7
|
|
|
English translation of the Spouse Consent Letter signed by the spouse of Mr. Hong Yao dated April 10, 2018
|
|
10.8
|
|
|
Financial Support Undertaking Letter issued by the Registrant to Weidai Financial Information, dated April 10, 2018
|
|
10.9
|
|
|
2018 Share Incentive Plan of the Registrant
|
|
10.10
|
|
|
Equity Transfer Agreement among Weidai Hong Kong Limited, the shareholders of Rymo Technology Industry Limited and Rymo Technology Industry Limited dated June 6, 2018
|
|
21.1
|
|
|
Principal Subsidiaries of the Registrant
|
|
23.1
|
|
|
Consent of Ernst & Young Hua Ming LLP, an independent registered public accounting firm
|
|
23.2
|
|
|
Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
|
|
23.3
|
|
|
Consent of Grandall Law Firm (Shanghai) (included in Exhibit 99.2)
|
|
24.1
|
|
|
Powers of Attorney (included on signature page)
|
|
99.1
|
|
|
Code of Business Conduct and Ethics of the Registrant
|
|
99.2
|
|
|
Opinion of Grandall Law Firm (Shanghai) regarding certain PRC law matters
|
|
*
To be filed by amendment.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Beijing, China, on August 10, 2018.
|
Weidai Ltd.
|
|
|
By:
|
|
|
/s/ Hong Yao
|
|
|
|
|
|
Name:
|
|
|
Hong Yao
|
|
|
|
|
|
Title:
|
|
|
Chairman of the Board of Director and
Chief Executive Officer
|
|
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of Hong Yao and Leo Li as attorneys-in-fact with full power of substitution for him or her in any and all capacities to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933, as amended (the “Securities Act”), and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant (the “Shares”), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1 (the “Registration Statement”) to be filed with the Securities and Exchange Commission with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
|
Signature
|
|
|
Title
|
|
|
Date
|
|
|
/s/ Hong Yao
Hong Yao
|
|
|
Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
|
|
|
August 10, 2018
|
|
|
/s/ Feng Chen
Feng Chen
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
/s/ Yuqun Sun
Yuqun Sun
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
/s/ Desheng Ding
Desheng Ding
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
/s/ Wei Ye
Wei Ye
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
/s/ Menma Huang
Menma Huang
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
Signature
|
|
|
Title
|
|
|
Date
|
|
|
/s/ Ziyang li
Ziyang Li
|
|
|
Director
|
|
|
August 10, 2018
|
|
|
/s/ Leo Li
Leo Li
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
|
August 10, 2018
|
|
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of Weidai Ltd. has signed this registration statement or amendment thereto in New York on August 10, 2018.
|
Authorized U.S. Representative
|
|
|
By:
|
|
|
/s/ Siu Fung Ming
|
|
|
|
|
|
Name:
|
|
|
Siu Fung Ming
|
|
|
|
|
|
Title:
|
|
|
Assistant Secretary
|
|
Exhibit
3.1
THE COMPANIES LAW (AS AMENDED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED MEMORANDUM OF
ASSOCIATION
OF
Weidai Ltd.
(adopted by Special Resolution on
April 10, 2018)
|
1.
|
The name of the Company is Weidai Ltd.
|
|
2.
|
The registered office of the Company shall be at the office of Sertus Incorporations (Cayman)Limited,
Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547,Grand Cayman, KY1-1104, Cayman Islands,
Cayman Islands, or at such other place in the Cayman Islands as the Directors may from time to time decide.
|
|
3.
|
The objects for which the Company is established are unrestricted and the Company shall have full
power and authority to carry out any object not prohibited by the Companies Law (as amended) or as the same may be revised from
time to time, or any other law of the Cayman Islands.
|
|
4.
|
The liability of each Shareholder is limited to the amount from time to time unpaid on such Shareholder's
shares.
|
|
5.
|
The Company has power to register by way of continuation as a body corporate limited by shares
under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
|
|
6.
|
Capitalised terms that are not defined in this Amended and Restated Memorandum of Association bear
the same meaning as those given in the Amended and Restated Articles of Association of the Company.
|
|
7.
|
The authorised share capital of the Company is US$50,000 divided into 500,000,000 shares, par value
of US$0.0001 each, of which (i) 499,658,026 shares are designated as Ordinary Shares; (ii) 182,925 shares are designated as Series
A Preferred Shares; (iii) 36,585 shares are designated as Series A+ Preferred Shares; (iv) 60,976 shares are designated as Series
B Preferred Shares; and (v) 61,488 shares are designated as Series C Preferred Shares.
|
THE COMPANIES LAW (AS AMENDED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED ARTICLES OF ASSOCIATION
OF
Weidai Ltd.
(adopted by Special Resolution on April 10,
2018)
INTERPRETATION
|
1
|
In these Articles, Table A in the First Schedule to the Statute does not apply and, unless there
is something in the subject or context inconsistent therewith:
|
"
Affiliate
"
|
|
means, with respect to a Person,
any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person. In the
case of any individual, his spouse, child, brother, sister, parent, the relatives of such spouse, trustee of any trust in
which such individual or any of his immediate family members is a beneficiary or a discretionary object, or any entity or
company Controlled by any of the aforesaid Persons. In the case of an Investor, the term “Affiliate” also
includes (v) any shareholder of such Investor, (w) any of such shareholder’s or such Investor’s general partners
or limited partners, (x) the fund manager managing or advising such shareholder or such Investor (and general partners,
limited partners and officers thereof) and other funds managed or advised by such fund manager, and (y) trusts controlled by
or for the benefit of any such Person referred to in (v), (w) or (x), and (z) any fund or holding company formed for
investment purposes that is promoted, sponsored, managed, advised or serviced by the such Investor.
|
|
|
|
"
Articles
"
|
|
means these Amended and Restated Articles of Association of the Company (including the Schedule A hereto), as amended and restated from time to time.
|
|
|
|
"
Auditor
"
|
|
means the person for the time being performing the duties of auditor of the Company (if any).
|
"
Board
" or "
Board of Directors
"
|
|
means the board of directors of the Company.
|
|
|
|
"
Business Day
"
|
|
means any day that is not a Saturday, Sunday, public holiday or other day on which commercial banks are required or authorized by law to be closed in the Cayman Islands, Hong Kong, New York or the PRC.
|
|
|
|
"
Company
"
|
|
means Weidai Ltd., an exempted company organized and existing under the laws of the Cayman Islands.
|
|
|
|
"
Directors
"
|
|
means the members of the Board of Directors.
|
|
|
|
"
Domestic Company
"
|
|
means Weidai (Hangzhou) Finance Information Service Co., Ltd. (
微贷(杭州)金融信息服务有限公司
), a limited liability company duly incorporated and validly existing under the laws of the PRC.
|
|
|
|
"
Equity Securities
"
|
|
means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any contract providing for the acquisition of any of the foregoing.
|
|
|
|
"
FANGWJ
"
|
|
means FANGWJ WDAI LTD, and/or its successors and assigns.
|
|
|
|
“
Founder
”
|
|
means Yao Hong (
姚宏
), a PRC citizen (PRC residential ID number: 330105198004040019).
|
|
|
|
"
Founder Holdco
"
|
|
means YAOH WDAI LTD, which is wholly owned by Yao Hong (
姚宏
).
|
|
|
|
"
Founder Parties
"
|
|
means collectively the Founder Holdco and the Founder.
|
|
|
|
"
Group Companies
"
|
|
has the meaning set forth in the Shareholders' Agreement.
|
|
|
|
"
Handing
"
|
|
means Hakim Unique Technology Limited, and/or its successors and assigns.
|
|
|
|
"
Intellectual Property
"
|
|
means any and all (i) patents, patent rights and applications therefor and reissues, reexaminations, continuations, continuations-in-part, divisions, and patent term extensions thereof, (ii) inventions (whether patentable or not), discoveries, improvements, concepts, innovations
|
|
|
and industrial models, (iii) registered
and unregistered copyrights, copyright registrations and applications, mask works and registrations and applications therefor,
author’s rights and works of authorship (including artwork, software, computer programs, source code, object code and executable
code, firmware, development tools, files, records and data, and related documentation), (iv) URLs, web sites, web pages and any
part thereof, (v) technical information, know-how, trade secrets, drawings, designs, design protocols, specifications, proprietary
data, customer lists, databases, proprietary processes, technology, formulae, and algorithms and other intellectual property,
(vi) trade names, trade dress, trademarks, domain names, service marks, logos, business names, and registrations and applications
therefor, and (vii) the goodwill symbolized or represented by the foregoing.
|
|
|
|
"
Investors
"
|
|
has the meaning set forth in the Shareholders' Agreement.
|
|
|
|
"
Liquidation Event
"
|
|
means unless otherwise agreed by the Preferred
Majority, any of the following events:
(i) the liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary; and
(ii) the Trade Sale.
|
|
|
|
"
Memorandum
"
|
|
means this Amended and Restated Memorandum of Association of the Company, as amended and restated from time to time.
|
|
|
|
"
New Shares
"
|
|
has the meaning set forth in the Shareholders' Agreement.
|
|
|
|
"
Option
"
|
|
means any options to purchase or rights to subscribe for Ordinary Shares, or other securities by their terms convertible into or exchangeable for Ordinary Shares, or options to purchase or rights to subscribe for such convertible or exchangeable securities.
|
|
|
|
"
Ordinary Resolution
"
|
|
means a resolution passed by the Shareholders holding at least 50% of the issued and outstanding Shares (on an as-converted basis) as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting, and includes a unanimous written resolution. In computing the majority when a poll is demanded regard shall be had to the number of votes to which each Shareholder is entitled by the Articles.
|
|
|
|
"
Ordinary Shareholder(s)
"
|
|
means holder(s) of the Ordinary Shares.
|
"
Ordinary Shares
"
|
|
means the Company’s ordinary shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Person
"
|
|
shall be construed as broadly as possible and shall include an individual, a partnership (including a limited liability partnership), a company, an association, a joint stock company, a limited liability company, a trust, a joint venture, a legal person, an unincorporated organization and a governmental authority.
|
|
|
|
"
Preferred Majority
"
|
|
means the Series A+ Preferred Majority, the Series B Preferred Majority and the Series C Preferred Majority.
|
|
|
|
"
PRC
"
|
|
means the People’s Republic of China, solely for purposes of this Agreement, excluding Hong Kong, the Macau Special Administrative Region and the islands of Taiwan.
|
|
|
|
"
Preferred Shares
"
|
|
means the Series A+ Preferred Shares, the Series B Preferred Shares and/or the Series C Preferred Shares, as applicable.
|
|
|
|
"
Preferred Shareholder(s)
"
|
|
means holder(s) of the Preferred Shares.
|
|
|
|
"
QIPO
"
|
|
has the meaning set forth in the Shareholders' Agreement.
|
|
|
|
"
RMB
"
|
|
means the lawful currency of PRC.
|
|
|
|
"
Seal
"
|
|
means the common seal of the Company and includes every duplicate seal.
|
|
|
|
"
Series A Issue Price
"
|
|
means U.S. dollar equivalent to RMB109.33, the deemed per-share purchase price for the Series A Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events).
|
|
|
|
"
Series A Preferred Majority
"
|
|
means the holder(s) of more than fifty (50%) of the issued and outstanding Series A Preferred Shares.
|
|
|
|
"
Series A Preferred Shares
"
|
|
means the Company’s series A preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series A Preferred Shareholders
"
|
|
means any holder of the issued and outstanding Series A Preferred Shares.
|
|
|
|
"
Series A+ Issue Price
"
|
|
means U.S. dollar equivalent to RMB820.01, the deemed per-share purchase price for the Series A+ Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events), calculated based on the middle exchange rate published by the Bank of China on the date of payment of any Junior Preference Amount to the Series A+ Preferred Shareholders, or on the date of adjusting conversion price of any Series A+ Preferred Share pursuant to
Section 4.3(b)
of
Schedule A
, as applicable.
|
"
Series A+ Preferred Majority
"
|
|
means the holder(s) of more than fifty (50%) of the issued and outstanding Series A+ Preferred Shares.
|
|
|
|
"
Series A+ Preferred Shareholders
"
|
|
means any holder of the issued and outstanding Series A+ Preferred Shares.
|
|
|
|
"
Series A+ Preferred Shares
"
|
|
means the Company’s series A+ preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series B Issue Price
"
|
|
means U.S. dollar equivalent to RMB2,459.98, the deemed per-share purchase price for the Series B Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events), calculated based on the middle exchange rate published by the Bank of China on the date of payment of any Junior Preference Amount to the Series B Preferred Shareholders, or on the date of adjusting conversion price of any Series B Preferred Share pursuant to
Section 4.3(b)
of
Schedule A
, as applicable.
|
|
|
|
"
Series B Preferred Majority
"
|
|
means the holder(s) of more than fifty (50%) of the issued and outstanding Series B Preferred Shares.
|
|
|
|
"
Series B Preferred Shareholders
"
|
|
means any holder of the issued and outstanding Series B Preferred Shares.
|
|
|
|
"
Series B Preferred Shares
"
|
|
means the Company’s series B preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series C Issue Date
"
|
|
means (i) with respect to the Series C Preferred Shares held by FANGWJ and Seed Field of Fortune Company Limited, the closing date on which the transaction contemplated under certain investment agreement dated as of September 9, 2016 entered into by and among the Domestic Company, Suzhou Weixin Zhonghua Venture Investment LLP (
苏州维新仲华创业投资合伙企业(有限合伙)
) and certain other parties thereto, was consummated, and (ii) with respect to the Series C Preferred Shares held by New Oriental Global Investments Ltd., January 1, 2018.
|
"
Series C Issue Price
"
|
|
means U.S. dollar equivalent to RMB3,903.20, the deemed per-share purchase price for the Series C Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events), calculated based on the middle exchange rate published by the Bank of China on the date of payment of any Series C Preference Amount to the Series C Preferred Shareholders, or on the date of adjusting conversion price of any Series C Preferred Share pursuant to
Section 4.3(b)
of
Schedule A
, as applicable.
|
|
|
|
"
Series C Preferred Majority
"
|
|
means the holder(s) of more than fifty (50%) of the issued and outstanding Series C Preferred Shares.
|
|
|
|
"
Series C Preferred Shareholders
"
|
|
means any holder of the issued and outstanding Series C Preferred Shares.
|
|
|
|
"
Series C Preferred Shares
"
|
|
means the Company’s series C preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Shareholder
"
|
|
means any individual or entity holding Shares in the Company.
|
|
|
|
"
Shareholders' Agreement
"
|
|
means that certain Shareholders' Agreement dated April 10, 2018 by and among the Company, the Founder Parties and the Investors.
|
|
|
|
"
Shares
"
|
|
means a share or shares in the Company and includes a fraction of a share.
|
|
|
|
"
Special Resolution
"
|
|
has the same meaning as in the Statute, and includes a unanimous written resolution.
|
|
|
|
"
Statute
"
|
|
means the Companies Law (as amended) of the Cayman Islands, and every statutory modification or re-enactment thereof for the time being in force.
|
|
|
|
"
Subsidiary
"
|
|
means, as of the relevant date of determination, with respect to any Person (the “subject entity”), (i) any Person (x) more than fifty percent (50%) of whose shares or other interests entitled to vote in the election of directors or (y) more than a fifty percent (50%) interest in the profits or capital of such Person are owned or controlled directly or indirectly by the subject entity or through one (1) or more subsidiaries of the subject entity, (ii) any Person whose assets, or portions thereof, are consolidated with the net earnings of the subject entity and are recorded on the books of the subject entity for financial reporting purposes in accordance with US GAAP or PRC GAAP, consistently applied, or (iii) any Person with respect to which the subject entity has the power to otherwise direct the business and policies of that entity directly or indirectly through another subsidiary.
|
"
Trade Sale
"
|
|
means any of the following events:
(i) the acquisition
of the Group Companies (taken as a whole) (whether by a sale of equity, merger or consolidation) in which in excess of 50% of the
Group Companies’ voting power outstanding before such transaction is transferred;
(ii) the sale,
lease, transfer or other disposition of all or substantially all of the assets, businesses, any trademarks, copyrights, domain
names or any other technology or Intellectual Properties of the Group Companies (taken as a whole); or
(iii) the exclusive
licensing of all or substantially all of the Group Companies' Intellectual Properties.
|
|
|
|
"
Super Majority Holders
"
|
|
means the holder(s) of more than two-thirds (2/3) of the voting power of the then issued and outstanding Shares of the Company, calculated on a fully diluted and as-converted basis, which shall further include the Founder Parties and FANGWJ.
|
|
|
|
"
U.S.
"
|
|
means the United States of America.
|
|
|
|
"
US$
"
|
|
means the lawful currency of the United States of America.
|
In addition, the following terms shall have the meanings defined
for such terms in the Sections or Exhibits set forth below:
"
Conversion Price
"
|
Section 4.1
of
Schedule A
|
“
Investor Directors
”
|
Section 5.2(a)
of
Schedule A
|
“
Junior Preference Amount
”
|
Section 2.1(b)
of
Schedule A
|
"
Series A Conversion Price
"
|
Section 4.1
of
Schedule A
|
"
Series A+ Conversion Price
"
|
Section 4.1
of
Schedule A
|
"
Series B Conversion Price
"
|
Section 4.1
of
Schedule A
|
"
Series C Conversion Price
"
|
Section 4.1
of
Schedule A
|
"
Series C Preference Amount
"
|
Section 2.1(a)
of
Schedule A
|
In the Articles:
|
1.1
|
words importing the singular number include the plural number and vice versa;
|
|
1.2
|
words importing the masculine gender include the feminine gender;
|
|
1.3
|
words importing persons include corporations;
|
|
1.4
|
"written" and "in writing" include all modes of representing or reproducing
words in visible form, including in the form of an electronic record;
|
|
1.5
|
references to provisions of any law or regulation shall be construed as references to those provisions
as amended, modified, re-enacted or replaced from time to time;
|
|
1.6
|
any phrase introduced by the terms "including", "include", "in particular"
or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms;
|
|
1.7
|
headings are inserted for reference only and shall be ignored in construing these Articles;
|
|
1.8
|
any reference in this Agreement to any party or any other Person shall be construed so as to include
its successors in title, permitted assigns and permitted transferees; and
|
|
1.9
|
in these Articles Section 8 of the Electronic Transactions Law (2003 Revision) shall not apply.
|
PRIORITY OF THE PROVISIONS SET OUT IN THE SCHEDULE
|
2
|
All provisions set out in the main body of these articles shall be read in conjunction with and
shall be subject to the terms set out in the Schedule A hereto, which provide further details on the rights of the Preferred Shareholders.
In the event of any difference between the provisions set out in the main body of these Articles and the provisions set out in
the Schedule A hereto, the provisions set out in the Schedule A hereto shall prevail.
|
COMMENCEMENT OF BUSINESS
|
3
|
The business of the Company may be commenced as soon after incorporation as the Directors shall
see fit.
|
|
4
|
The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred
in or about the formation and establishment of the Company, including the expenses of registration.
|
ISSUE OF SHARES
|
5
|
Subject to the other provisions in the Memorandum and Articles (and
to any direction that may be given by the Company in general meeting) and without prejudice to any rights attached to any existing
Shares, the Directors may allot, issue, grant Options over or otherwise dispose of Shares (including fractions of a Share) with
or without preferred, deferred or other rights or restrictions, whether in regard to dividend, voting,
return of capital
or otherwise and to such persons, at such times and on such other terms as they think proper.
|
|
6
|
The Company shall not issue Shares to bearer.
|
REGISTER OF SHAREHOLDERS
|
7
|
The Company shall maintain or cause to be maintained the register of members in accordance with
the Statute.
|
CLOSING REGISTER
OF MEMBERS OR FIXING RECORD DATE
|
8
|
For the purpose of determining Shareholders entitled to notice of, or to vote at any meeting of
Shareholders or any adjournment thereof, or Shareholders entitled to receive payment of any dividend, or in order to make a determination
of Shareholders for any other purpose, the Directors may provide that the register of members shall be closed for transfers for
a stated period which shall not in any case exceed forty (40) days. If the register of members shall be closed for the purpose
of determining Shareholders entitled to notice of, or to vote at, a meeting of Shareholders the register of members shall be closed
for at least ten (10) days immediately preceding the meeting.
|
|
9
|
In lieu of, or apart from, closing the register of members, the Directors may fix in advance or
arrears a date as the record date for any such determination of Shareholders entitled to notice of, or to vote at any meeting of
the Shareholders or any adjournment thereof, or for the purpose of determining the Shareholders entitled to receive payment of
any dividend or in order to make a determination of Shareholders for any other purpose.
|
|
10
|
If the register of members is not so closed and no record date is fixed for the determination of
Shareholders entitled to notice of, or to vote at, a meeting of Shareholders or Shareholders entitled to receive payment of a dividend,
the date on which notice of the meeting is sent or the date on which the resolution of the Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of Shareholders. When a determination of Shareholders
entitled to vote at any meeting of Shareholders has been made as provided in this Article, such determination shall apply to any
adjournment thereof.
|
CERTIFICATES
FOR SHARES
|
11
|
A Shareholder shall only be entitled to a share certificate if the Directors resolve that share
certificates shall be issued. Share certificates representing Shares, if any, shall be in such form as the Directors may determine.
Share certificates shall be signed by one or more Directors or other person authorised by the Directors. The Directors may authorise
certificates to be issued with the authorised signature(s) affixed by mechanical process. All certificates for Shares shall be
consecutively numbered or otherwise identified and shall specify the Shares to which they relate. All certificates surrendered
to the Company for transfer shall be cancelled and subject to these Articles no new certificate shall be issued until the former
certificate representing a like number of relevant Shares shall have been surrendered and cancelled.
|
|
12
|
The Company shall not be bound to issue more than one certificate for Shares held jointly by more
than one person and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.
|
|
13
|
If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such terms
(if any) as to evidence and indemnity and on the payment of such expenses reasonably incurred by the Company in investigating evidence,
as the Directors may prescribe, and (in the case of defacement or wearing out) upon delivery of the old certificate.
|
REDEMPTION AND
REPURCHASE OF SHARES
|
14
|
Subject to the Statute and the other provisions in the Memorandum and Articles, the Company may
issue Shares that are to be redeemed or are liable to be redeemed at the option of the Shareholder or the Company. The redemption
of such Shares shall be effected in such manner as the Company may determine before the issue of the Shares or as set forth in
the Articles.
|
|
15
|
Subject to the Statute and other provisions in the Memorandum and Articles, the Company may purchase
its own Shares (including any redeemable Shares).
|
|
16
|
The Company may make a payment in respect of the redemption or purchase of its own Shares in any
manner permitted by the Statute, including out of capital.
|
VARIATION OF
RIGHTS OF SHARES
|
17
|
If at any time the share capital of the Company is divided into different classes of Shares, the
rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may only be varied with
the consent in writing of members holding not less than two-thirds (2/3) of the votes entitled to be cast by holders (in person
or by proxy) of Shares on a poll at a general meeting of such class affected by the proposed variation of rights. The provisions
of these Articles relating to general meetings shall apply to every class meeting of the holders of one class of Shares except
that the necessary quorum shall be one person holding or representing by proxy at least one third of the issued Shares of the class
and that any holder of Shares of the class present in person or by proxy may demand a poll.
|
|
18
|
The rights conferred upon the holders of the Shares of any class issued with preferred or other
rights shall not, unless otherwise expressly provided by the terms of issue of the Shares of that class, be deemed to be varied
by the creation or issue of further Shares ranking pari passu therewith.
|
COMMISSION ON
SALE OF SHARES
|
19
|
The Company may, in so far as the Statute permits, pay a commission to any person in consideration
of his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares of the Company. Such commissions
may be satisfied by the payment of cash and/or the issue of fully or partly paid-up Shares. The Company may also on any issue of
Shares pay such brokerage as may be lawful.
|
NON RECOGNITION
OF TRUSTS
|
20
|
The Company shall not be bound by or compelled to recognise in any way (even when notified) any
equitable, contingent, future or partial interest in any Share, or (except only as is otherwise provided by these Articles or the
Statute) any other rights in respect of any Share other than an absolute right to the entirety thereof in the registered holder.
|
LIEN ON SHARES
|
21
|
The Company shall have a first and paramount lien on all Shares (whether fully paid-up or not)
registered in the name of a Shareholder (whether solely or jointly with others) for all debts, liabilities or engagements to or
with the Company (whether presently payable or not) by such Shareholder or his estate, either alone or jointly with any other person,
whether a Shareholder or not, but the Directors may at any time declare any Share to be wholly or in part exempt from the provisions
of this Article. The registration of a transfer of any such Share shall operate as a waiver of the Company's lien thereon. The
Company's lien on a Share shall also extend to any amount payable in respect of that Share.
|
|
22
|
The Company may sell, in such manner as the Directors think fit, any Shares on which the Company
has a lien, if a sum in respect of which the lien exists is presently payable, and is not paid within fourteen (14) clear days
after notice has been given to the holder of the Shares, or to the person entitled to it in consequence of the death or bankruptcy
of the holder, demanding payment and stating that if the notice is not complied with the Shares may be sold.
|
|
23
|
To give effect to any such sale the Directors may authorise any person to execute an instrument
of transfer of the Shares sold to, or in accordance with the directions of, the purchaser. The purchaser or his nominee shall be
registered as the holder of the Shares comprised in any such transfer, and he shall not be bound to see to the application of the
purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the sale or the exercise of
the Company's power of sale under these Articles.
|
|
24
|
The net proceeds of such sale after payment of costs, shall be applied in payment of such part
of the amount in respect of which the lien exists as is presently payable and any residue shall (subject to a like lien for sums
not presently payable as existed upon the Shares before the sale) be paid to the person entitled to the Shares at the date of the
sale.
|
CALL ON SHARES
|
25
|
Subject to the terms of the allotment the Directors may from time to time make calls upon the Shareholders
in respect of any monies unpaid on their Shares (whether in respect of par value or premium), and each Shareholder shall (subject
to receiving at least fourteen (14) days’ notice specifying the time or times of payment) pay to the Company at the time
or times so specified the amount called on the Shares. A call may be revoked or postponed as the Directors may determine. A call
may be required to be paid by instalments. A person upon whom a call is made shall remain liable for calls made upon him notwithstanding
the subsequent transfer of the Shares in respect of which the call was made.
|
|
26
|
A call shall be deemed to have been made at the time when the resolution of the Directors authorising
such call was passed.
|
|
27
|
The joint holders of a Share shall be jointly and severally liable to pay all calls in respect
thereof.
|
|
28
|
If a call remains unpaid after it has become due and payable, the person from whom it is due shall
pay interest on the amount unpaid from the day it became due and payable until it is paid at such rate as the Directors may determine,
but the Directors may waive payment of the interest wholly or in part.
|
|
29
|
An amount payable in respect of a Share on allotment or at any fixed date, whether on account of
the par value of the Share or premium or otherwise, shall be deemed to be a call and if it is not paid all the provisions of these
Articles shall apply as if that amount had become due and payable by virtue of a call.
|
|
30
|
The Directors may issue Shares with different terms as to the amount and times of payment of calls,
or the interest to be paid.
|
|
31
|
The Directors may, if they think fit, receive an amount from any Shareholder willing to advance
all or any part of the monies uncalled and unpaid upon any Shares held by him, and may (until the amount would otherwise become
payable) pay interest at such rate as may be agreed upon between the Directors and the Shareholder paying such amount in advance.
|
|
32
|
No such amount paid in advance of calls shall entitle the Shareholder paying such amount to any
portion of a dividend declared in respect of any period prior to the date upon which such amount would, but for such payment, become
payable.
|
FORFEITURE OF
SHARES
|
33
|
If a call remains unpaid after it has become due and payable the Directors may give to the person
from whom it is due not less than fourteen (14) clear days’ notice requiring payment of the amount unpaid together with any
interest, which may have accrued. The notice shall specify where payment is to be made and shall state that if the notice is not
complied with the Shares in respect of which the call was made will be liable to be forfeited.
|
|
34
|
If the notice is not complied with any Share in respect of which it was given may, before the payment
required by the notice has been made, be forfeited by a resolution of the Directors. Such forfeiture shall include all dividends
or other monies declared payable in respect of the forfeited Share and not paid before the forfeiture.
|
|
35
|
A forfeited Share may be sold, re-allotted or otherwise disposed of on such terms and in such manner
as the Directors think fit and at any time before a sale, re-allotment or disposition the forfeiture may be cancelled on such terms
as the Directors think fit. Where for the purposes of its disposal a forfeited Share is to be transferred to any person the Directors
may authorise some person to execute an instrument of transfer of the Share in favour of that person.
|
|
36
|
A person any of whose Shares have been forfeited shall cease to be
a Shareholder in respect of them and shall surrender to the Company for cancellation the certificate for
the Shares forfeited
and shall remain liable to pay to the Company all monies which at the date of forfeiture were payable by him to the Company in
respect of those Shares together with interest at such rate as may be agreed upon between such person and the Company, but his
liability shall cease if and when the Company shall have received payment in full of all monies due and payable by him in respect
of those Shares.
|
|
37
|
A certificate in writing under the hand of one Director or officer of the Company that a Share
has been forfeited on a specified date shall be conclusive evidence of the fact as against all persons claiming to be entitled
to the Share. The certificate shall (subject to the execution of an instrument of transfer) constitute a good title to the Share
and the person to whom the Share is disposed of shall not be bound to see to the application of the purchase money, if any, nor
shall his title to the Share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale
or disposal of the Share.
|
|
38
|
The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any
sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the par value of the Share
or by way of premium as if it had been payable by virtue of a call duly made and notified.
|
TRANSFER AND
TRANSMISSION OF SHARES
|
39
|
The instrument of transfer of any Share shall be in writing and shall be executed by or on behalf
of the transferor (and if the Directors so require, signed by the transferee). The transferor shall be deemed to remain the holder
of a Share until the name of the transferee is entered in the register of members. The Directors may decline to register any transfer
of Shares if such transfer of Shares does not comply with the terms of any agreement between the Company and such transferring
Shareholder.
|
|
40
|
If a Shareholder dies the survivor or survivors where he was a joint holder, and his legal personal
representatives where he was a sole holder, shall be the only persons recognised by the Company as having any title to his interest.
The estate of a deceased Shareholder is not thereby released from any liability in respect of any Share, which had been jointly
held by him.
|
|
41
|
Any person becoming entitled to a Share in consequence of the death or bankruptcy or liquidation
or dissolution of a Shareholder (or in any other way than by transfer) may, upon such evidence being produced as may from time
to time be required by the Directors, elect either to become the holder of the Share or to have some person nominated by him as
the transferee. If he elects to become the holder, he shall give notice to the Company to that effect, but the Directors shall,
in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the
Share by that Shareholder before his death or bankruptcy, as the case may be.
|
|
42
|
If the person so becoming entitled shall elect to be registered himself as holder he shall deliver
or send to the Company a notice in writing signed by him stating that he so elects.
|
|
43
|
A person becoming entitled to a Share by reason of the death or bankruptcy
or liquidation or dissolution of the holder (or in any other case than by transfer) shall be
entitled to the same dividends
and other advantages to which he would be entitled if he were the registered holder of the Share. However, he shall not, before
being registered as a Shareholder in respect of the Share, be entitled in respect of it to exercise any right conferred by ownership
in relation to meetings of the Company and the Directors may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the Share. If the notice is not complied with within ninety (90) days of being received
or deemed to be received as determined pursuant to the Articles, the Directors may thereafter withhold payment of all dividends,
bonuses or other monies payable in respect of the Share until the requirements of the notice have been complied with.
|
REGISTERED OFFICE
|
44
|
Subject to the Statute, the Company may by resolution of the Directors change the location of its
registered office.
|
GENERAL MEETINGS
|
45
|
All general meetings other than annual general meetings shall be called extraordinary general meetings.
|
|
46
|
The Company shall, if required by the Statute, in each year hold a general meeting as its annual
general meeting, and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such
time and place as the Directors shall appoint and if no other time and place is prescribed by them, it shall be held at the registered
office on the second Wednesday in December of each year at ten o'clock in the morning. At these meetings the report of the Directors
(if any) shall be presented.
|
|
47
|
The Company may hold an annual general meeting, but shall not (unless required by Statute) be obliged
to hold an annual general meeting.
|
|
48
|
The Directors may call general meetings, and they shall on a Shareholders requisition forthwith
proceed to convene an extraordinary general meeting of the Company.
|
|
49
|
The Directors shall on the requisition of members of the Company who hold, at the date of the deposit
of the requisition, at least ten percent (10%) of the outstanding Shares, proceed to convene a general meeting of the Company.
|
|
50
|
The requisition must state the objects of the meeting and must be signed by the requisitionists
and deposited at the registered office, and may consist of several documents in like form each signed by one or more requisitionists.
|
|
51
|
If the Directors do not within twenty-one (21) days from the date of the deposit of the requisition
duly proceed to convene a general meeting to be held within a further twenty-one (21) days, the requisitionists, or any of them
representing more than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting
so convened shall not be held after the expiration of three months after the expiration of the said twenty-one (21) days.
|
|
52
|
A general meeting convened as aforesaid by requisitionists shall be convened in the same manner
as nearly as possible as that in which general meetings are to be convened by Directors.
|
NOTICE OF GENERAL
MEETINGS
|
53
|
Written notice shall be given not less than ten (10) days nor more than sixty (60) days before
the date of any general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the
day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business
and shall be given in manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company, provided
that a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether
or not the provisions of the Articles regarding general meetings have been complied with, be deemed to have been duly convened
if it is so agreed:
|
|
53.1
|
in the case of an annual general meeting, by all the Shareholders (or their proxies) entitled to
attend and vote thereat; and
|
|
53.2
|
in the case of an extraordinary general meeting, by a majority in number of the Shareholders (or
their proxies) having a right to attend and vote at the meeting, being a majority together holding not less than seventy-five percent
(75%) of the outstanding Shares giving that right.
|
|
54
|
The accidental omission to give notice of a general meeting to, or the non-receipt of notice of
a meeting by, any person entitled to receive notice shall not invalidate the proceedings of that meeting.
|
PROCEEDINGS AT
GENERAL MEETINGS
|
55
|
No business shall be transacted at any general meeting unless a quorum is present. A general meeting
shall be deemed duly constituted if, at the commencement of and throughout the meeting, there are present in person or by proxy
the holders of more than fifty percent (50%) of the outstanding Shares entitled to vote.
|
|
56
|
A person may participate at a general meeting by conference telephone or other communications equipment
by means of which all the persons participating in the meeting can communicate with each other. Participation by a person in a
general meeting in this manner is treated as presence in person at that meeting.
|
|
57
|
A resolution (including a Special Resolution) in writing (in one or more counterparts) signed by
all Shareholders for the time being entitled to receive notice of and to attend and vote at general meetings (or, being corporations,
signed by their duly authorised representatives) shall be as valid and effective as if the resolution had been passed at a general
meeting of the Company duly convened and held.
|
|
58
|
If a quorum is not present within half an hour from the time appointed for the meeting or if during
such a meeting a quorum ceases to be present, the meeting, if convened upon the requisition of Shareholders, shall be dissolved
and in any other case it shall stand adjourned to the same day in the next week at the same time and place or to such other day,
time or such other place as the Directors may determine, and if at the adjourned meeting a quorum is not present within half an
hour from the time appointed for the meeting the Shareholders present shall be a quorum,
provided
that matters discussed
in such adjourned meeting shall be limited to those stated in the written notices and agendas of such meeting.
|
|
59
|
The chairman, if any, of the Board of Directors shall preside as chairman at every general meeting
of the Company, or if there is no such chairman, or if he shall not be present within fifteen minutes after the time appointed
for the holding of the meeting, or is unwilling to act, the Directors present shall elect one of their members to be chairman of
the meeting.
|
|
60
|
If no Director is willing to act as chairman or if no Director is present within fifteen minutes
after the time appointed for holding the meeting, the Shareholders present shall choose one of their members to be chairman of
the meeting.
|
|
61
|
The chairman may, with the consent of a meeting at which a quorum is present, (and shall if so
directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at
any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a general
meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.
Otherwise it shall not be necessary to give any such notice.
|
|
62
|
A resolution put to the vote of the meeting shall be decided on a show of hands unless before,
or on the declaration of the result of, the show of hands, the chairman demands a poll, or any other Shareholder or Shareholders
collectively present in person or by proxy and holding at least ten percent (10%) of the outstanding Shares giving a right to attend
and vote at the meeting demand a poll.
|
|
63
|
Unless a poll is duly demanded a declaration by the chairman that a resolution has been carried
or carried unanimously, or by a particular majority, or lost or not carried by a particular majority, an entry to that effect in
the minutes of the proceedings of the meeting shall be conclusive evidence of that fact without proof of the number or proportion
of the votes recorded in favour of or against such resolution.
|
|
64
|
The demand for a poll may be withdrawn.
|
|
65
|
Except on a poll demanded on the election of a chairman or on a question of adjournment, a poll
shall be taken as the chairman directs, and the result of the poll shall be deemed to be the resolution of the general meeting
at which the poll was demanded.
|
|
66
|
A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.
A poll demanded on any other question shall be taken at such time as the chairman of the general meeting directs, and any business
other than that upon which a poll has been demanded or is contingent thereon may proceed pending the taking of the poll.
|
|
67
|
In the case of an equality of votes, whether on a show of hands or on a poll, the chairman shall
not be entitled to a second or casting vote.
|
VOTES OF SHAREHOLDERS
|
68
|
Subject to any rights or restrictions attached to any Shares, on
a show of hands every Shareholder who (being an individual) is present in person or by proxy or, if a corporation or other non-natural
person is present by its duly authorised representative
or proxy, shall have one vote and on a poll every Shareholder shall
have one vote for every Share of which he is the holder.
|
|
69
|
In the case of joint holders of record the vote of the senior holder who tenders a vote, whether
in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and seniority shall be determined
by the order in which the names of the holders stand in the register of members.
|
|
70
|
A Shareholder of unsound mind, or in respect of whom an order has been made by any court, having
jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, receiver, curator bonis, or other
person on such Shareholder's behalf appointed by that court, and any such committee, receiver, curator bonis or other person may
vote by proxy.
|
|
71
|
No person shall be entitled to vote at any general meeting or at any separate meeting of the holders
of a class of Shares unless he is registered as a Shareholder on the record date for such meeting nor unless all calls or other
monies then payable by him in respect of Shares have been paid.
|
|
72
|
No objection shall be raised to the qualification of any voter except at the general meeting or
adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at the meeting shall
be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.
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|
73
|
On a poll or on a show of hands votes may be cast either personally or by proxy. A Shareholder
may appoint more than one proxy or the same proxy under one or more instruments to attend and vote at a meeting. Where a Shareholder
appoints more than one proxy the instrument of proxy shall state which proxy is entitled to vote on a show of hands.
|
|
74
|
A Shareholder holding more than one Share need not cast the votes in respect of his Shares in the
same way on any resolution and therefore may vote a Share or some or all such Shares either for or against a resolution and/or
abstain from voting a Share or some or all of the Shares and, subject to the terms of the instrument appointing him, a proxy appointed
under one or more instruments may vote a Share or some or all of the Shares in respect of which he is appointed either for or against
a resolution and/or abstain from voting.
|
|
75
|
The instrument appointing a proxy shall be in writing, be executed under the hand of the appointor
or of his attorney duly authorised in writing, or, if the appointor is a corporation under the hand of an officer or attorney duly
authorised for that purpose. A proxy need not be a Shareholder of the Company.
|
|
76
|
The instrument appointing a proxy shall be deposited at the registered office or at such other
place as is specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out by the Company:
|
|
76.1
|
not less than 48 hours before the time for holding the meeting or adjourned meeting at which the
person named in the instrument proposes to vote; or
|
|
76.2
|
in the case of a poll taken more than 48 hours after it is demanded, be deposited as aforesaid
after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or
|
|
76.3
|
where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded
be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any Director;
|
provided that the Directors may in
the notice convening the meeting, or in an instrument of proxy sent out by the Company, direct that the instrument appointing a
proxy may be deposited (no later than the time for holding the meeting or adjourned meeting) at the registered office or at such
other place as is specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out by the
Company. The chairman may in any event at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited.
An instrument of proxy that is not deposited in the manner permitted shall be invalid.
|
77
|
The instrument appointing a proxy may be in any usual or common form and may be expressed to be
for a particular meeting or any adjournment thereof or generally until revoked. An instrument appointing a proxy shall be deemed
to include the power to demand or join or concur in demanding a poll.
|
|
78
|
Votes given in accordance with the terms of an instrument of proxy shall be valid notwithstanding
the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed,
or the transfer of the Share in respect of which the proxy is given unless notice in writing of such death, insanity, revocation
or transfer was received by the Company at the registered office before the commencement of the general meeting, or adjourned meeting
at which it is sought to use the proxy.
|
CORPORATE SHAREHOLDERS
|
79
|
Any corporation or other non-natural person which is a Shareholder may in accordance with its constitutional
documents, or in the absence of such provision by resolution of its directors or other governing body, authorise such person as
it thinks fit to act as its representative at any meeting of the Company or of any class of Shareholders, and the person so authorised
shall be entitled to exercise the same powers on behalf of the corporation which he represents as the corporation could exercise
if it were an individual Shareholder.
|
SHARES THAT MAY
NOT BE VOTED
|
80
|
Shares in the Company that are beneficially owned by the Company shall not be voted, directly or
indirectly, at any meeting and shall not be counted in determining the total number of outstanding Shares at any given time.
|
DIRECTORS
|
81
|
Except as otherwise provided herein, the number of Directors of the
Company shall be determined from time to time by the Board of Directors. The first Directors of the Company shall be determined
in writing by, or appointed by a resolution of, the
subscriber(s) to the Memorandum. Each Director shall hold office until
such Director's successor is elected and qualified or until such Director's earlier resignation or removal. Any Director may resign
at any time upon written notice to the Company.
|
POWERS OF DIRECTORS
|
82
|
Subject to the Statute and the other provisions in the Memorandum and Articles and to any directions
given by Special Resolution, the business of the Company shall be managed by the Directors who may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction shall invalidate any prior act of the Directors which
would have been valid if that alteration had not been made or that direction had not been given. A duly convened meeting of Directors
at which a quorum is present may exercise all powers exercisable by the Directors.
|
|
83
|
All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all
receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in
such manner as the Directors shall determine by resolution.
|
|
84
|
The Directors on behalf of the Company may pay a gratuity or pension or allowance on retirement
to any Director who has held any other salaried office or place of profit with the Company or to his widow or dependants and may
make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.
|
|
85
|
Subejct to the other provisions in the Memorandum and Articles, the Directors may exercise all
the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part
thereof and to issue debentures, debenture stock, mortgages, bonds and other such securities whether outright or as security for
any debt, liability or obligation of the Company or of any third party.
|
APPOINTMENT AND
REMOVAL OF DIRECTORS
|
86
|
Except as otherwise provided in the Articles, Directors shall be appointed by the Shareholders
at a general or extraordinary meeting or by written consent. Appointments or elections of Directors need not be by written ballot.
|
|
87
|
Except as otherwise provided herein, vacancies in the Board of Directors may be filled by a majority
vote of the Board of Directors or by an appointment either at a general or extraordinary meeting of the Shareholders called for
that purpose or by written consent of the Shareholders. Any Directors appointed by the Shareholders to fill a vacancy shall hold
office for the balance of the term for which he or she was appointed. A Director appointed by the Board of Directors to fill a
vacancy shall serve until the next meeting of Shareholders at which Directors are appointed.
|
VACATION OF OFFICE
OF DIRECTOR
|
88
|
The office of a Director shall be vacated if:
|
|
88.1
|
he gives notice in writing to the Company that he resigns the office of Director; or
|
|
88.2
|
if he absents himself (without being represented by proxy or an alternate Director appointed by
him) from three consecutive meetings of the Board of Directors without special leave of absence from the Directors, and they pass
a resolution that he has by reason of such absence vacated office; or
|
|
88.3
|
if he dies, becomes bankrupt or makes any arrangement or composition with his creditors generally;
or
|
|
88.4
|
if he is found to be or becomes of unsound mind.
|
PROCEEDINGS OF
DIRECTORS
|
89
|
Subject to the other provisions in the Memorandum and Articles, the Directors may regulate their
proceedings as they think fit. Subject to the other provisions in the Memorandum and Articles, questions arising at any meeting
of the Board of Directors shall be decided by at least a majority of the votes of the Directors and alternate Directors present
at a meeting at which there is a quorum. In the case of an equality of votes, the chairman does not have a second or casting vote.
A Director who is also an alternate Director shall be entitled in the absence of his appointor to a separate vote on behalf of
his appointor in addition to his own vote.
|
|
90
|
A person may participate in a meeting of the Directors or committee of Directors by conference
telephone or other communications equipment by means of which all the persons participating in the meeting can communicate with
each other at the same time. Participation by a person in a meeting in this manner is treated as presence in person at that meeting.
Unless otherwise determined by the Directors the meeting shall be deemed to be held at the place where the chairman is at the start
of the meeting.
|
|
91
|
A resolution in writing (in one or more counterparts) signed by all the Directors or all the members
of a committee of Directors (an alternate Director being entitled to sign such a resolution on behalf of his appointor) shall be
as valid and effectual as if it had been passed at a meeting of the Directors, or committee of Directors as the case may be, duly
convened and held.
|
|
92
|
A Director or alternate Director may, or other officer of the Company on the requisition of a Director
or alternate Director shall, call a meeting of the Directors by at least five days' notice in writing to every Director and alternate
Director which notice shall set forth the general nature of the business to be considered unless notice is waived by all the Directors
(or their alternates) either at, before or after the meeting is held.
|
|
93
|
The continuing Directors may act notwithstanding any vacancy in their body, but if and so long
as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors the continuing
Directors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting
of the Company, but for no other purpose.
|
|
94
|
The Directors may elect a chairman of the Board of Directors and determine the period for which
he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes
after the time appointed for holding the same, the Directors present may choose one of their members to be chairman of the meeting.
|
|
95
|
All acts done by any meeting of the Directors or of a committee of Directors (including any person
acting as an alternate Director) shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment
of any Director or alternate Director, or that they or any of them were disqualified, be as valid as if every such person had been
duly appointed and qualified to be a Director or alternate Director as the case may be.
|
|
96
|
Any non-employee Director who expects to be unable to attend a Board of Director meeting because
of absence, illness or otherwise, may appoint any Person to be an alternate Director to act in his stead and such appointee whilst
he holds office as an alternate Director shall, in the event of absence therefrom of his appointor, be entitled to attend the Board
of Director meeting and to vote thereat and to do, in the place and stead of his appointor, any other act or thing that his appointor
is permitted or required to do by virtue of his being a Director as if the alternate Director were the appointor, other than appointment
of an alternate to himself, and he shall ipso facto vacate office if and when his appointor ceases to be a Director or removes
the appointee from office. A Director but not an alternate Director may be represented at any meetings of the Board of Directors
by a proxy appointed in writing by him. The proxy shall count towards the quorum and the vote of the proxy shall for all purposes
be deemed to be that of the appointing Director.
|
PRESUMPTION OF
ASSENT
|
97
|
A Director of the Company who is present at a meeting of the Board of Directors at which action
on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the chairman or secretary
of the meeting before the adjournment thereof or shall forward such dissent by registered post to such person immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.
|
DIRECTORS' INTERESTS
|
98
|
A Director may hold any other office or place of profit under the Company (other than the office
of Auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the
Directors may determine.
|
|
99
|
A Director may act by himself or his firm in a professional capacity for the Company and he or
his firm shall be entitled to remuneration for professional services as if he were not a Director or alternate Director.
|
|
100
|
A Director or alternate Director of the Company may be or become a director or other officer of
or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise,
and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received
by him as a director or officer of, or from his interest in, such other company.
|
|
101
|
No person shall be disqualified from the office of Director or alternate
Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any
such contract or any contract or transaction
entered into by or on behalf of the Company in which any Director or alternate
Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting
or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason
of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his
absence) shall be at liberty to vote in respect of any contract or transaction in which he is interested provided that the nature
of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him at or prior
to its consideration and any vote thereon.
|
|
102
|
A general notice that a Director or alternate Director is a shareholder, director, officer or employee
of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient
disclosure for the purposes of voting on a resolution in respect of a contract or transaction in which he has an interest, and
after such general notice it shall not be necessary to give special notice relating to any particular transaction.
|
MINUTES
|
103
|
The Directors shall cause minutes to be made in books kept for the purpose of all appointments
of officers made by the Directors, all proceedings at meetings of the Company or the holders of any class of Shares and of the
Directors, and of committees of Directors including the names of the Directors or alternate Directors present at each meeting.
|
DELEGATION OF
DIRECTORS' POWERS
|
104
|
The Directors may delegate any of their powers to any committee consisting of one or more Directors.
They may also delegate to any managing Director or any Director holding any other executive office such of their powers as they
consider desirable to be exercised by him provided that an alternate Director may not act as managing Director and the appointment
of a managing Director shall be revoked forthwith if he ceases to be a Director. Any such delegation may be made subject to any
conditions the Directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or
altered. Subject to any such conditions, the proceedings of a committee of Directors shall be governed by the Articles regulating
the proceedings of Directors, so far as they are capable of applying.
|
|
105
|
The Directors may establish any committees, local boards or agencies or appoint any person to be
a manager or agent for managing the affairs of the Company and may appoint any person to be a member of such committees or local
boards. Any such appointment may be made subject to any conditions the Directors may impose, and either collaterally with or to
the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of any such committee,
local board or agency shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of
applying.
|
|
106
|
The Directors may by power of attorney or otherwise appoint any person to be the agent of the Company
on such conditions as the Directors may determine, provided that the delegation is not to the exclusion of their own powers and
may be revoked by the Directors at any time.
|
|
107
|
The Directors may by power of attorney or otherwise appoint any company, firm, person or body of
persons, whether nominated directly or indirectly by the Directors, to be the attorney or authorised signatory of the Company for
such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under
these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney or other
appointment may contain such provisions for the protection and convenience of persons dealing with any such attorneys or authorised
signatories as the Directors may think fit and may also authorise any such attorney or authorised signatory to delegate all or
any of the powers, authorities and discretions vested in him.
|
|
108
|
The Directors may appoint such officers as they consider necessary on such terms, at such remuneration
and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors may think fit. Unless
otherwise specified in the terms of his appointment an officer may be removed by resolution of the Directors or Shareholders.
|
ALTERNATE DIRECTORS
|
109
|
Any Director (other than an alternate Director) may by writing appoint any other Director, or any
other person willing to act, to be an alternate Director and by writing may remove from office an alternate Director so appointed
by him.
|
|
110
|
An alternate Director shall be entitled to receive notice of all meetings of Directors and of all
meetings of committees of Directors of which his appointor is a Shareholder, to attend and vote at every such meeting at which
the Director appointing him is not personally present, and generally to perform all the functions of his appointor as a Director
in his absence.
|
|
111
|
An alternate Director shall cease to be an alternate Director if his appointor ceases to be a Director.
|
|
112
|
Any appointment or removal of an alternate Director shall be by notice to the Company signed by
the Director making or revoking the appointment or in any other manner approved by the Directors.
|
|
113
|
An alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible
for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him.
|
NO MINIMUM SHAREHOLDING
|
114
|
The Company in general meeting may fix a minimum shareholding required to be held by a Director,
but unless and until such a shareholding qualification is fixed a Director is not required to hold Shares.
|
REMUNERATION
OF DIRECTORS
|
115
|
The remuneration to be paid to the Directors, if any, shall be such
remuneration as the Directors shall determine. The Directors shall also be entitled to be paid all travelling, hotel and other
expenses properly incurred by them in connection with their attendance at meetings of Directors or committees of Directors, or
general meetings of the
Company, or separate meetings of the holders of any class of Shares or debentures of the Company,
or otherwise in connection with the business of the Company, or to receive a fixed allowance in respect thereof as may be determined
by the Directors, or a combination partly of one such method and partly the other.
|
|
116
|
The Directors may by resolution approve additional remuneration to any Director for any services
other than his ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company,
or otherwise serves it in a professional capacity shall be in addition to his remuneration as a Director.
|
SEAL
|
117
|
The Company may, if the Directors so determine, have a Seal. The Seal shall only be used by the
authority of the Directors or of a committee of the Directors authorised by the Directors. Every instrument to which the Seal has
been affixed shall be signed by at least one person who shall be either a Director or some officer or other person appointed by
the Directors for the purpose.
|
|
118
|
The Company may have for use in any place or places outside the Cayman Islands a duplicate Seal
or Seals each of which shall be a facsimile of the common Seal of the Company and, if the Directors so determine, with the addition
on its face of the name of every place where it is to be used.
|
|
119
|
A Director or officer, representative or attorney of the Company may without further authority
of the Directors affix the Seal over his signature alone to any document of the Company required to be authenticated by him under
seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever.
|
DIVIDENDS, DISTRIBUTIONS
AND RESERVE
|
120
|
Subject to the Statute and the other provisions in the Memorandum and Articles, the Directors may
declare dividends and distributions on Shares in issue and authorise payment of the dividends or distributions out of the funds
of the Company lawfully available therefor. No dividend or distribution shall be paid except out of the realised or unrealised
profits of the Company, or out of the share premium account or as otherwise permitted by the Statute.
|
|
121
|
The Directors may deduct from any dividend or distribution payable to any Shareholder all sums
of money (if any) then payable by him to the Company on account of calls or otherwise.
|
|
122
|
The Directors may declare that any dividend or distribution be paid wholly or partly by the distribution
of specific assets and in particular of shares, debentures, or securities of any other company or in any one or more of such ways
and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in
particular may issue fractional Shares and fix the value for distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any Shareholders upon the basis of the value so fixed in order to adjust the rights of all
Shareholders and may vest any such specific assets in trustees as may seem expedient to the Directors.
|
|
123
|
Any dividend, distribution, interest or other monies payable in cash in respect of Shares may be
paid by wire transfer to the holder or by cheque or warrant sent through the post directed to the registered address of the holder
or, in the case of joint holders, to the registered address of the holder who is first named on the register of members or to such
person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable
to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends,
bonuses, or other monies payable in respect of the Share held by them as joint holders.
|
|
124
|
No dividend or distribution shall bear interest against the Company.
|
|
125
|
Any dividend which cannot be paid to a Shareholder and/or which remains unclaimed after six months
from the date of declaration of such dividend may, in the discretion of the Directors, be paid into a separate account in the Company's
name, provided that the Company shall not be constituted as a trustee in respect of that account and the dividend shall remain
as a debt due to the Shareholder. Any dividend which remains unclaimed after a period of six years from the date of declaration
of such dividend shall be forfeited and shall revert to the Company.
|
CAPITALISATION
|
126
|
The Directors may capitalise any sum standing to the credit of any of the Company's reserve accounts
(including share premium account and capital redemption reserve fund) or any sum standing to the credit of profit and loss account
or otherwise available for distribution and to appropriate such sum to Shareholders in the proportions in which such sum would
have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their
behalf in paying up in full unissued Shares for allotment and distribution credited as fully paid-up to and amongst them in the
proportion aforesaid. In such event the Directors shall do all acts and things required to give effect to such capitalisation,
with full power to the Directors to make such provisions as they think fit for the case of Shares becoming distributable in fractions
(including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Shareholders concerned).
The Directors may authorise any person to enter on behalf of all of the Shareholders interested into an agreement with the Company
providing for such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective
and binding on all concerned.
|
BOOKS OF ACCOUNT
|
127
|
The Directors shall cause proper books of account to be kept with respect to all sums of money
received and expended by the Company and the matters in respect of which the receipt or expenditure takes place, all sales and
purchases of goods by the Company and the assets and liabilities of the Company. Such books of account must be retained for a minimum
period of five years from the date on which they are prepared. Proper books shall not be deemed to be kept if there are not kept
such books of account as are necessary to give a true and fair view of the state of the Company's affairs and to explain its transactions.
|
|
128
|
In addition to the Company's contractual rights, the Directors shall
from time to time determine whether and to what extent and at what times and places and under what
conditions or regulations
the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors and no
Shareholder (not being a Director) shall have any right of inspecting any account or book or document of the Company except as
conferred by Statute or authorised by the Directors or by the Company in general meeting.
|
|
129
|
The Directors may from time to time cause to be prepared and to be laid before the Company in general
meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required
by law.
|
AUDIT
|
130
|
The Directors may appoint an Auditor of the Company who shall hold office until removed from office
by a resolution of the Directors, and may fix his or their remuneration.
|
|
131
|
Every Auditor of the Company shall have a right of access at all times to the books and accounts
and vouchers of the Company and shall be entitled to require from the Directors and officers of the Company such information and
explanation as may be necessary for the performance of the duties of the Auditor.
|
|
132
|
Auditors shall, if so required by the Directors, make a report on the accounts of the Company during
their tenure of office at the next annual general meeting following their appointment in the case of a company which is registered
with the Registrar of Companies as an ordinary company, and at the next extraordinary general meeting following their appointment
in the case of a company which is registered with the Registrar of Companies as an exempted company, and at any other time during
their term of office, upon request of the Directors or any general meeting of the Shareholders.
|
NOTICES
|
133
|
Notices shall be in writing and may be given by the Company to any Shareholder either personally
or by sending it by courier, post, cable, telex, fax or e-mail to him or to his address as shown in the register of members (or
where the notice is given by e-mail by sending it to the e-mail address provided by such Shareholder). Any notice, if posted from
one country to another, is to be sent via FedEx or a similar internationally recognized carrier.
|
|
134
|
Where a notice is sent by courier, service of the notice shall be
deemed to be effected by delivery of the notice to a courier company, and shall be deemed to have been received on the third day
(not including Saturdays or Sundays or public holidays) following the day on which the notice was delivered to the courier. Where
a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre paying and posting a
letter containing the notice, and shall be deemed to have been received on the fifth (5th) day (not including Saturdays or Sundays
or public holidays) following the day on which the notice was posted. Where a notice is sent by cable, telex or fax, service of
the notice shall be deemed to be effected by properly addressing and sending such notice and shall be deemed to have been received
on the same day that it was transmitted. Where a notice is given by e-mail service shall be deemed to be effected by transmitting
the e-mail to the e-mail address provided by the intended recipient and
shall be deemed to have been received on the same
day that it was sent, and it shall not be necessary for the receipt of the e-mail to be acknowledged by the recipient.
|
|
135
|
A notice may be given by the Company to the person or persons which the Company has been advised
are entitled to a Share or Shares in consequence of the death or bankruptcy of a Shareholder in the same manner as other notices
which are required to be given under these Articles and shall be addressed to them by name, or by the title of representatives
of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the persons
claiming to be so entitled, or at the option of the Company by giving the notice in any manner in which the same might have been
given if the death or bankruptcy had not occurred.
|
|
136
|
Notice of every general meeting shall be given in any manner hereinbefore authorised to every person
shown as a Shareholder in the register of members on the record date for such meeting except that in the case of joint holders
the notice shall be sufficient if given to the joint holder first named in the register of members and every person upon whom the
ownership of a Share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a Shareholder
of record where the Shareholder of record but for his death or bankruptcy would be entitled to receive notice of the meeting, and
no other person shall be entitled to receive notices of general meetings.
|
INDEMNITY
|
137
|
Every Director, agent or officer of the Company shall be indemnified to the fullest extent permissible
under the law against any liability incurred by him as a result of any act or failure to act in carrying out his functions other
than such liability (if any) that he may incur by his own actual fraud or wilful default. No such Director, agent or officer shall
be liable to the Company for any loss or damage in carrying out his functions unless that liability arises through the actual fraud
or wilful default of such Director, agent or officer. References in this Article to actual fraud or wilful default mean a finding
to such effect by a competent court in relation to the conduct of the relevant party.
|
FINANCIAL YEAR
|
138
|
Unless the Directors otherwise prescribe, the financial year of the Company shall end on 31st December
in each year and, following the year of incorporation, shall begin on 1st January in each year.
|
TRANSFER BY WAY
OF CONTINUATION
|
139
|
If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the
Statute and the Memorandum and with the approval of a Special Resolution, have the power to register by way of continuation as
a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
|
SCHEDULE A
Rights, Preferences and Privileges of the Preferred
Shares
The rights, preferences
and privileges granted to and imposed on the Preferred Shares are as set forth in this
Schedule A
. This
Schedule A
is
an attachment to the main body of the Memorandum and Articles and form a part of the Memorandum and Articles. All provisions set
out in the main body of the Memorandum and Articles shall be read in conjunction with and shall be subject to the terms set out
in this
Schedule A
. In the event of any difference between the provisions set out in the main body of the Memorandum and
Articles and the provisions set out in this
Schedule A
, the provisions set out in this
Schedule A
shall prevail.
All references
in this
Schedule A
to designated "Sections" and other subdivisions are to the designated Sections and other subdivisions
of this
Schedule A
unless explicitly stated otherwise.
In a Liquidation Event, all assets
and funds of the Company legally available for distribution to the Shareholders shall, by reason of the Shareholders' ownership
of the Shares, be distributed as follows:
|
(a)
|
FIRST, prior and in preference to any distribution of any of the assets of the Company to the Ordinary
Shareholders, the Series A Preferred Shareholders, the Series A+ Preferred Shareholders, the Series B Preferred Shareholders, each
Series C Preferred Shareholder shall be entitled to receive for each outstanding Series C Preferred Share held, an amount (the
"
Series C Preference Amount
") equal to the greater of: (i) 100% of the Series C Issue Price, together with an
annual simple return at a rate of fifteen percent (15%) accrued since the applicable Series C Issue Date until the occurrence of
the Liquidation Event, plus all declared but unpaid dividends on each Series C Preferred Share, (ii) 150% of the Series C Issue
Price, or (iii) a quotient obtained by dividing the net assets of the Group Companies (as indicated in the audited financial statements
of the Group Companies prior to such Liquidation Event) by the total outstanding Share of the Company calculated on a converted
basis; provided that, if the Company's assets and funds are insufficient for the full payment of the Series C Preference Amount
to all the Series C Preferred Shareholders, then the entire assets and funds of the Company legally available for distribution
shall be distributed ratably among the Series C Preferred Shareholders in proportion to the aggregate Series C Preference Amount
each such Series C Preferred Shareholder is otherwise entitled to receive pursuant to this
Section 2.1(a)
;
|
|
(b)
|
SECOND, after distribution or payment in full of the Series C Preference
Amount pursuant to
Section 2.1(a)
, and prior and in preference to any distribution of any of the assets of the Company to
the Ordinary Shareholders or the Series A Preferred Shareholders, each Series A+ Preferred Shareholder and each Series B Preferred
Shareholder shall be entitled to receive, on a
pari passu
basis, for each outstanding Series A+ Preferred Share or
Series B Preferred Share held, an amount (the “
Junior Preference Amount
”) equal to (i) with respect to each
Series A+ Preferred Share, 100% of the Series A+ Issue Price, plus all accrued but unpaid dividends on each Series A+ Preferred
Share, or (ii) with respect to each Series B Preferred Share, 100% of the Series B Issue Price, plus all accrued but unpaid dividends
on each Series B Preferred Share; provided that, if the Company's remaining assets and funds are insufficient for the full payment
of the Junior Preference Amount to all the Series A+ Preferred Shareholders and the Series B Preferred Shareholders, then the remaining
assets and funds of the Company legally available for distribution shall be distributed ratably among the Series A+ Preferred Shareholders
and the Series B Preferred Shareholders in proportion to the aggregate Junior Preference Amount each such Series A+ Preferred Shareholder
or such Series B Preferred Shareholder is otherwise entitled to receive pursuant to this
Section 2.1(b)
;
|
|
(c)
|
THIRD, after distribution or payment in full of the Series C Preference Amount pursuant to
Section
2.1(a)
and the Junior Preference Amount pursuant to
Section 2.1(b)
, the remaining assets and funds of the Company legally
available for distribution to the Shareholders shall be distributed ratably among all Shareholders (on an as-converted basis) in
proportion to the number of Shares held by them.
|
Each holder of the Preferred Shares
shall have the following rights described below with respect to the conversion of its Preferred Shares into Ordinary Shares. Each
Preferred Share may, at the option of the holder thereof, be converted at any time after the date of issuance of such Preferred
Share into fully paid and non-assessable Ordinary Shares based on the then-effective Conversion Price (as defined below). For purpose
of this
Section 4
, the term “Preferred Shares” shall include the Series A Preferred Shares.
|
4.1
|
Conversion Price; Conversion Ratio
|
The number of
Ordinary Shares that each Series C Preferred Share is convertible into shall be the quotient of the Series C Issue Price divided
by the then-effective conversion price of the Series C Preferred Shares ("
Series C Conversion Price
"). The Series
C Conversion Price shall initially be the Series C Issue Price, resulting in an initial conversion ratio for Series C Preferred
Shares to Ordinary Shares of 1:1, and shall be adjusted from time to time as provided in
Section 4.3
.
The number of
Ordinary Shares that each Series B Preferred Share is convertible into shall be the quotient of the Series B Issue Price divided
by the then-effective conversion price of the Series B Preferred Shares ("
Series B Conversion Price
"). The Series
B Conversion Price shall initially be the Series B Issue Price, resulting in an initial conversion ratio for Series B Preferred
Shares to Ordinary Shares of 1:1, and shall be adjusted from time to time as provided in
Section 4.3(a)
.
The number of Ordinary Shares that
each Series A+ Preferred Share is convertible into shall be the quotient of the Series A+ Issue Price divided by the then-effective
conversion price of the Series A+ Preferred Shares ("
Series A+ Conversion Price
"). The Series A+ Conversion Price
shall initially be the Series A+ Issue Price, resulting in an initial conversion ratio for Series A+ Preferred Shares to Ordinary
Shares of 1:1, and shall be adjusted from time to time as provided in
Section 4.3(a)
.
The number of
Ordinary Shares that each Series A Preferred Share is convertible into shall be the quotient of the Series A Issue Price divided
by the then-effective conversion price of the Series A Preferred Shares ("
Series A Conversion Price
", together
with the Series C Conversion Price, the Series B Conversion Price, the Series A+ Conversion Price, the “
Conversion Price
”).
The Series A Conversion Price shall initially be the Series A Issue Price, resulting in an initial conversion ratio for Series
A Preferred Shares to Ordinary Shares of 1:1, and shall be adjusted from time to time as provided in
Section 4.3(a)
.
Each Preferred Share shall automatically be converted
into Ordinary Share based on the then-effective Conversion Price applicable to such Preferred Share:
|
(i)
|
(A) upon the approval of the Series C Preferred Majority with respect to the conversion of the
Series C Preferred Shares, (B) upon the approval of the Series B Preferred Majority with respect to the conversion of the Series
B Preferred Shares, (C) upon the approval of the Series A+ Preferred Majority with respect to the conversion of the Series A+ Preferred
Shares, or (D) upon the approval of the Series A Preferred Majority with respect to the conversion of the Series A Preferred Shares.
|
|
(ii)
|
upon the closing of an initial public offering, with respect to the conversion of all Preferred Shares.
|
|
4.3
|
Conversion Price Adjustments
|
The Conversion Price shall be subject to adjustment from
time to time as follows:
|
(a)
|
Proportional Adjustment
|
If at any time the number of outstanding
Ordinary Shares proportionately changes as a result of share split, share division, share combination, share dividend, reorganization,
mergers, consolidations, reclassifications, exchanges, substitutions, recapitalization or similar events, then the Conversion Price
shall be proportionately adjusted.
|
(i)
|
Anti-dilution Adjustment
. If at any time, the Company shall issue or sell New Shares for
a per-share consideration less than the then-effective Series C Conversion Price of any Series C Preferred Share, then the Conversion
Price in respect of such Series C Preferred Share shall be reduced, as of the date of such issue or sale, to a per share issue
price of such New Shares.
|
|
(ii)
|
Deemed Issuances of Ordinary Shares
. In the case of the issuance of an Option, the following
provisions shall apply for all purposes of this
Section 4.3(b)
:
|
|
(1)
|
The aggregate maximum number of Ordinary Shares deliverable upon exercise of Option shall be deemed
to have been issued at the time such Option were issued, and for a consideration equal to the consideration, if any, received by
the Company upon the issuance of such Option, plus the minimum exercise price provided in such Option for the Ordinary Shares covered
thereby.
|
|
(2)
|
In the event of any change in the number of Ordinary Shares deliverable, or in the consideration
payable to the Company upon exercise of such Option, including, but not limited to, a change resulting from the anti-dilution provisions
thereof, the Conversion Price, to the extent in any way affected by or computed using such Option, shall be recomputed to reflect
such change, but no further adjustment shall be made for the actual issuance of Ordinary Shares or any payment of such consideration
upon the exercise of any such Option.
|
|
(3)
|
Upon the expiration or termination of any such Option, the Conversion Price of the Preferred Shares
shall, to the extent in any way affected by or computed using such Option, be recomputed to reflect the issuance of only the number
of Ordinary Shares actually issued upon the exercise of such Option.
|
|
(iii)
|
Determination of Consideration
. In the case of the issuance of Ordinary Shares for cash,
the consideration shall be deemed to be the amount of cash received by the Company. In the case of the issuance of the Ordinary
Shares for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair
market value thereof, as determined by the Board of Directors irrespective of any accounting treatment.
|
|
4.4
|
Procedure of Conversion
|
|
(a)
|
Mechanics of Conversion
.
|
|
(i)
|
The Company may effect the conversion of Preferred Shares in any manner available under applicable
law, including redeeming or repurchasing the relevant Preferred Shares and applying the proceeds thereof towards payment for the
new Ordinary Shares. Upon the conversion of the Preferred Shares, the Company shall issue such number of the Ordinary Shares converted
from such Preferred Shares to the Preferred Shareholders holding such Preferred Shares, and cancel the Preferred Shares so converted.
The Company shall promptly update its register of members to reflect the issuance of such Ordinary Shares and the cancellation
of such Preferred Shares.
|
|
(ii)
|
The conversion shall be deemed to have been made at the close of business on the date of the surrender
of the certificates representing the shares of the Preferred Shares to be converted, and the person entitled to receive the Ordinary
Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Ordinary Shares on such date.
All Ordinary Shares issuable upon conversion of the Preferred Shares will upon issuance be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any pre-emptive rights. Upon any such conversion of any Preferred
Shares, such Preferred Shares shall no longer be deemed to be outstanding and all rights of the Preferred Shareholders holding
such Preferred Shares with respect to such Preferred Shares so converted shall immediately terminate upon the issuance of the Ordinary
Shares, except the right to receive the Ordinary Shares or other securities, cash or other assets as herein provided.
|
No fractional Ordinary Shares shall
be issued upon conversion of any Preferred Shares. In lieu of any fractional shares to which relevant Preferred Shareholder would
otherwise be entitled, the Company shall at the discretion of the Board of Directors either (A) pay cash equal to such fraction
multiplied by the fair market value for the applicable Preferred Share as determined and approved by the Board of Directors, or
(B) issue one whole Ordinary Share for each fractional share to which such Preferred Shareholder would otherwise be entitled.
|
(c)
|
Adjustment Certificate
.
|
Upon the occurrence of each
adjustment of the Conversion Price pursuant to this
Section 4
, the Company shall, at its expense, promptly compute
such adjustment or readjustment in accordance with the terms hereof and notify each holder of the applicable Preferred Shares
of such adjustment and the facts upon which such adjustment is based. The Company shall, upon the written request at any time
of any holder of the Preferred Shares, furnish or cause to be furnished to such holder an adjustment certificate setting
forth (A) such adjustment (B) the Conversion Price for the Preferred Shares, as applicable, at the time in effect, and (C)
the number of Ordinary Shares that each Preferred Share could then be converted into.
The Shareholders shall procure that
the Company shall not impair the conversion rights of the Preferred Shares, and shall at all times in good faith assist in the
carrying out of all the provisions of this
Section 4.5
and in the taking of all such actions as may be necessary or appropriate
in order to protect the conversion rights of the holder of Preferred Shares (including without limitation, reservation of sufficient
authorized by unissued Ordinary Shares for issuance upon the conversion of the Preferred Shares).
The Ordinary Shareholders shall
have the right to one (1) vote for each outstanding Ordinary Share held. The Series A Preferred Shareholders shall have the right
to one (1) vote for each Ordinary Share into which each outstanding Series A Preferred Share held could then be converted. The
Preferred Shareholders shall have the right to one (1) vote for each Ordinary Share into which each outstanding Preferred Share
held could then be converted. Subject to provisions to the contrary elsewhere in the Memorandum and Articles, or as required by
applicable laws, the Series A Preferred Shareholders and the Preferred Shareholders shall vote together with the Ordinary Shareholders,
and not as a separate class or series, on all matters put before the Shareholders.
The Board of Directors shall
consist of seven (7) Directors. Subject to the applicable U.S. securities laws and regulations, the Board of Directors shall
be constituted as follows:
|
(a)
|
Handing shall be entitled to appoint and remove two (2) directors of the Board (the “
Investor Directors
”
and each an “
Investor Director
”); and
|
|
(b)
|
The Founder Parties shall be entitled to appoint and remove five (5) directors of the Board.
|
Any Shareholder or group
of Shareholders entitled to designate any individual to be elected as a Director of the Board of Directors pursuant to this
Section
5.2
shall have the right to remove any such Director occupying such position and to fill any vacancy caused by the
death, disability, retirement, resignation or removal of any Director occupying such position. If a vacancy is created on the
Board of Directors at any time by the death, disability, retirement, resignation or removal of any Director designated
pursuant to this
Section 5.2
, the replacement to fill such vacancy shall be designated in the same manner as the
Director who is being replaced in accordance with this
Section 5.2.
For the avoidance of doubt, each director so
appointed pursuant to
Section 5.2
shall possess the necessary qualifications as required under the applicable U.S.
securities laws and regulations.
A quorum for a meeting of the Board
of Directors shall consist of a majority of all Directors. If a quorum is not present within half an hour from the time appointed
for the Board meeting or if during such a meeting a quorum ceases to be present, then such meeting shall be adjourned for no more
than fifteen (15) Business Days at the same place or such other time and place the Directors then present may determine,
provided
that, in each case, a notice of the adjourned meeting of the Board of Directors shall be sent to each Director at least three
(3) Business Days before the adjourned meeting of the Board of Directors. The number of the Directors attending such adjourned
meeting of the Board of Directors shall constitute a quorum at such adjourned meeting of the Board of Directors,
provided
that
matters discussed in such adjourned meeting shall be limited to those stated in the written notices and agendas of such meeting.
Each Director shall be entitled to appoint alternates to serve at any meeting of the Board of Directors (or the meeting of a committee
formed by the Board of Directors), and such alternates shall be permitted to attend all meetings of the Board of Directors and
vote on such Director's behalf.
|
5.3
|
Protective Provisions
.
|
For so long
as any Preferred Share remains outstanding, the Company shall not, and the Company shall cause other Group Companies not to, directly
or indirectly, and whether by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, take any of
the actions listed in this
Section 5.3
without the prior written consent of the Super Majority Holders. Notwithstanding
anything to the contrary contained herein, where any act listed below requires the approval of the Shareholders in accordance with
the Statute, and if the Shareholders vote in favour of such act but the approval of the Super Majority Holders has not yet been
obtained, the Shareholders who vote against such act at a meeting of the Shareholders in aggregate shall have the voting rights
equal to the aggregate voting power of all the Shareholders who voted in favor of such act plus one (1).
|
(a)
|
the liquidation, dissolution or winding up of any Group Company;
|
|
(b)
|
authorizing or consummating a Trade Sale;
|
|
(c)
|
any change to the Investor Directors; and
|
|
(d)
|
any agreement or commitment by any Group Company to do any of the foregoing items.
|
[End of Schedule A]
Exhibit 3.2
THE COMPANIES LAW
EXEMPTED COMPANY LIMITED BY SHARES
AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION
OF
Weidai Ltd
Adopted by special resolution of the shareholders
passed on August 7, 2018 and effective immediately prior to the closing of the Company’s initial public offering
|
1.
|
The name of the Company is
Weidai Ltd
.
|
|
2.
|
The Registered Office of the Company shall be at the offices of Conyers
Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. 2681, Grand Cayman KY1-1111, Cayman Islands.
|
|
3.
|
Subject to the following provisions of this Memorandum, the objects for
which the Company is established are unrestricted.
|
|
4.
|
Subject to the following provisions of this Memorandum, the Company shall
have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate
benefit, as provided by Section 27(2) of the Companies Law.
|
|
5.
|
Nothing in this Memorandum shall permit the Company to carry on a business
for which a licence is required under the laws of the Cayman Islands unless duly licensed.
|
|
6.
|
The Company shall not trade in the Cayman Islands with any person, firm
or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing
in this clause shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising
in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.
|
|
7.
|
The liability of each member is limited to the amount from time to time
unpaid on such member's shares.
|
|
8.
|
The share capital of the Company is US$50,000 divided into 500,000,000 shares
of a par value of US$0.0001 each, of which (a) [400,000,000] shall be designated as Class A ordinary shares, (b) [90,000,000] shall
be designated as Class B ordinary shares and (c) [10,000,000] shall be designated as preferred shares.
|
|
9.
|
The Company may exercise the power contained in the Companies Law to deregister
in the Cayman Islands and be registered by way of continuation in another jurisdiction.
|
|
10.
|
Capitalised terms that are not defined in this Memorandum bear the same
meanings as those given in the Articles of Association of the Company.
|
The Companies Law (Revised)
Company Limited by Shares
SECOND AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
Weidai Ltd.
(Adopted by way of a special
resolution passed on August 7, 2018 and effective immediately prior to the closing of the Company's initial public offering of
Class A Ordinary Shares represented by American Depositary Shares on the Designated Stock Exchange)
INDEX
SUBJECT
|
|
Article No.
|
Table A
|
|
1
|
Interpretation
|
|
2
|
Share Capital
|
|
3
|
Alteration Of Capital
|
|
4-7
|
Share Rights
|
|
8-9
|
Variation Of Rights
|
|
10-11
|
Shares
|
|
12-15
|
Share Certificates
|
|
16-21
|
Lien
|
|
22-24
|
Calls On Shares
|
|
25-33
|
Forfeiture Of Shares
|
|
34-42
|
Register Of Members
|
|
43-44
|
Record Dates
|
|
45
|
Transfer Of Shares
|
|
46-51
|
Transmission Of Shares
|
|
52-54
|
Untraceable Members
|
|
55
|
General Meetings
|
|
56-58
|
Notice Of General Meetings
|
|
59-60
|
Proceedings At General Meetings
|
|
61-64
|
No Action by Written Resolutions
|
|
65
|
Voting
|
|
66-77
|
Proxies
|
|
78-83
|
Corporations Acting By Representatives
|
|
84
|
Board Of Directors
|
|
85
|
Disqualification Of Directors
|
|
86
|
Executive Directors
|
|
87-88
|
Alternate Directors
|
|
89-92
|
Directors’ Fees And Expenses
|
|
93-96
|
Directors’ Interests
|
|
97-100
|
General Powers Of The Directors
|
|
101-106
|
Borrowing Powers
|
|
107-110
|
Proceedings Of The Directors
|
|
111-120
|
Audit Committee
|
|
121-123
|
Officers
|
|
124-127
|
Register of Directors and Officers
|
|
128
|
Minutes
|
|
129
|
Seal
|
|
130
|
Authentication Of Documents
|
|
131
|
Destruction Of Documents
|
|
132
|
Dividends And Other Payments
|
|
133-142
|
Reserves
|
|
143
|
Capitalisation
|
|
144-145
|
Subscription Rights Reserve
|
|
146
|
Accounting Records
|
|
147-151
|
Audit
|
|
152-15
|
Notices
|
|
158-160
|
Signatures
|
|
161
|
Winding Up
|
|
162-163
|
Indemnity
|
|
164
|
Amendment To Memorandum and Articles of Association And Name of Company
|
|
165
|
Information
|
|
166
|
INTERPRETATION
TABLE A
1. The
regulations in Table A in the Schedule to the Companies Law (Revised) do not apply to the Company.
INTERPRETATION
|
2.
|
(1)
In these Articles, unless the context otherwise requires, the words standing in the first column of the following table shall
bear the meaning set opposite them respectively in the second column.
|
WORD
|
|
MEANING
|
|
|
|
"Affiliate"
|
|
with respect to any person, means another person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person. With respect to a natural person, “Affiliate” shall also mean such person’s spouse, parents, children and siblings, whether by blood, marriage or adoption or anyone residing in such person’s home.
|
|
|
|
"Audit Committee"
|
|
the audit committee of the Company formed by the Board pursuant to Article 121 hereof, or any successor audit committee.
|
|
|
|
“Auditor”
|
|
the independent auditor of the Company which shall be an internationally recognized firm of independent accountants.
|
|
|
|
“Articles”
|
|
these Articles in their present form or as supplemented or amended or substituted from time to time.
|
|
|
|
“Board” or “Directors”
|
|
the board of directors of the Company or the directors present at a meeting of directors of the Company at which a quorum is present.
|
|
|
|
“capital”
|
|
the share capital from time to time of the Company.
|
|
|
|
“Class A Ordinary Shares”
|
|
class A ordinary shares of par value US$0.0001 each of the Company having the rights set out in these Articles.
|
|
|
|
“Class B Ordinary Shares”
|
|
class B ordinary shares of par value US$0.0001 each of the Company having the rights set out in these Articles.
|
|
|
|
“clear days”
|
|
in relation to the period of a notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect.
|
|
|
|
“clearing house”
|
|
a clearing house recognised by the laws of the jurisdiction in which the shares of the Company (or depositary receipts therefor) are listed or quoted on a stock exchange or interdealer quotation system in such jurisdiction.
|
“Company”
|
|
Weidai Ltd.
|
|
|
|
“competent regulatory authority”
|
|
a competent regulatory authority in the territory where the shares of the Company (or depositary receipts therefor) are listed or quoted on a stock exchange or interdealer quotation system in such territory.
|
|
|
|
“Conversion Date”
|
|
in respect of a Conversion Notice means the day on which that Conversion Notice is delivered.
|
|
|
|
“Conversion Notice”
|
|
a written notice delivered to the Company at its Office (and as otherwise stated therein) stating that a holder of Class B Ordinary Shares elects to convert the number of Class B Ordinary Shares specified therein pursuant to Article 9.
|
|
|
|
“Conversion Number”
|
|
in relation to any Class B Ordinary Shares, such number of Class A Ordinary Shares as may, upon exercise of the Conversion Right, be issued at the Conversion Rate.
|
|
|
|
“Conversion Rate”
|
|
means, at any time, on a 1 : 1 basis.
|
|
|
|
“Conversion Right”
|
|
in respect of a Class B Ordinary Share means the right of its holder, subject to the provisions of these Articles and to any applicable fiscal or other laws or regulations including the Law, to convert all or any of its Class B Ordinary Shares, into the Conversion Number of Class A Ordinary Shares in its discretion.
|
|
|
|
“debenture” and “debenture holder”
|
|
include debenture stock and debenture stockholder respectively.
|
|
|
|
“Designated Stock
Exchange”
|
|
New York Stock Exchange
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“dollars” and “$”
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dollars, the legal currency of the United States of America.
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“Exchange Act”
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the Securities Exchange Act of 1934, as amended.
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“head office”
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such office of the Company as the Directors may from time to time determine to be the principal office of the Company.
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“Law”
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The Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.
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“Member”
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a duly registered holder from time to time of the shares in the capital of the Company.
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“month”
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a calendar month.
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“Nominee Holder”
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any trustee, custodian, bailee, securities intermediary, clearing system, agent or nominee (or other person acting in substantially similar capacity) which holds the legal title to any Class B Ordinary Shares, directly or indirectly, for the benefit of the beneficial owner of such Class B Ordinary Shares, provided (and for so long as) such beneficial owner retains (directly or indirectly) beneficial ownership of such Class B Ordinary Shares.
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“Notice”
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written notice unless otherwise specifically stated and as further defined in these Articles.
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“Office”
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the registered office of the Company for the time being.
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“ordinary resolution”
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a resolution shall be an ordinary resolution when it has been (a) passed by a simple majority of votes cast by such Members as, being entitled so to do, vote in person or, in the case of any Member being a corporation, by its duly authorised representative or, where proxies are allowed, by proxy at a general meeting of which not less than ten (10) clear days’ Notice has been duly given; or (b) approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments if more than one, is executed;
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“Ordinary Shares”
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Class A Ordinary Shares and Class B Ordinary Shares collectively.
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“paid up”
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paid up or credited as paid up.
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“Register”
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the principal register and where applicable, any branch register of Members of the Company to be maintained at such place within or outside the Cayman Islands as the Board shall determine from time to time.
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“Registration Office”
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in respect of any class of share capital such place as the Board may from time to time determine to keep a branch register of Members in respect of that class of share capital and where (except in cases where the Board otherwise directs) the transfers or other documents of title for such class of share capital are to be lodged for registration and are to be registered.
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“SEC”
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the United States Securities and Exchange Commission.
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“Seal”
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common seal or any one or more duplicate seals of the Company (including a securities seal) for use in the Cayman Islands or in any place outside the Cayman Islands.
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“Secretary”
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any person, firm or corporation appointed by the Board to perform any of the duties of secretary of the Company and includes any assistant, deputy, temporary or acting secretary.
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“special resolution”
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a resolution shall be a special resolution when it has been (a) passed by a majority of not less than two-thirds of votes cast by such Members as, being entitled so to do, vote in person or, in the case of such Members as are corporations, by their respective duly authorised representative or, where proxies are allowed, by proxy at a general meeting of which not less than ten (10) clear days’ Notice, specifying (without prejudice to the power contained in these Articles to amend the same) the intention to propose the resolution as a special resolution, has been duly given,
provided
that, except in the case of an annual general meeting, if it is so agreed by a majority in number of the Members having the right to attend and vote at any such meeting, being a majority together holding not less than ninety-five (95) per cent. in nominal value of the shares giving that right and in the case of an annual general meeting, if it is so agreed by all Members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than ten (10) clear days’ Notice has been given;
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a special resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required under any provision of these Articles or the Statutes.
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“Statutes”
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the Law and every other law of the Legislature of the Cayman Islands for the time being in force applying to or affecting the Company, its Memorandum of Association and/or these Articles.
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“year”
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a calendar year.
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(2) In
these Articles, unless there be something within the subject or context inconsistent with such construction:
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(a)
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words importing the singular include the plural and vice versa;
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(b)
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words importing a gender include both gender and the neuter;
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(c)
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words importing persons include companies, associations and bodies of persons whether corporate
or not;
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(i)
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“may” shall be construed as permissive;
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(ii)
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“shall” or “will” shall be construed as imperative;
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(e)
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expressions referring to writing shall, unless the contrary intention appears, be construed as
including printing, lithography, photography and other modes of representing words or figures in a visible form, and including
where the representation takes the form of electronic display,
provided
that both the mode of service of the relevant document
or notice and the Member’s election comply with all applicable Statutes, rules and regulations;
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(f)
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references to any law, ordinance, statute or statutory provision shall be interpreted as relating
to any statutory modification or re-enactment thereof for the time being in force;
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(g)
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save as aforesaid words and expressions defined in the Statutes shall bear the same meanings in
these Articles if not inconsistent with the subject in the context;
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(h)
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references to a document being executed include references to it being executed under hand or under
seal or by electronic signature or by any other method and references to a notice or document include a notice or document recorded
or stored in any digital, electronic, electrical, magnetic or other retrievable form or medium and information in visible form
whether having physical substance or not;
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(i)
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Section 8 of the Electronic Transactions Law (2003) of the Cayman Islands, as amended from time
to time, shall not apply to these Articles to the extent it imposes obligations or requirements in addition to those set out in
these Articles.
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SHARE CAPITAL
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3.
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(1) The
share capital of the Company at the date on which these Articles come into effect shall be US$50,000 divided into 500,000,000
shares of a par value of US$0.0001 each comprising (a) [400,000,000] Class A Ordinary Shares of a par value of $0.0001 each, (b)
[90,000,000] Class B Ordinary Shares of a par value of US$0.0001 each, and (c) [10,000,000] preferred shares of a par value of
US$0.0001 each of such class or classes (however designated) as the Board may determine in accordance with Article 12.
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(2) Subject
to the Law, the Company’s Memorandum and Articles of Association and, where applicable, the rules of the Designated Stock
Exchange and/or any competent regulatory authority, any power of the Company to purchase or otherwise acquire its own shares shall
be exercisable by the Board in such manner, upon such terms and subject to such conditions as it thinks fit.
(3) No
share shall be issued to bearer.
ALTERATION OF CAPITAL
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4.
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(1) The
Company may from time to time by ordinary resolution in accordance with the Law alter the conditions of its Memorandum of Association
to:
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(a)
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increase its capital by such sum, to be divided into shares of such amounts, as the resolution
shall prescribe;
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(b)
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consolidate and divide all or any of its capital into shares of larger amount than its existing
shares;
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(c)
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without prejudice to the powers of the Board under Article 12, divide its shares into several classes
and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively
any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions which in the absence of any
such determination by the Company in general meeting, as the Board may determine
provided
always that, for the avoidance
of doubt, where a class of shares has been authorized by the Members no resolution of the Members in general meeting is required
for the issuance of shares of that class and the Board may issue shares of that class and determine such rights, privileges, conditions
or restrictions attaching thereto as aforesaid, and further
provided
that where the Company issues shares which do not carry
voting rights, the words “non-voting” shall appear in the designation of such shares and where the equity capital includes
shares with different voting rights, the designation of each class of shares, other than those with the most favourable voting
rights, must include the words “restricted voting” or “limited voting”;
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(d)
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sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum
of Association (subject, nevertheless, to the Law), and may by such resolution determine that, as between the holders of the shares
resulting from such sub-division, one or more of the shares may have any such preferred, deferred or other rights or be subject
to any such restrictions as compared with the other or others as the Company has power to attach to unissued or new shares;
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(e)
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cancel any shares which, at the date of the passing of the resolution, have not been taken, or
agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled or, in the case
of shares, without par value, diminish the number of shares into which its capital is divided.
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(2) No
alteration may be made of the kind contemplated by Article 4(1), or otherwise, to the par value of the Class A Ordinary Shares
or the Class B Ordinary Shares unless an identical alteration is made to the par value of the Class B Ordinary Shares or the Class
A Ordinary Shares, as the case may be.
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5.
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The Board may settle as it considers expedient any difficulty which arises in relation to any consolidation
and division under Article 4 and in particular but without prejudice to the generality of the foregoing may issue certificates
in respect of fractions of shares or arrange for the sale of the shares representing fractions and the distribution of the net
proceeds of sale (after deduction of the expenses of such sale) in due proportion amongst the Members who would have been entitled
to the fractions, and for this purpose the Board may authorise some persons to transfer the shares representing fractions to their
purchaser or resolve that such net proceeds be paid to the Company for the Company’s benefit. Such purchaser will not be
bound to see to the application of the purchase money nor will his title to the shares be affected by any irregularity or invalidity
in the proceedings relating to the sale.
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6.
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The Company may from time to time by special resolution, subject to any confirmation or consent
required by the Law, reduce its share capital or any capital redemption reserve in any manner permitted by the Law.
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7.
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Except so far as otherwise provided by the conditions of issue, or by these Articles, any capital
raised by the creation of new shares shall be treated as if it formed part of the original capital of the Company, and such shares
shall be subject to the provisions contained in these Articles with reference to the payment of calls and instalments, transfer
and transmission, forfeiture, lien, cancellation, surrender, voting and otherwise.
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SHARE RIGHTS
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8.
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(1) Subject
to the provisions of the Law, the rules of the Designated Stock Exchange and the Memorandum and Articles of Association and to
any special rights conferred on the holders of any shares or class of shares, and without prejudice to Article 12 hereof, any
share in the Company (whether forming part of the present capital or not) may be issued with or have attached thereto such rights
or restrictions whether in regard to dividend, voting, return of capital or otherwise as the Board may determine, including without
limitation on terms that they may be, or at the option of the Company or the holder are, liable to be redeemed on such terms and
in such manner, including out of capital, as the Board may deem fit.
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(2) Subject
to the Law and the rules of the Designated Stock Exchange, any preferred shares may be issued or converted into shares that, at
a designated date or at the option of the Company or the holder if so authorised by its Memorandum of Association, are liable to
be redeemed on such terms and in such manner as the Members before the issue or conversion may by ordinary resolution of the Members
determine. Where the Company purchases for redemption a redeemable share, purchases not made through the market or by tender shall
be limited to a maximum price as may from time to time be determined by the Board, either generally or with regard to specific
purchases. If purchases are by tender, tenders shall comply with applicable laws and the rules of the Designated Stock Exchange.
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9.
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Subject to Article 8(1), the Memorandum of Association and any resolution of the Members to the
contrary and without prejudice to any special rights conferred thereby on the holders of any other shares or class of shares, the
share capital of the Company shall be divided into shares of two classes, Class A Ordinary Shares and Class B Ordinary Shares immediately
upon the effectiveness of these Articles. Class A Ordinary Shares and Class B Ordinary Shares shall carry equal rights and rank
pari passu with one another other than as set out below.
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(a)
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As regards conversion
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(i)
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Subject to the provisions hereof and to compliance with all fiscal and other laws and regulations
applicable thereto, including the Law, a holder of Class B Ordinary Shares shall have the Conversion Right in respect of each Class
B Ordinary Share. For the avoidance of doubt, a holder of Class A Ordinary Shares shall have no rights to convert Class A Ordinary
Shares into Class B Ordinary Shares under any circumstances.
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(ii)
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Each Class B Ordinary Share shall be converted at the option of the holder, at any time after issue
and without the payment of any additional sum, into one fully paid Class A Ordinary Share calculated at the Conversion Rate. Such
conversion shall take effect on the Conversion Date. A Conversion Notice shall not be effective if it is not accompanied by the
share certificates in respect of the relevant Class B Ordinary Shares and such other evidence (if any) as the Directors may reasonably
require to prove the title of the person exercising such right (or, if such certificates have been lost or destroyed, such evidence
of title and such indemnity as the Directors may reasonably require). Any and all taxes and stamp, issue and registration duties
(if any) arising on conversion shall be borne by the holder of Class B Ordinary Shares requesting conversion.
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(iii)
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On the Conversion Date, every Class B Ordinary Share to be converted shall automatically be re-designated
and re-classified as a Class A Ordinary Share with such rights and restrictions attached thereto and shall rank pari passu in all
respects with the Class A Ordinary Shares then in issue and the Company shall enter or procure the entry of the name of the relevant
holder of Class B Ordinary Shares as the holder of the same number of Class A Ordinary Shares resulting from the conversion of
the Class B Ordinary Shares in, and make any other necessary and consequential changes to, the Register of Members and shall procure
that certificates in respect of the relevant Class A Ordinary Shares, together with a new certificate for any unconverted Class
B Ordinary Shares comprised in the certificate(s) surrendered by the holder of the Class B Ordinary Shares, are issued to the holders
thereof.
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(iv)
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Until such time as the Class B Ordinary Shares have been converted into Class A Ordinary Shares,
the Company shall:
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(1)
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at all times keep available for issue and free of all liens, charges, options, mortgages, pledges,
claims, equities, encumbrances and other third-party rights of any nature, and not subject to any pre-emptive rights out of its
authorised but unissued share capital, such number of authorised but unissued Class A Ordinary Shares as would enable all Class
B Ordinary Shares to be converted into Class A Ordinary Shares and any other rights of conversion into, subscription for or exchange
into Class A Ordinary Shares to be satisfied in full; and
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(2)
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not make any issue, grant or distribution or take any other action if the effect would be that
on the conversion of the Class B Ordinary Shares to Class A Ordinary Shares it would be required to issue Class A Ordinary Shares
at a price lower than the par value thereof.
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(b)
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As regards Voting Rights
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Holders of Ordinary
Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Holders of shares of Class
A Ordinary Shares and Class B Ordinary Shares shall, at all times (other than in respect of separate general meetings of the holders
of a class or series of shares held in accordance with Article 10(a) below), vote together as one class on all matters submitted
to a vote for Members’ consent. Each Class A Ordinary Share shall be entitled to one (1) vote on all matters subject to the
vote at general meetings of the Company, and each Class B Ordinary Share shall be entitled to five (5) votes on all matters subject
to the vote at general meetings of the Company.
Upon any sale,
transfer, assignment or disposition of Class B Ordinary Shares by a holder (or any Affiliate of such holder) to any person or entity
(other than an Affiliate or a Nominee Holder of such holder or Affiliate) including, without limitation, to give effect to a Third
Party Enforcement (as defined below), such Class B Ordinary Shares validly transferred to the new holder shall be automatically
and immediately converted into an equal number of Class A Ordinary Shares. Upon any sale, transfer, assignment or disposition of
Class B Ordinary Shares by a holder (or Affiliate of such holder) thereof to an Affiliate or Nominee Holder of such holder (or
Affiliate of such holder), other than to give effect to an Third Party Enforcement, such Class B Ordinary Shares validly transferred
to the new holder shall not be converted into an equal number of Class A Ordinary Shares.
For the avoidance
of doubt, (i) a sale, transfer, assignment or disposition shall be effective upon the Company’s registration of such sale,
transfer, assignment or disposition in the Company’s Register of Members; and (ii) the creation of any pledge, charge, encumbrance
or other third party right of whatever description on any of Class B Ordinary Shares to secure a holder's contractual or legal
obligations shall not be deemed as a sale, transfer, assignment or disposition unless and until any such pledge, charge, encumbrance
or other third party right is enforced and results in the third party holding legal title to the related Class B Ordinary Shares
(a “
Third Party Enforcement
”), in which case all the related Class B Ordinary Shares shall be automatically
converted into the same number of Class A Ordinary Shares upon the Company's registration of the third party or its designee as
a Member holding that number of Class A Ordinary Shares in the Register of Members.
VARIATION OF RIGHTS
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10.
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Subject to the Law and without prejudice to Article 8, all or any of the special rights for the
time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of
that class, from time to time (whether or not the Company is being wound up) be varied, modified or abrogated with the sanction
of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate
general meeting all the provisions of these Articles relating to general meetings of the Company shall,
mutatis mutandis
,
apply, but so that:
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(a)
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separate general meetings of the holders of a class or series of shares may be called only by (i)
the Chairman of the Board, or (ii) a majority of the Board (unless otherwise specifically provided by the terms of issue of the
shares of such class or series). Nothing in this Article 10 shall be deemed to give any Member or Members the right to call a class
or series meeting;
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(b)
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the necessary quorum (whether at a separate general meeting or at its adjourned meeting) shall
be a person or persons (or in the case of a Member being a corporation, its duly authorized representative) together holding or
representing by proxy not less than one-third of the voting power of the issued shares of that class;
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(c)
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every holder of shares of the class shall be entitled on a poll to one vote for every such share
held by him; and
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(d)
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any holder of shares of the class present in person or by proxy or authorised representative may
demand a poll.
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11.
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The special rights conferred upon the holders of any shares or class of shares shall not, unless
otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified
or abrogated by the creation or issue of further shares ranking
pari passu
therewith.
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SHARES
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12.
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(1) Subject
to the Law, these Articles and, where applicable, the rules of the Designated Stock Exchange and without prejudice to any special
rights or restrictions for the time being attached to any shares or any class of shares, the unissued shares of the Company (whether
forming part of the original or any increased capital) shall be at the disposal of the Board, which may offer, allot, grant options
over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions
as the Board may in its absolute discretion determine but so that no shares shall be issued at a discount to par value. In particular
and without prejudice to the generality of the foregoing, the Board is hereby empowered to authorize by resolution or resolutions
from time to time the issuance of one or more classes or series of preferred shares and to fix the designations, powers, preferences
and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof,
if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion
rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase
or decrease the size of any such class or series (but not below the number of shares of any class or series of preferred shares
then outstanding) to the extent permitted by the Law. Without limiting the generality of the foregoing, the resolution or resolutions
providing for the establishment of any class or series of preferred shares may, to the extent permitted by the Law, provide that
such class or series shall be superior to, rank equally with or be junior to the preferred shares of any other class or series.
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(2) Neither
the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares,
to make, or make available, any such allotment, offer, option or shares to Members or others with registered addresses in any particular
territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities,
this would or might, in the opinion of the Board, be unlawful or impracticable. Members affected as a result of the foregoing sentence
shall not be, or be deemed to be, a separate class of members for any purpose whatsoever. Except as otherwise expressly provided
in the resolution or resolutions providing for the establishment of any class or series of preferred shares, no vote of the holders
of preferred shares or ordinary shares shall be a prerequisite to the issuance of any shares of any class or series of the preferred
shares authorized by and complying with the conditions of the Memorandum and Articles of Association.
(3) The
Board may issue options, warrants or convertible securities or securities of similar nature conferring the right upon the holders
thereof to subscribe for, purchase or receive any class of shares or securities in the capital of the Company on such terms as
it may from time to time determine.
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13.
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The Company may in connection with the issue of any shares exercise all powers of paying commission
and brokerage conferred or permitted by the Law. Subject to the Law, the commission may be satisfied by the payment of cash or
by the allotment of fully or partly paid shares or partly in one and partly in the other.
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14.
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Except as required by the Law, no person shall be recognised by the Company as holding any share
upon any trust and the Company shall not be bound by or required in any way to recognise (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any fractional part of a share or (except only as otherwise provided
by these Articles or by the Law) any other rights in respect of any share except an absolute right to the entirety thereof in the
registered holder.
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15.
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Subject to the Law and these Articles, the Board may at any time after the allotment of shares
but before any person has been entered in the Register as the Member, recognise a renunciation thereof by the allottee in favour
of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms
and conditions as the Board considers fit to impose.
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SHARE CERTIFICATES
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16.
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A share certificate may be issued under the Seal or a facsimile thereof and shall specify the number
and class and distinguishing numbers (if any) of the shares to which it relates, and the amount paid up thereon and may otherwise
be in such form as the Board may from time to time determine. No certificate shall be issued representing shares of more than one
class. The Board may by resolution determine, either generally or in any particular case or cases, that any signatures on any such
certificates (or certificates in respect of other securities) need not be autographic but may be affixed to such certificates by
some mechanical means or may be printed thereon.
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17.
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(1) In
the case of a share held jointly by several persons, the Company shall not be bound to issue more than one certificate therefor
and delivery of a certificate to one of several joint holders shall be sufficient delivery to all such holders.
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(2) Where
a share stands in the names of two or more persons, the person first named in the Register shall as regards service of notices
and, subject to the provisions of these Articles, all or any other matters connected with the Company, except the transfer of the
shares, be deemed the sole holder thereof.
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18.
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Every person whose name is entered, upon an allotment of shares, as a Member in the Register shall
be entitled, without payment, to receive one certificate for all such shares of any one class or several certificates each for
one or more of such shares of such class upon payment for every certificate after the payment of such reasonable out-of-pocket
expenses as the Board from time to time determines, provided however, the Company is not obligated to issue a share certificate
to a Members unless the Member requests it from the Company..
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19.
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Upon request by a Member, a share certificates shall be issued within the relevant time limit as
prescribed by the Law or as the Designated Stock Exchange may from time to time determine, whichever is the shorter, after allotment
or, except in the case of a transfer which the Company is for the time being entitled to refuse to register and does not register,
after lodgment of a transfer with the Company.
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20.
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(1) Upon
every transfer of shares the certificate held by the transferor shall be given up to be cancelled, and shall forthwith be cancelled
accordingly, and a new certificate may be issued to the transferee in respect of the shares transferred to him at such fee as
is provided in paragraph (2) of this Article 20. If any of the shares included in the certificate so given up shall be retained
by the transferor a new certificate for the balance may be issued to him at the aforesaid fee payable by the transferor to the
Company in respect thereof.
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(2) The
fee referred to in paragraph (1) above shall be an amount not exceeding the relevant maximum amount as the Designated Stock Exchange
may from time to time determine
provided
that the Board may at any time determine a lower amount for such fee.
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21.
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If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed
a new certificate representing the same shares may be issued to the relevant Member upon request and on payment of such fee as
the Board may determine and, subject to compliance with such terms (if any) as to evidence and indemnity and to payment of the
costs and reasonable out-of-pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board
may think fit and, in case of damage or defacement, on delivery of the old certificate to the Company
provided
always that
where share warrants have been issued, no new share warrant shall be issued to replace one that has been lost unless the Board
has determined that the original has been destroyed.
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LIEN
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22.
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The Company shall have a first and paramount lien on every share that is not a fully paid share,
for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share. The Company shall
also have a first and paramount lien on every share that is not a fully paid share registered in the name of a Member (whether
or not jointly with other Members) for all amounts of money presently payable by such Member or his estate to the Company whether
the same shall have been incurred before or after notice to the Company of any equitable or other interest of any person other
than such member, and whether the payment or discharge of the same shall have actually become due or not, and notwithstanding that
the same are joint debts or liabilities of such Member or his estate and any other person, whether a Member of the Company or not.
The Company’s lien on a share shall extend to all dividends or other moneys payable thereon or in respect thereof. The Board
may at any time, generally or in any particular case, waive any lien that has arisen or declare any share exempt in whole or in
part, from the provisions of this Article 22.
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23.
|
Subject to these Articles, the Company may sell in such manner as the Board determines any share
on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable,
or the liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged nor until
the expiration of fourteen (14) clear days after a Notice, stating and demanding payment of the sum presently payable, or specifying
the liability or engagement and demanding fulfilment or discharge thereof and giving notice of the intention to sell in default,
has been served on the registered holder for the time being of the share or the person entitled thereto by reason of his death
or bankruptcy.
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24.
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The net proceeds of the sale shall be received by the Company and applied in or towards payment
or discharge of the debt or liability in respect of which the lien exists, so far as the same is presently payable, and any residue
shall, subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale, be paid
to the person entitled to the share at the time of the sale. To give effect to any such sale the Board may authorise some person
to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares so transferred
and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings relating to the sale.
|
CALLS ON SHARES
|
25.
|
Subject to these Articles and to the terms of allotment, the Board may from time to time make calls
upon the Members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way
of premium), and each Member shall (subject to being given at least fourteen (14) clear days’ Notice specifying the time
and place of payment) pay to the Company as required by such notice the amount called on his shares. A call may be extended, postponed
or revoked in whole or in part as the Board determines but no Member shall be entitled to any such extension, postponement or revocation
except as a matter of grace and favour.
|
|
26.
|
A call shall be deemed to have been made at the time when the resolution of the Board authorising
the call was passed and may be made payable either in one lump sum or by instalments.
|
|
27.
|
A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the
subsequent transfer of the shares in respect of which the call was made. The joint holders of a share shall be jointly and severally
liable to pay all calls and instalments due in respect thereof or other moneys due in respect thereof.
|
|
28.
|
If a sum called in respect of a share is not paid before or on the day appointed for payment thereof,
the person from whom the sum is due shall pay interest on the amount unpaid from the day appointed for payment thereof to the time
of actual payment at such rate (not exceeding twenty per cent. (20%) per annum) as the Board may determine, but the Board may in
its absolute discretion waive payment of such interest in whole or in part.
|
|
29.
|
No Member shall be entitled to receive any dividend or bonus or to be present and vote (save as
proxy for another Member) at any general meeting either personally or by proxy, or be reckoned in a quorum, or exercise any other
privilege as a Member until all calls or instalments due by him to the Company, whether alone or jointly with any other person,
together with interest and expenses (if any) shall have been paid.
|
|
30.
|
On the trial or hearing of any action or other proceedings for the recovery of any money due for
any call, it shall be sufficient to prove that the name of the Member sued is entered in the Register as the holder, or one of
the holders, of the shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute
book, and that notice of such call was duly given to the Member sued, in pursuance of these Articles; and it shall not be necessary
to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid
shall be conclusive evidence of the debt.
|
|
31.
|
Any amount payable in respect of a share upon allotment or at any fixed date, whether in respect
of nominal value or premium or as an instalment of a call, shall be deemed to be a call duly made and payable on the date fixed
for payment and if it is not paid the provisions of these Articles shall apply as if that amount had become due and payable by
virtue of a call duly made and notified.
|
|
32.
|
On the issue of shares the Board may differentiate between the allottees or holders as to the amount
of calls to be paid and the times of payment.
|
|
33.
|
The Board may, if it thinks fit, receive from any Member willing to advance the same, and either
in money or money’s worth, all or any part of the moneys uncalled and unpaid or instalments payable upon any shares held
by him and upon all or any of the moneys so advanced (until the same would, but for such advance, become presently payable) pay
interest at such rate (if any) as the Board may decide. The Board may at any time repay the amount so advanced upon giving to such
Member not less than one month’s Notice of its intention in that behalf, unless before the expiration of such notice the
amount so advanced shall have been called up on the shares in respect of which it was advanced. Such payment in advance shall not
entitle the holder of such share or shares to participate in respect thereof in a dividend subsequently declared.
|
FORFEITURE OF SHARES
|
34.
|
(1) If
a call remains unpaid after it has become due and payable the Board may give to the person from whom it is due not less than fourteen
(14) clear days’ Notice:
|
|
(a)
|
requiring payment of the amount unpaid together with any interest which may have accrued and which
may still accrue up to the date of actual payment; and
|
|
(b)
|
stating that if the Notice is not complied with the shares on which the call was made will be liable
to be forfeited.
|
(2) If
the requirements of any such notice are not complied with, any share in respect of which such notice has been given may at any
time thereafter, before payment of all calls and interest due in respect thereof has been made, be forfeited by a resolution of
the Board to that effect, and such forfeiture shall include all dividends and bonuses declared in respect of the forfeited share
but not actually paid before the forfeiture.
|
35.
|
When any share has been forfeited, notice of the forfeiture shall be served upon the person who
was before forfeiture the holder of the share. No forfeiture shall be invalidated by any omission or neglect to give such notice.
|
|
36.
|
The Board may accept the surrender of any share liable to be forfeited hereunder and, in such case,
references in these Articles to forfeiture will include surrender.
|
|
37.
|
Any share so forfeited shall be deemed the property of the Company and may be sold, re-allotted
or otherwise disposed of to such person, upon such terms and in such manner as the Board determines, and at any time before a sale,
re-allotment or disposition the forfeiture may be annulled by the Board on such terms as the Board determines.
|
|
38.
|
A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited
shares but nevertheless shall remain liable to pay the Company all moneys which at the date of forfeiture were presently payable
by him to the Company in respect of the shares, with, if the Board shall in its discretion so requires, interest thereon from the
date of forfeiture until payment at such rate (not exceeding twenty per cent. (20%) per annum) as the Board determines. The Board
may enforce payment thereof if it thinks fit, and without any deduction or allowance for the value of the forfeited shares, at
the date of forfeiture, but his liability shall cease if and when the Company shall have received payment in full of all such moneys
in respect of the shares. For the purposes of this Article 38 any sum which, by the terms of issue of a share, is payable thereon
at a fixed time which is subsequent to the date of forfeiture, whether on account of the nominal value of the share or by way of
premium, shall notwithstanding that time has not yet arrived be deemed to be payable at the date of forfeiture, and the same shall
become due and payable immediately upon the forfeiture, but interest thereon shall only be payable in respect of any period between
the said fixed time and the date of actual payment.
|
|
39.
|
A declaration by a Director or the Secretary that a share has been forfeited on a specified date
shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and such
declaration shall (subject to the execution of an instrument of transfer by the Company if necessary) constitute a good title to
the share, and the person to whom the share is disposed of shall be registered as the holder of the share and shall not be bound
to see to the application of the consideration (if any), nor shall his title to the share be affected by any irregularity in or
invalidity of the proceedings in reference to the forfeiture, sale or disposal of the share. When any share shall have been forfeited,
notice of the declaration shall be given to the Member in whose name it stood immediately prior to the forfeiture, and an entry
of the forfeiture, with the date thereof, shall forthwith be made in the Register, but no forfeiture shall be in any manner invalidated
by any omission or neglect to give such notice or make any such entry.
|
|
40.
|
Notwithstanding any such forfeiture as aforesaid the Board may at any time, before any shares so
forfeited shall have been sold, re-allotted or otherwise disposed of, permit the shares forfeited to be bought back upon the terms
of payment of all calls and interest due upon and expenses incurred in respect of the share, and upon such further terms (if any)
as it thinks fit.
|
|
41.
|
The forfeiture of a share shall not prejudice the right of the Company to any call already made
or instalment payable thereon.
|
|
42.
|
The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any
sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share
or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
|
REGISTER OF MEMBERS
|
43.
|
(1) The
Company shall keep in one or more books a Register of its Members and shall enter therein the following particulars, that is to
say:
|
|
(a)
|
the name and address of each Member, the number and class of shares held by him and the amount
paid or agreed to be considered as paid on such shares;
|
|
(b)
|
the date on which each person was entered in the Register; and
|
|
(c)
|
the date on which any person ceased to be a Member.
|
(2) The
Company may keep an overseas or local or other branch register of Members resident in any place, and the Board may make and vary
such regulations as it determines in respect of the keeping of any such register and maintaining a Registration Office in connection
therewith.
|
44.
|
The Register and branch register of Members, as the case may be, shall be open to inspection for
such times and on such days as the Board shall determine by Members without charge or by any other person, upon a maximum payment
of $2.50 or such other sum specified by the Board, at the Office or Registration Office or such other place at which the Register
is kept in accordance with the Law. The Register including any overseas or local or other branch register of Members may, after
compliance with any notice requirement of the Designated Stock Exchange, be closed at such times or for such periods not exceeding
in the whole thirty (30) days in each year as the Board may determine and either generally or in respect of any class of shares.
|
RECORD DATES
|
45.
|
For the purpose of determining the Members entitled to notice of or to vote at any general meeting,
or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful
action, the Board may fix, in advance, a date as the record date for any such determination of the Members, which date shall not
be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to
any other such action.
|
If the Board does not fix a record
date for any general meeting, the record date for determining the Members entitled to a notice of or to vote at such meeting shall
be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with these Articles
notice is waived, at the close of business on the day next preceding the day on which the meeting is held. The record date for
determining the Members for any other purpose shall be at the close of business on the day on which the Board adopts the resolution
relating thereto.
A determination of the Members of
record entitled to notice of or to vote at a meeting of the Members shall apply to any adjournment of the meeting;
provided
,
however
, that the Board may fix a new record date for the adjourned meeting.
TRANSFER OF SHARES
|
46.
|
Subject to these Articles including, without limitation, in the case of Class B Ordinary Shares,
Article 9(c), any Member may transfer all or any of his shares by an instrument of transfer in the usual or common form or in a
form prescribed by the Designated Stock Exchange or in any other form approved by the Board and may be under hand or, if the transferor
or transferee is a clearing house or a central depository house or its nominee(s), by hand or by machine imprinted signature or
by such other manner of execution as the Board may approve from time to time.
|
|
47.
|
The instrument of transfer shall be executed by or on behalf of the transferor and the transferee
provided
that the Board may dispense with the execution of the instrument of transfer by the transferee in any case which
it thinks fit in its discretion to do so. Without prejudice to Article 46, the Board may also resolve, either generally or in any
particular case, upon request by either the transferor or transferee, to accept mechanically executed transfers. The transferor
shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof.
Nothing in these Articles shall preclude the Board from recognising a renunciation of the allotment or provisional allotment of
any share by the allottee in favour of some other person.
|
|
48.
|
(1) The
Board may, in its absolute discretion, and without giving any reason therefor, refuse to register a transfer of any share that
is not a fully paid up share to a person of whom it does not approve, or any share issued under any share incentive scheme for
employees upon which a restriction on transfer imposed thereby still subsists, and it may also, without prejudice to the foregoing
generality, refuse to register a transfer of any share to more than four joint holders or a transfer of any share that is not
a fully paid up share on which the Company has a lien.
|
(2) The
Board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer
any share upon the Register to any branch register or any share on any branch register to the Register or any other branch register.
In the event of any such transfer, the Member requesting such transfer shall bear the cost of effecting the transfer unless the
Board otherwise determines.
(3) Unless
the Board otherwise agrees (which agreement may be on such terms and subject to such conditions as the Board in its absolute discretion
may from time to time determine, and which agreement the Board shall, without giving any reason therefor, be entitled in its absolute
discretion to give or withhold), no shares upon the Register shall be transferred to any branch register nor shall shares on any
branch register be transferred to the Register or any other branch register and all transfers and other documents of title shall
be lodged for registration, and registered, in the case of any shares on a branch register, at the relevant Registration Office,
and, in the case of any shares on the Register, at the Office or such other place at which the Register is kept in accordance with
the Law.
|
49.
|
Without limiting the generality of Article 48, the Board may decline to recognise any instrument
of transfer unless:-
|
|
(a)
|
a fee of such maximum sum as the Designated Stock Exchange may determine to be payable or such
lesser sum as the Board may from time to time require is paid to the Company in respect thereof;
|
|
(b)
|
the instrument of transfer is in respect of only one class of share;
|
|
(c)
|
the instrument of transfer is lodged at the Office or such other place at which the Register is
kept in accordance with the Law or the Registration Office (as the case may be) accompanied by the relevant share certificate(s)
and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and, if the
instrument of transfer is executed by some other person on his behalf, the authority of that person so to do); and
|
|
(d)
|
if applicable, the instrument of transfer is duly and properly stamped.
|
|
50.
|
If the Board refuses to register a transfer of any share, it shall, within three months after the
date on which the transfer was lodged with the Company, send to each of the transferor and transferee notice of the refusal.
|
|
51.
|
The registration of transfers of shares or of any class of shares may, after compliance with any
notice requirement of the Designated Stock Exchange, be suspended at such times and for such periods (not exceeding in the whole
thirty (30) days in any year) as the Board may determine.
|
TRANSMISSION OF SHARES
|
52.
|
If a Member dies, the survivor or survivors where the deceased was a joint holder, and his legal
personal representatives where he was a sole or only surviving holder, will be the only persons recognised by the Company as having
any title to his interest in the shares; but nothing in this Article will release the estate of a deceased Member (whether sole
or joint) from any liability in respect of any share which had been solely or jointly held by him.
|
|
53.
|
Any person becoming entitled to a share in consequence of the death or bankruptcy or winding-up
of a Member may, upon such evidence as to his title being produced as may be required by the Board, elect either to become the
holder of the share or to have some person nominated by him registered as the transferee thereof. If he elects to become the holder
he shall notify the Company in writing either at the Registration Office or the Office, as the case may be, to that effect. If
he elects to have another person registered he shall execute a transfer of the share in favour of that person. The provisions of
these Articles relating to the transfer and registration of transfers of shares shall apply to such notice or transfer as aforesaid
as if the death or bankruptcy of the Member had not occurred and the notice or transfer were a transfer signed by such Member.
|
|
54.
|
A person becoming entitled to a share by reason of the death or bankruptcy or winding-up of a Member
shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of
the share. However, the Board may, if it thinks fit, withhold the payment of any dividend payable or other advantages in respect
of such share until such person shall become the registered holder of the share or shall have effectually transferred such share,
but, subject to the requirements of Article 75(2) being met, such a person may vote at meetings.
|
UNTRACEABLE MEMBERS
|
55.
|
(1) Without
prejudice to the rights of the Company under paragraph (2) of this Article 55, the Company may cease sending cheques for dividend
entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on two consecutive occasions. However,
the Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants after the first occasion
on which such a cheque or warrant is returned undelivered.
|
(2) The
Company shall have the power to sell, in such manner as the Board thinks fit, any shares of a Member who is untraceable, but no
such sale shall be made unless:
|
(a)
|
all cheques or warrants in respect of dividends of the shares in question, being not less than
three in total number, for any sum payable in cash to the holder of such shares sent during the relevant period in the manner authorised
by these Articles have remained uncashed;
|
|
(b)
|
so far as it is aware at the end of the relevant period, the Company has not at any time during
the relevant period received any indication of the existence of the Member who is the holder of such shares or of a person entitled
to such shares by death, bankruptcy or operation of law; and
|
|
(c)
|
the Company, if so required by the rules governing the listing of shares on the Designated Stock
Exchange, has given notice to, and caused advertisement in newspapers to be made in accordance with the requirements of the Designated
Stock Exchange of its intention to sell such shares in the manner required by the Designated Stock Exchange, and a period of three
months or such shorter period as may be allowed by the Designated Stock Exchange has elapsed since the date of such advertisement.
|
For the purpose of the foregoing, the
“relevant period” means the period commencing twelve (12) years before the date of publication of the advertisement
referred to in paragraph (c) of this Article and ending at the expiry of the period referred to in that paragraph.
(3) To
give effect to any such sale the Board may authorise some person to transfer the said shares and an instrument of transfer signed
or otherwise executed by or on behalf of such person shall be as effective as if it had been executed by the registered holder
or the person entitled by transmission to such shares, and the purchaser shall not be bound to see to the application of the purchase
money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.
The net proceeds of the sale will belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted
to the former Member for an amount equal to such net proceeds. No trust shall be created in respect of such debt and no interest
shall be payable in respect of it and the Company shall not be required to account for any money earned from the net proceeds which
may be employed in the business of the Company or as it thinks fit. Any sale under this Article 55 shall be valid and effective
notwithstanding that the Member holding the shares sold is dead, bankrupt or otherwise under any legal disability or incapacity.
GENERAL MEETINGS
|
56.
|
The Company may hold an annual general meeting and shall specify the meeting as such in the notices
calling it. An annual general meeting of the Company shall be held at such time and place as may be determined by the Board.
|
|
57.
|
Each general meeting, other than an annual general meeting, shall be called an extraordinary general
meeting. General meetings may be held at such times and in any location in the world as may be determined by the Board.
|
|
58.
|
A majority of the Board or the Chairman of the Board may call extraordinary general meetings, which
extraordinary general meetings shall be held at such times and locations (as permitted hereby) as such person or persons shall
determine.
|
NOTICE OF GENERAL MEETINGS
|
59.
|
(1) An
annual general meeting and any extraordinary general meeting may be called by not less than ten (10) clear days’ Notice
but a general meeting may be called by shorter notice, subject to the Law, if it is so agreed:
|
|
(a)
|
in the case of a meeting called as an annual general meeting, by all the Members entitled to attend
and vote thereat; and
|
|
(b)
|
in the case of any other meeting, by a majority in number of the Members having the right to attend
and vote at the meeting, being a majority together holding not less than ninety-five per cent. (95%) in nominal value of the issued
shares giving that right.
|
(2) The
notice shall specify the time and place of the meeting and the general nature of the business. The notice convening an annual general
meeting shall specify the meeting as such. Notice of every general meeting shall be given to all Members other than to such Members
as, under the provisions of these Articles or the terms of issue of the shares they hold, are not entitled to receive such notices
from the Company, to all persons entitled to a share in consequence of the death or bankruptcy or winding-up of a Member and to
each of the Directors.
|
60.
|
The accidental omission to give Notice of a meeting or (in cases where instruments of proxy are
sent out with the notice) to send such instrument of proxy to, or the non-receipt of such notice or such instrument of proxy by,
any person entitled to receive such notice shall not invalidate any resolution passed or the proceedings at that meeting.
|
PROCEEDINGS AT GENERAL MEETINGS
|
61.
|
(1) No
business other than the appointment of a chairman of a meeting shall be transacted at any general meeting unless a quorum is present
at the commencement of the business. At any general meeting of the Company, one or more Members entitled to vote and present in
person or by proxy or (in the case of a Member being a corporation) by its duly authorised representative representing not less
than one-third of all voting power of the Company’s share capital in issue throughout the meeting shall form a quorum for
all purposes.
|
(2) If
within thirty (30) minutes (or such longer time not exceeding one hour as the chairman of the meeting may determine to wait) after
the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day in the next week
at the same time and place or to such time and place as the Board may determine. If at such adjourned meeting a quorum is not present
within half an hour from the time appointed for holding the meeting, the meeting shall be dissolved.
|
62.
|
The Chairman of the Board shall preside as chairman at every general meeting. If at any meeting
the chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, or is not willing to
act as chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside
as chairman if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, or if
the chairman chosen shall retire from the chair, the Members present in person or by proxy and entitled to vote shall elect one
of their members to be chairman.
|
|
63.
|
The chairman may adjourn the meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting other than the business which might lawfully have been transacted at the meeting had
the adjournment not taken place. When a meeting is adjourned for fourteen (14) days or more, at least seven (7) clear days’
notice of the adjourned meeting shall be given specifying the time and place of the adjourned meeting but it shall not be necessary
to specify in such notice the nature of the business to be transacted at the adjourned meeting and the general nature of the business
to be transacted. Save as aforesaid, it shall be unnecessary to give notice of an adjournment.
|
|
64.
|
If an amendment is proposed to any resolution under consideration but is in good faith ruled out
of order by the chairman of the meeting, the proceedings on the substantive resolution shall not be invalidated by any error in
such ruling. In the case of a resolution duly proposed as a special resolution, no amendment thereto (other than a mere clerical
amendment to correct a patent error) may in any event be considered or voted upon.
|
NO ACTION BY WRITTEN RESOLUTIONS OF MEMBERS
65. Any
action required or permitted to be taken at any annual or extraordinary general meetings of the Company may be taken only upon
the vote of the Members at an annual or extraordinary general meeting duly noticed and convened in accordance with these Articles
and the Law and may not be taken by written resolution of Members without a meeting.
VOTING
|
66.
|
(1) Holders
of Ordinary Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Except as required
by applicable law and subject to these Articles (including without limitation Article 10(a)), holders of Class A Ordinary Shares
and Class B Ordinary Shares shall at all times vote together as one class on all matters submitted to a vote of the Shareholders.
|
(2) Subject
to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with these Articles,
at any general meeting on a show of hands:
|
(a)
|
every Member holding Class A Ordinary Shares present in person (or being a corporation, is present
by a duly authorised representative), or by proxy shall have one vote for every fully paid Class A Ordinary Share of which he is
the holder and on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly
authorised representative shall have one vote for every fully paid Class A Ordinary Share of which he is the holder; and
|
|
(b)
|
every Member holding Class B Ordinary Shares present in person (or being a corporation, is present
by a duly authorised representative), or by proxy shall have five (5) votes for every fully paid Class B Ordinary Share of which
he is the holder and on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its
duly authorised representative shall have five (5) votes for every fully paid Class B Ordinary Share of which he is the holder.
|
(3) No
amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purposes as paid
up on the share.
(4) Notwithstanding
anything contained in these Articles, where more than one proxy is appointed by a Member which is a clearing house or a central
depository house (or its nominee(s)), each such proxy shall have one vote on a show of hands. A resolution put to the vote of a
meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal
of any other demand for a poll) a poll is demanded by the chairman of such meeting or by any one or more Members who together hold
not less than ten percent (10%) in nominal value of the total issued voting shares in the Company, present in person or in the
case of a Member being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the
meeting. A demand by a person as proxy for a Member or in the case of a Member being a corporation by its duly authorised representative
shall be deemed to be the same as a demand by a Member.
|
67.
|
Unless a poll is duly demanded and the demand is not withdrawn, a declaration by the chairman that
a resolution has been carried, or carried unanimously, or by a particular majority, or not carried by a particular majority, or
lost, and an entry to that effect made in the minute book of the Company, shall be conclusive evidence of the facts without proof
of the number or proportion of the votes recorded for or against the resolution.
|
|
68.
|
If a poll is duly demanded the result of the poll shall be deemed to be the resolution of the meeting
at which the poll was demanded. There shall be no requirement for the chairman to disclose the voting figures on a poll.
|
|
69.
|
A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken
forthwith. A poll demanded on any other question shall be taken in such manner (including the use of ballot or voting papers or
tickets) either forthwith or at such time (being not later than thirty (30) days after the date of the demand) and place as the
chairman directs. It shall not be necessary (unless the chairman otherwise directs) for notice to be given of a poll not taken
immediately.
|
|
70.
|
The demand for a poll shall not prevent the continuance of a meeting or the transaction of any
business other than the question on which the poll has been demanded, and, with the consent of the chairman, it may be withdrawn
at any time before the close of the meeting or the taking of the poll, whichever is the earlier.
|
|
71.
|
On a poll votes may be given either personally or
by proxy.
|
|
72.
|
A person entitled to more than one vote on a poll need not use all his votes or cast all the votes
he uses in the same way.
|
|
73.
|
All questions submitted to a meeting shall be decided by a simple majority of votes cast by such
Members as, being entitled to do so, vote in person or, by proxy or, in the case of a Member being a corporation, by its duly authorised
representative except where a greater majority is required by these Articles or by the Law. In the case of an equality of votes,
whether on a show of hands or on a poll, the chairman of such meeting shall be entitled to a second or casting vote in addition
to any other vote he may have.
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|
74.
|
Where there are joint holders of any share any one of such joint holder may vote, either in person
or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present
at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of
the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand
in the Register in respect of the joint holding. Several executors or administrators of a deceased Member in whose name any share
stands shall for the purposes of this Article be deemed joint holders thereof.
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|
75.
|
(1) A
Member who is a patient for any purpose relating to mental health or in respect of whom an order has been made by any court having
jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether
on a show of hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee
or curator bonis appointed by such court, and such receiver, committee, curator bonis or other person may vote on a poll by proxy,
and may otherwise act and be treated as if he were the registered holder of such shares for the purposes of general meetings,
provided
that such evidence as the Board may require of the authority of the person claiming to vote shall have been deposited
at the Office, head office or Registration Office, as appropriate, not less than forty-eight (48) hours before the time appointed
for holding the meeting, or adjourned meeting or poll, as the case may be.
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(2) Any
person entitled under Article 53 to be registered as the holder of any shares may vote at any general meeting in respect thereof
in the same manner as if he were the registered holder of such shares,
provided
that forty-eight (48) hours at least before
the time of the holding of the meeting or adjourned meeting, as the case may be, at which he proposes to vote, he shall satisfy
the Board of his entitlement to such shares, or the Board shall have previously admitted his right to vote at such meeting in respect
thereof.
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76.
|
No Member shall, unless the Board otherwise determines, be entitled to attend and vote and to be
reckoned in a quorum at any general meeting unless he is duly registered and all calls or other sums presently payable by him in
respect of shares in the Company have been paid.
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|
(a)
|
any objection shall be raised to the qualification of any voter; or
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|
(b)
|
any votes have been counted which ought not to have been counted or which might have been rejected;
or
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|
(c)
|
any votes are not counted which ought to have been counted;
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the objection or error shall not vitiate
the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or,
as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any
objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution
if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters
shall be final and conclusive.
PROXIES
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78.
|
Any Member entitled to attend and vote at a general meeting of the Company shall be entitled to
appoint another person as his proxy to attend and vote instead of him. A Member who is the holder of two or more shares may appoint
more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy
need not be a Member. In addition, a proxy or proxies representing either a Member who is an individual or a Member which is a
corporation shall be entitled to exercise the same powers on behalf of the Member which he or they represent as such Member could
exercise.
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|
79.
|
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his
attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer,
attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of
a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to
sign such instrument of proxy on behalf of the corporation without further evidence of the facts.
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|
80.
|
The instrument appointing a proxy and, if required by the Board, the power of attorney or other
authority, if any, under which it is signed, or a certified copy of such power or authority, shall be delivered to such place or
one of such places, if any, as may be specified for that purpose in or by way of note to or in any document accompanying the notice
convening the meeting or, if no place is so specified at the Registration Office or the Office, as may be appropriate, not less
than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in
the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not
less than twenty-four (24) hours before the time appointed for the taking of the poll and in default the instrument of proxy shall
not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of twelve (12) months from the date
named in it as the date of its execution, except at an adjourned meeting or on a poll demanded at a meeting or an adjourned meeting
in cases where the meeting was originally held within twelve (12) months from such date. Delivery of an instrument appointing a
proxy shall not preclude a Member from attending and voting in person at the meeting convened and in such event, the instrument
appointing a proxy shall be deemed to be revoked.
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|
81.
|
Instruments of proxy shall be in any common form or in such other form as the Board may approve
(
provided
that this shall not preclude the use of the two-way form) and the Board may, if it thinks fit, send out with the
notice of any meeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemed to confer authority
to demand or join in demanding a poll and to vote on any amendment of a resolution put to the meeting for which it is given as
the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment
of the meeting as for the meeting to which it relates.
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|
82.
|
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding
the previous death or insanity of the principal, or revocation of the instrument of proxy or of the authority under which it was
executed,
provided
that no intimation in writing of such death, insanity or revocation shall have been received by the Company
at the Office or the Registration Office (or such other place as may be specified for the delivery of instruments of proxy in the
notice convening the meeting or other document sent therewith) two (2) hours at least before the commencement of the meeting or
adjourned meeting, or the taking of the poll, at which the instrument of proxy is used.
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|
83.
|
Anything which under these Articles a Member may do by proxy he may likewise do by his duly appointed
attorney and the provisions of these Articles relating to proxies and instruments appointing proxies shall apply
mutatis mutandis
in relation to any such attorney and the instrument under which such attorney is appointed.
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CORPORATIONS ACTING BY REPRESENTATIVES
|
84.
|
(1) Any
corporation which is a Member may by resolution of its directors or other governing body authorise such person as it thinks fit
to act as its representative at any meeting of the Company or at any meeting of any class of Members. The person so authorised
shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual
Member and such corporation shall for the purposes of these Articles be deemed to be present in person at any such meeting if
a person so authorised is present thereat.
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(2) If
a clearing house (or its nominee(s)) or a central depository entity, being a corporation, is a Member, it may authorise such persons
as it thinks fit to act as its representatives at any meeting of the Company or at any meeting of any class of Members
provided
that the authorisation shall specify the number and class of shares in respect of which each such representative is so authorised.
Each person so authorised under the provisions of this Article shall be deemed to have been duly authorised without further evidence
of the facts and be entitled to exercise the same rights and powers on behalf of the clearing house or central depository entity
(or its nominee(s)) as if such person was the registered holder of the shares of the Company held by the clearing house or a central
depository entity (or its nominee(s)) including the right to vote individually on a show of hands.
(3) Any
reference in these Articles to a duly authorised representative of a Member being a corporation shall mean a representative authorised
under the provisions of this Article.
BOARD OF DIRECTORS
|
85.
|
(1) Unless
otherwise determined by the Members in general meeting, the number of Directors shall not be less than three (3). There shall
be no maximum number of Directors unless otherwise determined from time to time by the Members in general meeting. The Directors
shall be elected or appointed in the first place by the subscribers to the Memorandum of Association or by a majority of them
and shall hold office until their successors are elected or appointed or their office is otherwise vacated.
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(2) Subject
to the Articles and the Law, the Members may by ordinary resolution elect any person to be a Director either to fill a casual vacancy
or as an addition to the existing Board.
(3) The
Directors shall have the power from time to time and at any time to appoint any person as a Director to fill a casual vacancy on
the Board or as an addition to the existing Board.
(4) No
Director shall be required to hold any shares of the Company by way of qualification and a Director who is not a Member shall be
entitled to receive notice of and to attend and speak at any general meeting of the Company and of all classes of shares of the
Company. Each Director shall hold office until the expiration of his term, or his resignation from the Board, or until his successor
shall have been elected and qualified.
(5) Subject
to any provision to the contrary in these Articles, a Director may be removed by way of an ordinary resolution of the Members at
any time before the expiration of his period of office notwithstanding anything in these Articles or in any agreement between the
Company and such Director (but without prejudice to any claim for damages under any such agreement).
(6) A
vacancy on the Board created by the removal of a Director under the provisions of subparagraph (5) above may be filled by the election
or appointment by ordinary resolution of the Members at the meeting at which such Director is removed or by the affirmative vote
of a simple majority of the remaining Directors present and voting at a Board meeting.
(7) The
Members may from time to time in general meeting by ordinary resolution increase or reduce the number of Directors but so that
the number of Directors shall never be less than three (3).
DISQUALIFICATION OF DIRECTORS
|
86.
|
The office of a Director shall be vacated if the Director:
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(1) resigns
his office by Notice delivered to the Company at the Office or tendered at a meeting of the Board;
(2) becomes
of unsound mind or dies;
(3) without
special leave of absence from the Board, is absent from meetings of the Board for six consecutive times and the Board resolves
that his office be vacated; or
(4) becomes
bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;
(5) is
prohibited by law from being a Director; or
(6) ceases
to be a Director by virtue of any provision of the Statutes or is removed from office pursuant to these Articles.
EXECUTIVE DIRECTORS
|
87.
|
The Board may from time to time appoint any one or more of its body to be a managing director,
joint managing director or deputy managing director or to hold any other employment or executive office with the Company for such
period (subject to their continuance as Directors) and upon such terms as the Board may determine and the Board may revoke or terminate
any of such appointments. Any such revocation or termination as aforesaid shall be without prejudice to any claim for damages that
such Director may have against the Company or the Company may have against such Director. A Director appointed to an office under
this Article 87 shall be subject to the same provisions as to removal as the other Directors of the Company, and he shall (subject
to the provisions of any contract between him and the Company) ipso facto and immediately cease to hold such office if he shall
cease to hold the office of Director for any cause.
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|
88.
|
Notwithstanding Articles 93, 94, 95 and 96, an executive director appointed to an office under
Article 87 hereof shall receive such remuneration (whether by way of salary, commission, participation in profits or otherwise
or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement)
and allowances as the Board may from time to time determine, and either in addition to or in lieu of his remuneration as a Director.
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ALTERNATE DIRECTORS
|
89.
|
Any Director may at any time by Notice delivered to the Office or head office or at a meeting of
the Directors appoint any person (including another Director) to be his alternate Director. Any person so appointed shall have
all the rights and powers of the Director or Directors for whom such person is appointed in the alternative
provided
that
such person shall not be counted more than once in determining whether or not a quorum is present. An alternate Director may be
removed at any time by the body which appointed him and, subject thereto, the office of alternate Director shall continue until
the happening of any event which, if he were a Director, would cause him to vacate such office or if his appointer ceases for any
reason to be a Director. Any appointment or removal of an alternate Director shall be effected by Notice signed by the appointor
and delivered to the Office or head office or tendered at a meeting of the Board. An alternate Director may also be a Director
in his own right and may act as alternate to more than one Director. An alternate Director shall, if his appointor so requests,
be entitled to receive notices of meetings of the Board or of committees of the Board to the same extent as, but in lieu of, the
Director appointing him and shall be entitled to such extent to attend and vote as a Director at any such meeting at which the
Director appointing him is not personally present and generally at such meeting to exercise and discharge all the functions, powers
and duties of his appointor as a Director and for the purposes of the proceedings at such meeting the provisions of these Articles
shall apply as if he were a Director save that as an alternate for more than one Director his voting rights shall be cumulative.
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|
90.
|
An alternate Director shall only be a Director for the purposes of the Law and shall only be subject
to the provisions of the Law insofar as they relate to the duties and obligations of a Director when performing the functions of
the Director for whom he is appointed in the alternative and shall alone be responsible to the Company for his acts and defaults
and shall not be deemed to be the agent of or for the Director appointing him. An alternate Director shall be entitled to contract
and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified
by the Company to the same extent
mutatis mutandis
as if he were a Director but he shall not be entitled to receive
from the Company any fee in his capacity as an alternate Director except only such part, if any, of the remuneration otherwise
payable to his appointor as such appointor may by Notice to the Company from time to time direct.
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|
91.
|
Every person acting as an alternate Director shall have one vote for each Director for whom he
acts as alternate (in addition to his own vote if he is also a Director). If his appointor is for the time being not available
or unable to act, the signature of an alternate Director to any resolution in writing of the Board or a committee of the Board
of which his appointor is a member shall, unless the notice of his appointment provides to the contrary, be as effective as the
signature of his appointor.
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|
92.
|
An alternate Director shall ipso facto cease to be an alternate Director if his appointor ceases
for any reason to be a Director, however, such alternate Director or any other person may be re-appointed by the Directors to serve
as an alternate Director
provided
always that, if at any meeting any Director retires but is re-elected at the same meeting,
any appointment of such alternate Director pursuant to these Articles which was in force immediately before his retirement shall
remain in force as though he had not retired.
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DIRECTORS’ FEES AND EXPENSES
|
93.
|
The Directors shall receive such remuneration as the Board may from time to time determine.
|
|
94.
|
Each Director shall be entitled to be repaid or prepaid all travelling, hotel and incidental expenses
reasonably incurred or expected to be incurred by him in attending meetings of the Board or committees of the Board or general
meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge
of his duties as a Director.
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|
95.
|
Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs
services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether
by way of salary, commission, participation in profits or otherwise) as the Board may determine and such extra remuneration shall
be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Article.
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|
96.
|
The Board shall determine any payment to any Director or past
Director of the Company by way of compensation for loss of office, or as consideration for or in connection with his retirement
from office (not being payment to which the Director is contractually entitled).
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DIRECTORS’ INTERESTS
|
(a)
|
hold any other office or place of profit with the Company (except that of Auditor) in conjunction
with his office of Director for such period and upon such terms as the Board may determine. Any remuneration (whether by way of
salary, commission, participation in profits or otherwise) paid to any Director in respect of any such other office or place of
profit shall be in addition to any remuneration provided for by or pursuant to any other Article;
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|
(b)
|
act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor)
and he or his firm may be remunerated for professional services as if he were not a Director;
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|
(c)
|
continue to be or become a director, managing director, joint managing director, deputy managing
director, executive director, manager or other officer or member of any other company promoted by the Company or in which the Company
may be interested as a vendor, shareholder or otherwise and, unless otherwise agreed, no such Director shall be accountable for
any remuneration, profits or other benefits received by him as a director, managing director, joint managing director, deputy managing
director, executive director, manager or other officer or member of or from his interests in any such other company. Subject as
otherwise provided by these Articles the Directors may exercise or cause to be exercised the voting powers conferred by the shares
in any other company held or owned by the Company, or exercisable by them as Directors of such other company in such manner in
all respects as they think fit (including the exercise thereof in favour of any resolution appointing themselves or any of them
directors, managing directors, joint managing directors, deputy managing directors, executive directors, managers or other officers
of such company) or voting or providing for the payment of remuneration to the director, managing director, joint managing director,
deputy managing director, executive director, manager or other officers of such other company and any Director may vote in favour
of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or about to be, appointed a director,
managing director, joint managing director, deputy managing director, executive director, manager or other officer of such other
company, and that as such he is or may become interested in the exercise of such voting rights in manner aforesaid.
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Notwithstanding the
foregoing, no “Independent Director” as defined in the rules of the Designated Stock Exchange or in Rule 10A-3 under
the Exchange Act, and with respect of whom the Board has determined constitutes an “Independent Director” for purposes
of compliance with applicable law or the rules of the Designated Stock Exchange, shall take any of the foregoing actions or any
other action that would reasonably be likely to affect such Director’s status as an “Independent Director” of
the Company without the consent of the Audit Committee.
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98.
|
Subject to the Law and to these Articles, no Director or proposed or intending Director shall be
disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit
or as vendor, purchaser or in any other manner whatever, nor shall any such contract or any other contract or arrangement in which
any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be
liable to account to the Company or the Members for any remuneration, profit or other benefits realised by any such contract or
arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established
provided
that such Director shall disclose the nature of his interest in any contract or arrangement in which he is interested in accordance
with Article 99 herein. Any such transaction that would reasonably be likely to affect a Director’s status as an “Independent
Director”, or that would constitute a “related party transaction”, as defined under applicable law or the rules
of the Designated Stock Exchange, shall require the approval of the Audit Committee.
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|
99.
|
A Director who to his knowledge is in any way, whether directly or indirectly, interested in a
contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the meeting
of the Board at which the question of entering into the contract or arrangement is first considered, if he knows his interest then
exists, or in any other case at the first meeting of the Board after he knows that he is or has become so interested. For the purposes
of this Article, a general Notice to the Board by a Director to the effect that:
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|
(a)
|
he is a member or officer of a specified company or firm and is to be regarded as interested in
any contract or arrangement which may after the date of the Notice be made with that company or firm; or
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|
(b)
|
he is to be regarded as interested in any contract or arrangement which may after the date of the
Notice be made with a specified person who is connected with him;
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shall be deemed to be a sufficient
declaration of interest under this Article in relation to any such contract or arrangement,
provided
that no such notice
shall be effective unless either it is given at a meeting of the Board or the Director takes reasonable steps to secure that it
is brought up and read at the next Board meeting after it is given.
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100.
|
Following a declaration being made pursuant to the last preceding two Articles, subject to any
separate requirement for Audit Committee approval under applicable law or the listing rules of the Company’s Designated Stock
Exchange, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract
or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting.
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GENERAL POWERS OF THE DIRECTORS
|
101.
|
(1) The
business of the Company shall be managed and conducted by the Board, which may pay all expenses incurred in forming and registering
the Company and may exercise all powers of the Company (whether relating to the management of the business of the Company or otherwise)
which are not by the Statutes or by these Articles required to be exercised by the Members in a general meeting, subject nevertheless
to the provisions of the Statutes and of these Articles and to such regulations being not inconsistent with such provisions, as
may be prescribed by the Members in a general meeting, but no regulations made by the Members in a general meeting shall invalidate
any prior act of the Board which would have been valid if such regulations had not been made. The general powers given by this
Article shall not be limited or restricted by any special authority or power given to the Board by any other Article.
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(2) Any
person contracting or dealing with the Company in the ordinary course of business shall be entitled to rely on any written or oral
contract or agreement or deed, document or instrument entered into or executed as the case may be by any two of the Directors acting
jointly on behalf of the Company and the same shall be deemed to be validly entered into or executed by the Company as the case
may be and shall, subject to any rule of law, be binding on the Company.
(3) Without
prejudice to the general powers conferred by these Articles it is hereby expressly declared that the Board shall have the following
powers:
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(a)
|
To give to any person the right or option of requiring at a future date that an allotment shall
be made to him of any share at par or at such premium as may be agreed.
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|
(b)
|
To give to any Directors, officers or employees of the Company an interest in any particular business
or transaction or participation in the profits thereof or in the general profits of the Company either in addition to or in substitution
for a salary or other remuneration.
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|
(c)
|
To resolve that the Company be deregistered in the Cayman Islands and continued in a named jurisdiction
outside the Cayman Islands subject to the provisions of the Law.
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|
102.
|
The Board may establish any regional or local boards or agencies for managing any of the affairs
of the Company in any place, and may appoint any persons to be members of such local boards, or any managers or agents, and may
fix their remuneration (either by way of salary or by commission or by conferring the right to participation in the profits of
the Company or by a combination of two or more of these modes) and pay the working expenses of any staff employed by them upon
the business of the Company. The Board may delegate to any regional or local board, manager or agent any of the powers, authorities
and discretions vested in or exercisable by the Board (other than its powers to make calls and forfeit shares), with power to sub-delegate,
and may authorise the members of any of them to fill any vacancies therein and to act notwithstanding vacancies. Any such appointment
or delegation may be made upon such terms and subject to such conditions as the Board may think fit, and the Board may remove any
person appointed as aforesaid, and may revoke or vary such delegation, but no person dealing in good faith and without notice of
any such revocation or variation shall be affected thereby.
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|
103.
|
The Board may by power of attorney appoint any company, firm or person or any fluctuating body
of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Articles)
and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as the Board may think fit, and may also authorise
any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. Such attorney or attorneys
may, if so authorised under the Seal of the Company, execute any deed or instrument under their personal seal with the same effect
as the affixation of the Company’s Seal.
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|
104.
|
The Board may entrust to and confer upon a managing director, joint managing director, deputy managing
director, an executive director or any Director any of the powers exercisable by it upon such terms and conditions and with such
restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, and may from time to time
revoke or vary all or any of such powers but no person dealing in good faith and without notice of such revocation or variation
shall be affected thereby.
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|
105.
|
All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable
or transferable or not, and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed or otherwise
executed, as the case may be, in such manner as the Board shall from time to time by resolution determine. The Company’s
banking accounts shall be kept with such banker or bankers as the Board shall from time to time determine.
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|
106.
|
(1) The
Board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which
it is associated in business) in establishing and making contributions out of the Company’s moneys to any schemes or funds
for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression
as used in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive
office or any office of profit under the Company or any of its subsidiary companies) and ex-employees of the Company and their
dependants or any class or classes of such person.
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(2) The
Board may pay, enter into agreements to pay or make grants of revocable or irrevocable pensions or other benefits to employees
and ex-employees and their dependants, or to any of such persons, including pensions or benefits additional to those, if any, to
which such employees or ex-employees or their dependants are or may become entitled under any such scheme or fund as mentioned
in the last preceding paragraph. Any such pension or benefit may, as the Board considers desirable, be granted to an employee either
before and in anticipation of or upon or at any time after his actual retirement, and may be subject or not subject to any terms
or conditions as the Board may determine.
BORROWING POWERS
|
107.
|
The Board may exercise all the powers of the Company to raise or borrow money and to mortgage or
charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject
to the Law, to issue debentures, bonds and other securities, whether outright or as collateral security for any debt, liability
or obligation of the Company or of any third party.
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|
108.
|
Debentures, bonds and other securities may be made assignable free from any equities between the
Company and the person to whom the same may be issued.
|
|
109.
|
Any debentures, bonds or other securities may be issued at a discount (other than shares), premium
or otherwise and with any special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at
general meetings of the Members, appointment of Directors and otherwise.
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|
110.
|
(1) Where
any uncalled capital of the Company is charged, all persons taking any subsequent charge thereon shall take the same subject to
such prior charge, and shall not be entitled, by notice to the Members or otherwise, to obtain priority over such prior charge.
|
(2) The
Board shall cause a proper register to be kept, in accordance with the provisions of the Law, of all charges specifically affecting
the property of the Company and of any series of debentures issued by the Company and shall duly comply with the requirements of
the Law in regard to the registration of charges and debentures therein specified and otherwise.
PROCEEDINGS OF THE DIRECTORS
|
111.
|
The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as
it considers appropriate. Questions arising at any meeting shall be determined by a majority of votes. In the case of any equality
of votes the chairman of the meeting shall have an additional or casting vote.
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|
112.
|
A meeting of the Board may be convened by the Secretary on request of a Director or by any Director.
The Secretary shall convene a meeting of the Board of which notice may be given in writing or by telephone or in such other manner
as the Board may from time to time determine whenever he shall be required so to do by the chief executive officer or chairman,
as the case may be, or any Director.
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|
113.
|
(1) The
quorum necessary for the transaction of the business of the Board may be fixed by the Board and, unless so fixed at any other
number, shall be a majority of the Directors then in office, including the Chairman. An alternate Director shall be counted in
a quorum in the case of the absence of a Director for whom he is the alternate
provided
that he shall not be counted more
than once for the purpose of determining whether or not a quorum is present.
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(2) Directors
may participate in any meeting of the Board by means of a conference telephone or other communications equipment through which
all persons participating in the meeting can communicate with each other simultaneously and instantaneously and, for the purpose
of counting a quorum, such participation shall constitute presence at a meeting as if those participating were present in person.
(3) Any
Director who ceases to be a Director at a Board meeting may continue to be present and to act as a Director and be counted in the
quorum until the termination of such Board meeting if no other Director objects and if otherwise a quorum of Directors would not
be present.
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114.
|
The continuing Directors or a sole continuing Director may act notwithstanding any vacancy in the
Board but, if and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with these Articles
as the quorum, the continuing Directors or Director, notwithstanding that the number of Directors is below the number fixed by
or in accordance with these Articles as the quorum or that there is only one continuing Director, may act for the purpose of filling
vacancies in the Board or of summoning general meetings of the Company but not for any other purpose.
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|
115.
|
The Chairman of the Board shall be the chairman of all meetings of the Board. If the Chairman of
the Board is not present at any meeting within five (5) minutes after the time appointed for holding the same, the Directors present
may choose one of their number to be chairman of the meeting.
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|
116.
|
A meeting of the Board at which a quorum is present shall be competent to exercise all the powers,
authorities and discretions for the time being vested in or exercisable by the Board.
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117.
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(1) The
Board may delegate any of its powers, authorities and discretions to committees (including, without limitation, the Audit Committee),
consisting of such Director or Directors and other persons as it thinks fit, and they may, from time to time, revoke such delegation
or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes.
Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations
which may be imposed on it by the Board.
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(2) All
acts done by any such committee in conformity with such regulations, and in fulfilment of the purposes for which it was appointed,
but not otherwise, shall have like force and effect as if done by the Board, and the Board (or if the Board delegates such power,
the committee) shall have power to remunerate the members of any such committee, and charge such remuneration to the current expenses
of the Company.
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118.
|
The meetings and proceedings of any committee consisting of two or more members shall be governed
by the provisions contained in these Articles for regulating the meetings and proceedings of the Board so far as the same are applicable
and are not superseded by any regulations imposed by the Board under the last preceding Article, indicating, without limitation,
any committee charter adopted by the Board for purposes or in respect of any such committee.
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|
119.
|
A resolution in writing signed by all the Directors except such as are temporarily unable to act
due to ill-health or disability shall (
provided
that such number is sufficient to constitute a quorum and further
provided
that a copy of such resolution has been given or the contents thereof communicated to all the Directors for the time being entitled
to receive notices of Board meetings in the same manner as notices of meetings are required to be given by these Articles) be as
valid and effectual as if a resolution had been passed at a meeting of the Board duly convened and held. Such resolution may be
contained in one document or in several documents in like form each signed by one or more of the Directors and for this purpose
a facsimile signature of a Director shall be treated as valid.
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120.
|
All acts bona fide done by the Board or by any committee or by any person acting as a Director
or members of a committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment
of any member of the Board or such committee or person acting as aforesaid or that they or any of them were disqualified or had
vacated office, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director
or member of such committee.
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COMMITTEES
|
121.
|
Without prejudice to the freedom of the Directors to establish any other committees, for so long
as the shares of the Company (or depositary receipts therefor) are listed or quoted on the Designated Stock Exchange, the Board
shall establish and maintain an Audit Committee as a committee of the Board, the composition and responsibilities of which shall
comply with the rules of the Designated Stock Exchange and the rules and regulations of the SEC.
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|
122.
|
(1) The
Board shall adopt a formal written audit committee charter and review and assess the adequacy of the formal written charter on
an annual basis.
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(2) The
Audit Committee shall meet at least once every financial quarter, or more frequently as circumstances dictate.
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123.
|
For so long as the shares of the Company (or depositary receipts therefor) are listed or quoted
on the Designated Stock Exchange, the Company shall conduct an appropriate review of all related party transactions on an ongoing
basis and shall utilize the Audit Committee for the review and approval of potential conflicts of interest. Specially, the Audit
Committee shall approve any transaction or transactions between the Company and any of the following parties: (i) any shareholder
owning an interest in the voting power of the Company or any subsidiary of the Company that gives such shareholder significant
influence over the Company or any subsidiary of the Company, (ii) any director or executive officer of the Company or any subsidiary
of the Company and any relative of such director or executive officer, (iii) any person in which a substantial interest in the
voting power is owned, directly or indirectly, by any person described in (i) or (ii) or over which such a person is able to exercise
significant influence, and (iv) any affiliate (other than a subsidiary) of the Company.
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OFFICERS
|
124.
|
(1) The
officers of the Company shall consist of the Chairman of the Board, the Directors and such additional officers (who may or may
not be Directors) as the Board may from time to time determine, all of whom shall be deemed to be officers for the purposes of
the Law and these Articles. In addition to the officers of the Company, the Board may also from time to time determine and appoint
managers and delegate to the same such powers and duties as are prescribed by the Board.
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(2) The
Directors shall elect, by a majority of the Directors then in office, amongst the Directors a chairman.
(3) The
officers shall receive such remuneration as the Directors may from time to time determine.
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125.
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(1) The
Secretary and additional officers, if any, shall be appointed by the Board and shall hold office on such terms and for such period
as the Board may determine. If thought fit, two or more persons may be appointed as joint Secretaries. The Board may also appoint
from time to time on such terms as it thinks fit one or more assistant or deputy Secretaries.
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(2) The
Secretary shall attend all meetings of the Members and shall keep correct minutes of such meetings and enter the same in the proper
books provided for the purpose. He shall perform such other duties as are prescribed by the Law or these Articles or as may be
prescribed by the Board.
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126.
|
The officers of the Company shall have such powers and perform such duties in the management, business
and affairs of the Company as may be delegated to them by the Directors from time to time.
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|
127.
|
A provision of the Law or of these Articles requiring or authorising a thing to be done by or to
a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as or
in place of the Secretary.
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REGISTER OF DIRECTORS AND OFFICERS
|
128.
|
The Company shall cause to be kept in one or more books at its Office a Register of Directors and
Officers in which there shall be entered the full names and addresses of the Directors and Officers and such other particulars
as required by the Law or as the Directors may determine. The Company shall send to the Registrar of Companies in the Cayman Islands
a copy of such register, and shall from time to time notify to the said Registrar of any change that takes place in relation to
such Directors and Officers as required by the Law.
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MINUTES
|
129.
|
(1) The
Board shall cause minutes to be duly entered in books provided for the purpose:
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|
(a)
|
of all elections and appointments of officers;
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(b)
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of the names of the Directors present at each meeting of the Directors and of any committee of
the Directors;
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(c)
|
of all resolutions and proceedings of each general meeting of the Members, meetings of the Board
and meetings of committees of the Board and where there are managers, of all proceedings of meetings of the managers.
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(2)
|
Minutes shall be kept by the Secretary at the Office.
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SEAL
|
130.
|
(1) The
Company shall have one or more Seals, as the Board may determine. For the purpose of sealing documents creating or evidencing
securities issued by the Company, the Company may have a securities seal which is a facsimile of the Seal of the Company with
the addition of the word “Securities” on its face or in such other form as the Board may approve. The Board shall
provide for the custody of each Seal and no Seal shall be used without the authority of the Board or of a committee of the Board
authorised by the Board in that behalf. Subject as otherwise provided in these Articles, any instrument to which a Seal is affixed
shall be signed autographically by one Director and the Secretary or by two Directors or by such other person (including a Director)
or persons as the Board may appoint, either generally or in any particular case, save that as regards any certificates for shares
or debentures or other securities of the Company the Board may by resolution determine that such signatures or either of them
shall be dispensed with or affixed by some method or system of mechanical signature. Every instrument executed in manner provided
by this Article 130 shall be deemed to be sealed and executed with the authority of the Board previously given.
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(2) Where
the Company has a Seal for use abroad, the Board may by writing under the Seal appoint any agent or committee abroad to be the
duly authorised agent of the Company for the purpose of affixing and using such Seal and the Board may impose restrictions on the
use thereof as may be thought fit. Wherever in these Articles reference is made to the Seal, the reference shall, when and so far
as may be applicable, be deemed to include any such other Seal as aforesaid.
AUTHENTICATION OF DOCUMENTS
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131.
|
Any Director or the Secretary or any person appointed by the Board for the purpose may authenticate
any documents affecting the constitution of the Company and any resolution passed by the Company or the Board or any committee,
and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts
therefrom as true copies or extracts, and if any books, records, documents or accounts are elsewhere than at the Office or the
head office the local manager or other officer of the Company having the custody thereof shall be deemed to be a person so appointed
by the Board. A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company or
of the Board or any committee thereof which is so certified shall be conclusive evidence in favour of all persons dealing with
the Company upon the faith thereof that such resolution has been duly passed or, as the case may be, that such minutes or extract
is a true and accurate record of proceedings at a duly constituted meeting.
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DESTRUCTION OF DOCUMENTS
|
132.
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(1) The
Company shall be entitled to destroy the following documents at the following times:
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(a)
|
any share certificate which has been cancelled at any time after the expiry of one (1) year from
the date of such cancellation;
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(b)
|
any dividend mandate or any variation or cancellation thereof or any notification of change of
name or address at any time after the expiry of two (2) years from the date such mandate variation cancellation or notification
was recorded by the Company;
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(c)
|
any instrument of transfer of shares which has been registered at any time after the expiry of
seven (7) years from the date of registration;
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(d)
|
any allotment letters after the expiry of seven (7) years from the date of issue thereof; and
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(e)
|
copies of powers of attorney, grants of probate and letters of administration at any time after
the expiry of seven (7) years after the account to which the relevant power of attorney, grant of probate or letters of administration
related has been closed;
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and it shall conclusively be presumed
in favour of the Company that every entry in the Register purporting to be made on the basis of any such documents so destroyed
was duly and properly made and every share certificate so destroyed was a valid certificate duly and properly cancelled and that
every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every other
document destroyed hereunder was a valid and effective document in accordance with the recorded particulars thereof in the books
or records of the Company.
Provided
always that: (1) the foregoing provisions of this Article 132 shall apply only to the
destruction of a document in good faith and without express notice to the Company that the preservation of such document was relevant
to a claim; (2) nothing contained in this Article 132 shall be construed as imposing upon the Company any liability in respect
of the destruction of any such document earlier than as aforesaid or in any case where the conditions of proviso (1) above are
not fulfilled; and (3) references in this Article to the destruction of any document include references to its disposal in any
manner.
(2) Notwithstanding
any provision contained in these Articles, the Directors may, if permitted by applicable law, authorise the destruction of documents
set out in sub-paragraphs (a) to (e) of paragraph (1) of this Article 132 and any other documents in relation to share registration
which have been microfilmed or electronically stored by the Company or by the share registrar on its behalf
provided
always
that this Article shall apply only to the destruction of a document in good faith and without express notice to the Company and
its share registrar that the preservation of such document was relevant to a claim.
DIVIDENDS AND OTHER PAYMENTS
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133.
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Subject to the Law and any rights and restrictions for the time being attached to any class or
classes of shares and these Articles, the Board may from time to time declare dividends in any currency to be paid to the Members
and other distributions on shares in issue and authorise payment of the same out of the funds of the Company lawfully available
therefor. At any and every time the Board declares dividends, Class A Ordinary Shares and Class B Ordinary Shares shall have identical
rights in the dividends so declared.
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|
134.
|
Dividends may be declared and paid out of the profits of the Company, realised or unrealised, or
from any reserve set aside from profits which the Directors determine is no longer needed. The Board may also declare and pay dividends
out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Law.
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|
135.
|
Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provide,
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|
(a)
|
all dividends shall be declared and paid according to the amounts paid up on the shares in respect
of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for the purposes of this Article
as paid up on the share; and
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|
(b)
|
all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares
during any portion or portions of the period in respect of which the dividend is paid.
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|
136.
|
The Board may from time to time pay to the Members such interim dividends as appear to the Board
to be justified by the profits of the Company and in particular (but without prejudice to the generality of the foregoing) if at
any time the share capital of the Company is divided into different classes, the Board may pay such interim dividends in respect
of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferential rights as well as
in respect of those shares which confer on the holders thereof preferential rights with regard to dividend and may also pay any
fixed dividend which is payable on any shares of the Company half-yearly or on any other dates, whenever such profits, in the opinion
of the Board, justifies such payment. The Board shall not incur any responsibility to the holders of shares conferring any preference
for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non-preferential
rights
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|
137.
|
The Board may deduct from any dividend or other moneys payable to a Member by the Company on or
in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.
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|
138.
|
No dividend or other moneys payable by the Company on or in respect of any share shall bear interest
against the Company.
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|
139.
|
Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque
or warrant sent through the post addressed to the holder at his registered address or, in the case of joint holders, addressed
to the holder whose name stands first in the Register in respect of the shares at his address as appearing in the Register or addressed
to such person and at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless
the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the
order of the holder whose name stands first on the Register in respect of such shares, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company notwithstanding
that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged. Any one of two or
more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of
the shares held by such joint holders.
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|
140.
|
All dividends or bonuses unclaimed for one (1) year after having been declared may be invested
or otherwise made use of by the Board for the benefit of the Company until claimed. Any dividend or bonuses unclaimed after a period
of six (6) years from the date of declaration shall be forfeited and shall revert to the Company. The payment by the Board of any
unclaimed dividend or other sums payable on or in respect of a share into a separate account shall not constitute the Company a
trustee in respect thereof.
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|
141.
|
Whenever the Board has resolved that a dividend be paid or declared, the Board may further resolve
that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind and in particular of paid
up shares, debentures or warrants to subscribe securities of the Company or any other company, or in any one or more of such ways,
and where any difficulty arises in regard to the distribution the Board may settle the same as it thinks expedient, and in particular
may issue certificates in respect of fractions of shares, disregard fractional entitlements or round the same up or down, and may
fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made
to any Members upon the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific
assets in trustees as may seem expedient to the Board and may appoint any person to sign any requisite instruments of transfer
and other documents on behalf of the persons entitled to the dividend, and such appointment shall be effective and binding on the
Members. The Board may resolve that no such assets shall be made available to Members with registered addresses in any particular
territory or territories where, in the absence of a registration statement or other special formalities, such distribution of assets
would or might, in the opinion of the Board, be unlawful or impracticable and in such event the only entitlement of the Members
aforesaid shall be to receive cash payments as aforesaid. Members affected as a result of the foregoing sentence shall not be or
be deemed to be a separate class of Members for any purpose whatsoever.
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|
142.
|
(1) Whenever
the Board has resolved that a dividend be paid or declared on any class of the share capital of the Company, the Board may further
resolve either:
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|
(a)
|
that such dividend be satisfied wholly or in part in the form of an allotment of shares credited
as fully paid up,
provided
that the Members entitled thereto will be entitled to elect to receive such dividend (or part
thereof if the Board so determines) in cash in lieu of such allotment. In such case, the following provisions shall apply:
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|
(i)
|
the basis of any such allotment shall be determined by the Board;
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|
(ii)
|
the Board, after determining the basis of allotment, shall give not less than ten (10) days’
Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of
election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms
of election must be lodged in order to be effective;
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|
(iii)
|
the right of election may be exercised in respect of the whole or part of that portion of the dividend
in respect of which the right of election has been accorded; and
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|
(iv)
|
the dividend (or that part of the dividend to be satisfied by the allotment of shares as aforesaid)
shall not be payable in cash on shares in respect whereof the cash election has not been duly exercised (“the non-elected
shares”) and in satisfaction thereof shares of the relevant class shall be allotted credited as fully paid up to the holders
of the non-elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and
apply out of any part of the undivided profits of the Company (including profits carried and standing to the credit of any reserves
or other special account, share premium account, capital redemption reserve other than the Subscription Rights Reserve) as the
Board may determine, such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment
and distribution to and amongst the holders of the non-elected shares on such basis; or
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|
(b)
|
that the Members entitled to such dividend shall be entitled to elect to receive an allotment of
shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. In such case, the
following provisions shall apply:
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|
(i)
|
the basis of any such allotment shall be determined by the Board;
|
|
(ii)
|
the Board, after determining the basis of allotment, shall give not less than ten (10) days’
Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of
election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms
of election must be lodged in order to be effective;
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|
(iii)
|
the right of election may be exercised in respect of the whole or part of that portion of the dividend
in respect of which the right of election has been accorded; and
|
|
(iv)
|
the dividend (or that part of the dividend in respect of which a right of election has been accorded)
shall not be payable in cash on shares in respect whereof the share election has been duly exercised (“the elected shares”)
and in satisifaction thereof shares of the relevant class shall be allotted credited as fully paid up to the holders of the elected
shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and apply out of any part
of the undivided profits of the Company (including profits carried and standing to the credit of any reserves or other special
account, share premium account, capital redemption reserve other than the Subscription Rights Reserve) as the Board may determine,
such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment and distribution
to and amongst the holders of the elected shares on such basis.
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|
(2)
|
(a) The
shares allotted pursuant to the provisions of paragraph (1) of this Article 142 shall rank
pari passu
in all respects with
shares of the same class (if any) then in issue save only as regards participation in the relevant dividend or in any other distributions,
bonuses or rights paid, made, declared or announced prior to or contemporaneously with the payment or declaration of the relevant
dividend unless, contemporaneously with the announcement by the Board of their proposal to apply the provisions of sub-paragraph
(a) or (b) of paragraph (2) of this Article 142 in relation to the relevant dividend or contemporaneously with their announcement
of the distribution, bonus or rights in question, the Board shall specify that the shares to be allotted pursuant to the provisions
of paragraph (1) of this Article shall rank for participation in such distribution, bonus or rights.
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|
(b)
|
The Board may do all acts and things considered necessary or expedient to give effect to any capitalisation
pursuant to the provisions of paragraph (1) of this Article 142 , with full power to the Board to make such provisions as it thinks
fit in the case of shares becoming distributable in fractions (including provisions whereby, in whole or in part, fractional entitlements
are aggregated and sold and the net proceeds distributed to those entitled, or are disregarded or rounded up or down or whereby
the benefit of fractional entitlements accrues to the Company rather than to the Members concerned). The Board may authorise any
person to enter into on behalf of all Members interested, an agreement with the Company providing for such capitalisation and matters
incidental thereto and any agreement made pursuant to such authority shall be effective and binding on all concerned.
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(3) The
Board may resolve in respect of any one particular dividend of the Company that notwithstanding the provisions of paragraph (1)
of this Article 142 a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid up without
offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.
(4) The
Board may on any occasion determine that rights of election and the allotment of shares under paragraph (1) of this Article 142
shall not be made available or made to any shareholders with registered addresses in any territory where, in the absence of a registration
statement or other special formalities, the circulation of an offer of such rights of election or the allotment of shares would
or might, in the opinion of the Board, be unlawful or impracticable, and in such event the provisions aforesaid shall be read and
construed subject to such determination. Members affected as a result of the foregoing sentence shall not be or be deemed to be
a separate class of Members for any purpose whatsoever.
(5) Any
resolution declaring a dividend on shares of any class may specify that the same shall be payable or distributable to the persons
registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior
to that on which the resolution is passed, and thereupon the dividend shall be payable or distributable to them in accordance with
their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors
and transferees of any such shares. The provisions of this Article shall
mutatis mutandis
apply to bonuses, capitalisation
issues, distributions of realised capital profits or offers or grants made by the Company to the Members.
RESERVES
|
143.
|
(1) The
Board shall establish an account to be called the share premium account and shall carry to the credit of such account from time
to time a sum equal to the amount or value of the premium paid on the issue of any share in the Company. Unless otherwise provided
by the provisions of these Articles, the Board may apply the share premium account in any manner permitted by the Law. The Company
shall at all times comply with the provisions of the Law in relation to the share premium account.
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(2) Before
recommending any dividend, the Board may set aside out of the profits of the Company such sums as it determines as reserves which
shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied
and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in
such investments as the Board may from time to time think fit and so that it shall not be necessary to keep any investments constituting
the reserve or reserves separate or distinct from any other investments of the Company. The Board may also without placing the
same to reserve carry forward any profits which it may think prudent not to distribute.
CAPITALISATION
|
144.
|
The Company may, upon the recommendation of the Board, at any time and from time to time pass an
ordinary resolution to the effect that it is desirable to capitalise all or any part of any amount for the time being standing
to the credit of any reserve or fund (including a share premium account and capital redemption reserve and the profit and loss
account) whether or not the same is available for distribution and accordingly that such amount be set free for distribution among
the Members or any class of Members who would be entitled thereto if it were distributed by way of dividend and in the same proportions,
on the basis that the same is not paid in cash but is applied either in or towards paying up the amounts for the time being unpaid
on any shares in the Company held by such Members respectively or in paying up in full unissued shares, debentures or other obligations
of the Company, to be allotted and distributed credited as fully paid up among such Members, or partly in one way and partly in
the other, and the Board shall give effect to such resolution
provided
that, for the purposes of this Article 144, a share
premium account and any capital redemption reserve or fund representing unrealised profits, may be applied only in paying up in
full unissued shares of the Company to be allotted to such Members credited as fully paid.
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|
145.
|
The Board may settle, as it considers appropriate, any difficulty arising in regard to any distribution
under Article 144 and in particular may issue certificates in respect of fractions of shares or authorise any person to sell and
transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion
but not exactly so or may ignore fractions altogether, and may determine that cash payments shall be made to any Members in order
to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any person to sign on behalf of
the persons entitled to participate in the distribution any contract necessary or desirable for giving effect thereto and such
appointment shall be effective and binding upon the Members.
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SUBSCRIPTION RIGHTS RESERVE
|
146.
|
The following provisions shall have effect to the extent that they are not prohibited by and are
in compliance with the Law:
|
|
(1)
|
If, so long as any of the rights attached to any warrants issued by the Company to subscribe for
shares of the Company shall remain exercisable, the Company does any act or engages in any transaction which, as a result of any
adjustments to the subscription price in accordance with the provisions of the conditions of the warrants, would reduce the subscription
price to below the par value of a share, then the following provisions shall apply:
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|
(a)
|
as from the date of such act or transaction the Company shall establish and thereafter (subject
as provided in this Article 146) maintain in accordance with the provisions of this Article 146 a reserve (the “Subscription
Rights Reserve”) the amount of which shall at no time be less than the sum which for the time being would be required to
be capitalised and applied in paying up in full the nominal amount of the additional shares required to be issued and allotted
credited as fully paid pursuant to sub-paragraph (c) below on the exercise in full of all the subscription rights outstanding and
shall apply the Subscription Rights Reserve in paying up such additional shares in full as and when the same are allotted;
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(b)
|
the Subscription Rights Reserve shall not be used for any purpose other than that specified above
unless all other reserves of the Company (other than share premium account) have been extinguished and will then only be used to
make good losses of the Company if and so far as is required by the Law;
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(c)
|
upon the exercise of all or any of the subscription rights represented by any warrant, the relevant
subscription rights shall be exercisable in respect of a nominal amount of shares equal to the amount in cash which the holder
of such warrant is required to pay on exercise of the subscription rights represented thereby (or, as the case may be the relevant
portion thereof in the event of a partial exercise of the subscription rights) and, in addition, there shall be allotted in respect
of such subscription rights to the exercising warrantholder, credited as fully paid, such additional nominal amount of shares as
is equal to the difference between:
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|
(i)
|
the said amount in cash which the holder of such warrant is required to pay on exercise of the
subscription rights represented thereby (or, as the case may be, the relevant portion thereof in the event of a partial exercise
of the subscription rights); and
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(ii)
|
the nominal amount of shares in respect of which such subscription rights would have been exercisable
having regard to the provisions of the conditions of the warrants, had it been possible for such subscription rights to represent
the right to subscribe for shares at less than par and immediately upon such exercise so much of the sum standing to the credit
of the Subscription Rights Reserve as is required to pay up in full such additional nominal amount of shares shall be capitalised
and applied in paying up in full such additional nominal amount of shares which shall forthwith be allotted credited as fully paid
to the exercising warrantholders; and
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(d)
|
if, upon the exercise of the subscription rights represented by any warrant, the amount standing
to the credit of the Subscription Rights Reserve is not sufficient to pay up in full such additional nominal amount of shares equal
to such difference as aforesaid to which the exercising warrantholder is entitled, the Board shall apply any profits or reserves
then or thereafter becoming available (including, to the extent permitted by the Law, share premium account) for such purpose until
such additional nominal amount of shares is paid up and allotted as aforesaid and until then no dividend or other distribution
shall be paid or made on the fully paid shares of the Company then in issue. Pending such payment and allotment, the exercising
warrantholder shall be issued by the Company with a certificate evidencing his right to the allotment of such additional nominal
amount of shares. The rights represented by any such certificate shall be in registered form and shall be transferable in whole
or in part in units of one share in the like manner as the shares for the time being are transferable, and the Company shall make
such arrangements in relation to the maintenance of a register therefor and other matters in relation thereto as the Board may
think fit and adequate particulars thereof shall be made known to each relevant exercising warrantholder upon the issue of such
certificate.
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(2) Shares
allotted pursuant to the provisions of this Article shall rank
pari passu
in all respects with the other shares allotted
on the relevant exercise of the subscription rights represented by the warrant concerned. Notwithstanding anything contained in
paragraph (1) of this Article, no fraction of any share shall be allotted on exercise of the subscription rights.
(3) The
provision of this Article as to the establishment and maintenance of the Subscription Rights Reserve shall not be altered or added
to in any way which would vary or abrogate, or which would have the effect of varying or abrogating the provisions for the benefit
of any warrantholder or class of warrantholders under this Article without the sanction of a special resolution of such warrantholders
or class of warrantholders.
(4) A
certificate or report by the auditors for the time being of the Company as to whether or not the Subscription Rights Reserve is
required to be established and maintained and if so the amount thereof so required to be established and maintained, as to the
purposes for which the Subscription Rights Reserve has been used, as to the extent to which it has been used to make good losses
of the Company, as to the additional nominal amount of shares required to be allotted to exercising warrantholders credited as
fully paid, and as to any other matter concerning the Subscription Rights Reserve shall (in the absence of manifest error) be conclusive
and binding upon the Company and all warrantholders and shareholders.
ACCOUNTING RECORDS
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147.
|
The Board shall cause true accounts to be kept of the sums of money received and expended by the
Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and
liabilities of the Company and of all other matters required by the Law or necessary to give a true and fair view of the Company’s
affairs and to explain its transactions.
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|
148.
|
The accounting records shall be kept at the Office or, at such other place or places as the Board
decides and shall always be open to inspection by the Directors. No Member (other than a Director) shall have any right of inspecting
any accounting record or book or document of the Company except as conferred by the Law or authorised by the Board or the Members
in general meeting.
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149.
|
Subject to Article 150, a printed copy of the Directors’ report, accompanied by the balance
sheet and profit and loss account, including every document required by the Law to be annexed thereto, made up to the end of the
applicable financial year and containing a summary of the assets and liabilities of the Company under convenient heads and a statement
of income and expenditure, together with a copy of the Auditors’ report, shall be sent to each person entitled thereto at
least ten (10) days before the date of the general meeting and laid before the Company at the annual general meeting held in accordance
with Article 56
provided
that this Article 150 shall not require a copy of those documents to be sent to any person whose
address the Company is not aware or to more than one of the joint holders of any shares or debentures.
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150.
|
Subject to due compliance with all applicable Statutes, rules and regulations, including, without
limitation, the rules of the Designated Stock Exchange, and to obtaining all necessary consents, if any, required thereunder, the
requirements of Article 149 shall be deemed satisfied in relation to any person by sending to the person in any manner not prohibited
by the Statutes, a summary financial statement derived from the Company’s annual accounts and the directors’ report
which shall be in the form and containing the information required by applicable laws and regulations,
provided
that any
person who is otherwise entitled to the annual financial statements of the Company and the directors’ report thereon may,
if he so requires by Notice served on the Company, demand that the Company sends to him, in addition to a summary financial statement,
a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.
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|
151.
|
The requirement to send to a person referred to in Article 149 the documents referred to in that
article or a summary financial report in accordance with Article 150 shall be deemed satisfied where, in accordance with all applicable
Statutes, rules and regulations, including, without limitation, the rules of the Designated Stock Exchange, the Company publishes
copies of the documents referred to in Article 149 and, if applicable, a summary financial report complying with Article 150, on
the Company’s computer network or in any other permitted manner (including by sending any form of electronic communication),
and that person has agreed or is deemed to have agreed to treat the publication or receipt of such documents in such manner as
discharging the Company’s obligation to send to him a copy of such documents.
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AUDIT
|
152.
|
Subject to applicable law and rules of the Designated Stock Exchange, the Board may appoint an
Auditor, who shall hold office until removed from office by a resolution of the Board, to audit the accounts of the Company. Such
auditor may be a Member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible
to act as an auditor of the Company.
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|
153.
|
Subject to the Law the accounts of the Company shall be audited at least once in every year.
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|
154.
|
The remuneration of the Auditor shall be determined by the Audit Committee or, in the absence of
such an Audit Committee, by the Board.
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155.
|
If the office of auditor becomes vacant by the resignation or death of the Auditor, or by his becoming
incapable of acting by reason of illness or other disability at a time when his services are required, the Directors shall fill
the vacancy and determine the remuneration of such Auditor.
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|
156.
|
The Auditor shall at all reasonable times have access to all books kept by the Company and to all
accounts and vouchers relating thereto; and he may call on the Directors or officers of the Company for any information in their
possession relating to the books or affairs of the Company.
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|
157.
|
The statement of income and expenditure and the balance sheet provided for by these Articles shall
be examined by the Auditor and compared by him with the books, accounts and vouchers relating thereto; and he shall make a written
report thereon stating whether such statement and balance sheet are drawn up so as to present fairly the financial position of
the Company and the results of its operations for the period under review and, in case information shall have been called for from
Directors or officers of the Company, whether the same has been furnished and has been satisfactory. The financial statements of
the Company shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a
written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted
to the Audit Committee. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction
other than the Cayman Islands. If so, the financial statements and the report of the Auditor should disclose this fact and name
such country or jurisdiction.
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NOTICES
|
158.
|
Any Notice or document, whether or not, to be given or issued under these Articles from the Company
to a Member shall be in writing or by cable, telex or facsimile transmission message or other form of electronic transmission or
communication and any such notice and document may be served or delivered by the Company on or to any Member either personally
or by sending it through the post in a prepaid envelope addressed to such Member at his registered address as appearing in the
Register or at any other address supplied by him to the Company for the purpose or, as the case may be, by transmitting it to any
such address or transmitting it to any telex or facsimile transmission number or electronic number or address or website supplied
by him to the Company for the giving of notice to him or which the person transmitting the notice reasonably and bona fide believes
at the relevant time will result in the Notice being duly received by the Member or may also be served by advertisement in appropriate
newspapers in accordance with the requirements of the Designated Stock Exchange or, to the extent permitted by the applicable laws,
by placing it on the Company’s website and giving to the member a notice stating that the notice or other document is available
there (a “notice of availability”). The notice of availability may be given to the Member by any of the means set out
above. In the case of joint holders of a share all notices shall be given to that one of the joint holders whose name stands first
in the Register and notice so given shall be deemed a sufficient service on or delivery to all the joint holders.
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159.
|
Any Notice or other document:
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(a)
|
if served or delivered by post, shall where appropriate be sent by airmail and shall be deemed
to have been served or delivered on the day following that on which the envelope containing the same, properly prepaid and addressed,
is put into the post; in proving such service or delivery it shall be sufficient to prove that the envelope or wrapper containing
the notice or document was properly addressed and put into the post and a certificate in writing signed by the Secretary or other
officer of the Company or other person appointed by the Board that the envelope or wrapper containing the notice or other document
was so addressed and put into the post shall be conclusive evidence thereof;
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(b)
|
if sent by electronic communication, shall be deemed to be given on the day on which it is transmitted
from the server of the Company or its agent. A notice placed on the Company’s website is deemed given by the Company to a
Member on the day following that on which a notice of availability is deemed served on the Member;
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(c)
|
if served or delivered in any other manner contemplated by these Articles, shall be deemed to have
been served or delivered at the time of personal service or delivery or, as the case may be, at the time of the relevant despatch
or transmission; and in proving such service or delivery a certificate in writing signed by the Secretary or other officer of the
Company or other person appointed by the Board as to the act and time of such service, delivery, despatch or transmission shall
be conclusive evidence thereof; and
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|
(d)
|
may be given to a Member in the English language or
such other language as may be approved by the Directors, subject to due compliance with all applicable Statutes, rules and regulations.
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160.
|
(1) Any
Notice or other document delivered or sent by post to or left at the registered address of any Member in pursuance of these Articles
shall, notwithstanding that such Member is then dead or bankrupt or that any other event has occurred, and whether or not the
Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any
share registered in the name of such Member as sole or joint holder unless his name shall, at the time of the service or delivery
of the notice or document, have been removed from the Register as the holder of the share, and such service or delivery shall
for all purposes be deemed a sufficient service or delivery of such Notice or document on all persons interested (whether jointly
with or as claiming through or under him) in the share.
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(2) A
notice may be given by the Company to the person entitled to a share in consequence of the death, mental disorder or bankruptcy
of a Member by sending it through the post in a prepaid letter, envelope or wrapper addressed to him by name, or by the title of
representative of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, supplied for the
purpose by the person claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner
in which the same might have been given if the death, mental disorder or bankruptcy had not occurred.
(3) Any
person who by operation of law, transfer or other means whatsoever shall become entitled to any share shall be bound by every notice
in respect of such share which prior to his name and address being entered on the Register shall have been duly given to the person
from whom he derives his title to such share.
SIGNATURES
|
161.
|
For the purposes of these Articles, a cable or telex or facsimile or electronic transmission message
purporting to come from a holder of shares or, as the case may be, a Director, or, in the case of a corporation which is a holder
of shares from a director or the secretary thereof or a duly appointed attorney or duly authorised representative thereof for it
and on its behalf, shall in the absence of express evidence to the contrary available to the person relying thereon at the relevant
time be deemed to be a document or instrument in writing signed by such holder or Director in the terms in which it is received.
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WINDING UP
|
162.
|
(1) The
Board shall have power in the name and on behalf of the Company to present a petition to the court for the Company to be wound
up.
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(2) A
resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.
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163.
|
(1) Subject
to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time
being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available for distribution
amongst the Members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement
of the winding up, the excess shall be distributed
pari passu
amongst such members in proportion to the amount paid up
on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst
the Members as such shall be insufficient to repay the whole of the paid-up capital such assets shall be distributed so that,
a nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been
paid up, at the commencement of the winding up on the shares held by them respectively.
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(2) If
the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of
a special resolution and any other sanction required by the Law, divide among the Members in specie or kind the whole or any part
of the assets of the Company and whether or not the assets shall consist of properties of one kind or shall consist of properties
to be divided as aforesaid of different kinds, and may for such purpose set such value as he deems fair upon any one or more class
or classes of property and may determine how such division shall be carried out as between the Members or different classes of
Members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit
of the Members as the liquidator with the like authority shall think fit, and the liquidation of the Company may be closed and
the Company dissolved, but so that no contributory shall be compelled to accept any shares or other property in respect of which
there is a liability.
INDEMNITY
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164.
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(1) The
Directors, Secretary and other officers for the time being of the Company and the liquidator or trustees (if any) for the time
being acting in relation to any of the affairs of the Company and everyone of them, and everyone of their heirs, executors and
administrators, shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions,
costs, charges, losses, damages and expenses which they or any of them, their or any of their heirs, executors or administrators,
shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty,
or supposed duty, in their respective offices or trusts; and none of them shall be answerable for the acts, receipts, neglects
or defaults of the other or others of them or for joining in any receipts for the sake of conformity, or for any bankers or other
persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for
insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested,
or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation
thereto,
provided
that this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach
to any of said persons.
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(2) Each
Member agrees to waive any claim or right of action he might have, whether individually or by or in the right of the Company, against
any Director on account of any action taken by such Director, or the failure of such Director to take any action in the performance
of his duties with or for the Company,
provided
that such waiver shall not extend to any matter in respect of any fraud
or dishonesty which may attach to such Director.
AMENDMENT TO MEMORANDUM AND ARTICLES OF ASSOCIATION
AND NAME OF COMPANY
|
165.
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No Article shall be rescinded, altered or amended and no new Article shall be made until the same
has been approved by a special resolution of the Members. A special resolution shall be required to alter the provisions of the
Memorandum of Association or to change the name of the Company.
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INFORMATION
|
166.
|
No Member shall be entitled to require discovery of or any information respecting any detail of
the Company’s trading or any matter which is or may be in the nature of a trade secret or secret process which may relate
to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interests
of the members of the Company to communicate to the public.
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Exhibit 4.2
Exhibit 4.4
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT
(this "
Agreement
") is entered into on April 10, 2018 (the "
Signing Date
"), by and among:
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(1)
|
Weidai Ltd., an exempted company duly incorporated with limited liability and validly existing
under the Laws of the Cayman Islands (the "
Company
");
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(2)
|
the party listed on
Part I
of
Exhibit A
attached hereto (the “
Series A Investor
”);
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(3)
|
the party listed on
Part II
of
Exhibit A
attached hereto (the “
Series A+
Investor
”);
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(4)
|
the parties listed on
Part III
of
Exhibit A
attached hereto (the “
Series
B Investors
”, and each a “
Series B Investor
”);
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(5)
|
the parties listed on
Part IV
of
Exhibit A
attached hereto (the “
Series
C Investors
”, and each a “
Series C Investor
”, together with the Series A Investor, the Series A+ Investor
and the Series B Investors, the “
Investors
” and each an “
Investor
”);
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(6)
|
the parties listed on
Part V
of
Exhibit A
(the "
Founder Parties
"
and each, a "
Founder Party
"); and
|
|
(7)
|
the parties listed on
Part VI
of
Exhibit A
(the "
Ordinary Purchasers
"
and each, an "
Ordinary Purchaser
").
|
Each of the forgoing parties is referred
to herein individually as a "
Party
" and collectively as the "
Parties
".
RECITALS
A. Each
of the Ordinary Purchasers and the Investors has individually entered into a Share Subscription Agreement with the Company dated
April 10, 2018 (the "
Share Subscription Agreements
").
B. Each
Share Subscription Agreement requires that the Parties enter into this Agreement as a condition to the consummation of transactions
contemplated therein.
C. The
Parties intend to enter into this Agreement and make the respective representations, warranties, covenants and agreements set forth
herein on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Unless otherwise
defined in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth in
Exhibit B
.
(i)
Board
Composition
. On and after the Closing, the Company shall have a board of directors (the "
Board
") consisting
of seven (7) directors. Subject to the applicable U.S. securities laws and regulations, the Board shall be constituted as follows:
|
(a)
|
Handing shall be entitled to appoint and remove two (2) directors (the “
Investor Directors
”
and each, an “
Investor Director
”) of the Board; and
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|
(b)
|
The Founder Parties shall be entitled to appoint and remove five (5) directors of the Board.
|
(ii)
Removal
and Replacement
. Any Shareholder or group of Shareholders entitled to designate any individual to be elected as a director
of the Board pursuant to
Section 2.1(i)
shall have the right to remove any such director occupying such position and to
fill any vacancy caused by the death, disability, retirement, resignation or removal of any director occupying such position. If
a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal of any director designated
pursuant to
Section 2.1(i)
, the replacement to fill such vacancy shall be designated in the same manner as the director
who is being replaced in accordance with
Section 2.1(i)
. For the avoidance of doubt, each director so appointed pursuant
to
Section 2.1(i)
shall possess the necessary qualifications as required under the applicable U.S. securities laws and regulations.
(iii)
Board
Meetings
. A quorum for a Board meeting shall consist of a majority of all directors. If a quorum is not present within half
an hour from the time appointed for the Board meeting or if during such a meeting a quorum ceases to be present, then such meeting
shall be adjourned for no more than fifteen (15) Business Days at the same place or such other time and place the directors then
present may determine, provided that, a notice of the adjourned Board meeting shall be sent to each director at least three (3)
Business Days before the adjourned Board meeting. The number of the directors attending such adjourned Board meeting shall constitute
a quorum at such adjourned Board meeting,
provided
that matters discussed in such adjourned meeting shall be limited to
those stated in the written notices and agendas of such meeting. Each director shall be entitled to appoint alternates to serve
at any Board meeting (or the meeting of a committee formed by the Board), and such alternates shall be permitted to attend all
Board meetings and vote on such director's behalf.
2.2
Protective
Provisions
. For so long as any Preferred Share remains outstanding, the Company shall not, and the Company shall cause other
Group Company not to, directly or indirectly, and whether by amendment, merger, consolidation, scheme of arrangement, amalgamation,
or otherwise, take any of the actions listed in
Exhibit C
attached hereto without the prior written consent of the Super
Majority Holders. Notwithstanding anything to the contrary contained herein, where any act listed in
Exhibit C
requires
the approval of the Shareholders in accordance with the Statute, and if the Shareholders vote in favour of such act but the approval
of the Super Majority Holders has not yet been obtained, the Shareholders who vote against such act at a meeting of the Shareholders
in aggregate shall have the voting rights equal to the aggregate voting power of all the Shareholders who voted in favor of such
act plus one (1).
2.3
Voting
Agreement
. Each Shareholder agrees that it shall vote all of its Shares (or give shareholders' consent) in such manner that
gives effect to the provisions of this Agreement, including without limitation to cause the Board to be constituted in accordance
with
Section 2.1(i)
.
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3.
|
RIGHTS AND RESTRICTIONS IN RESPECT OF SHARE ISSUANCE AND TRANSFER
|
3.1
Transfer
Restriction of the Ordinary Shareholders
. At any time prior to the QIPO, none of the Ordinary Shareholders shall transfer any
Ordinary Shares directly or indirectly owned by him/it without the prior written consent of the Series C Investors.
3.2
Exempted
Transfer
. The transfer restrictions under
Section 3.1
and the Right of First Refusal and Right of Co-Sale under
Sections
3.3
shall not apply to the transfer of any Shares pursuant to the ESOP (each such transferee, a “
Permitted Transferee
”);
provided
, that each such Permitted Transferee, prior to the completion of the transfer, shall have executed a joinder agreement,
in form and substance approved by the Board, to assume the obligations of an Ordinary Shareholder under this Agreement, with respect
to the transferred Shares;
provided further
, that the transferor shall remain liable for any breach by such Permitted Transferee
of any provision under this Agreement.
3.3
Rights
in Respect of Share Issuance or Transfer
. Each holder of the Preferred Shares shall have the Preemptive Right, the Right of
First Refusal and Right of Co-Sale as set forth in
Exhibit E
attached hereunder.
3.4
Waiver
.
In respect of any particular proposed issuance or transfer of Shares, the applicable Preemptive Right, Right of First Refusal or
Right of Co-Sale may be waived as follows:
(i) for
a right held by the holders of the Series C Preferred Shares, by written consent signed by the Series C Preferred Majority;
(ii) for
a right held by the holders of the Series B Preferred Shares, by written consent signed by the Series B Preferred Majority;
(iii) for
a right held by the holders of the Series A+ Preferred Shares, by written consent signed by the Series A+ Preferred Majority.
3.5
Transfer
Defined
. For the purpose of this Agreement, the term "transfer" shall include any direct or indirect transfer, sale,
assignment or any other disposal (including creation of any encumbrance), and its verb form and the terms of "transferor"
and "transferee" shall have the meaning correlative to the foregoing. In the case that any Ordinary Share is held by
its ultimate beneficial owner through one or more level of holding companies, any transfer, repurchase, or new issuance of the
shares of such holding companies or similar transactions that have the effect of change the beneficial ownership of such Ordinary
Share shall be deemed as an indirect transfer of such Ordinary Shares. The Parties agree that the restrictions on the transfer
of the Ordinary Shares contained in this Agreement shall apply to such indirect transfer and shall not be circumvented by means
any indirect transfer of the Ordinary Shares.
3.6
New
Shareholders
. Unless otherwise approved by the Board, any new shareholder of the Company who is not already a Party to this
Agreement shall, not later than the time that it becomes a shareholder of the Company, agree in writing that it adhere to, and
be bound by, the terms of this Agreement as a Party to this Agreement.
3.7
Prohibited
Issuance or Transfer Void
. The Company agrees that any issuance or transfer of Shares not made in compliance with this Agreement
shall be null and void as against the Company, shall not be recorded on the register of members of the Company and shall not be
recognized by the Company.
Each of the
Founder Parties agrees and acknowledges that all the Ordinary Shares directly or indirectly owned by him/it, shall be designated
as "
Restricted Shares
" and shall be subject to the restrictions as set forth on
Exhibit D
.
5.1
Drag-Along
Rights
. If the holder(s) of at least fifty percent (50%) of the voting power of the then issued and outstanding Shares of the
Company (calculated on a fully diluted and as-converted basis) including the Founder Parties and the Series C Investors (together,
the "
Drag-Along Shareholders
") collectively approve the sale of Shares or a Trade Sale (each, an "
Approved
Sale
") to a bona fide third-party potential purchaser (the "
Potential Purchaser
") any time after the
Closing at a valuation of the Company exceeding RMB 15 billion or the equivalents in other currency, then upon written notice from
the Drag-Along Shareholders, each of the other shareholders of the Company (the "
Dragged Shareholders
") shall
(i) vote, or give its written consent with respect to, all the Shares held by them in favor of such proposed Approved Sale and
in opposition of any proposal that could reasonably be expected to delay or impair the consummation of any such proposed Approved
Sale; (ii) sell, transfer, and/or exchange, as the case may be, all of their Shares in such Approved Sale to such Potential Purchaser;
(iii) refrain from exercising any dissenters' rights or rights of appraisal under applicable Law at any time with respect to or
in connection with such proposed Approved Sale; and (iv) take all actions reasonably necessary to consummate the proposed Approved
Sale. Upon the approval of an Approved Sale as described in this
Section 5.1
, each Shareholder (other than Drag-Along Shareholders)
shall grant to the chief executive officer (“
CEO
”) or an authorized officer, a power of attorney to transfer
their Shares and to do and carry out all other necessary or advisable acts to complete the Approved Sale, including, without limitation,
executing any and all documents (including instruments of transfer) on behalf of such Shareholder. The CEO or an authorized officer
shall be authorized to transfer the Shares of each such Shareholder and to do and carry out all other necessary or advisable acts
to complete the Approved Sale, including, without limitation, executing any and all documents (including instruments of transfers)
on behalf of each such Shareholder. Notwithstanding any provision to the contrary, the share transfer restrictions of
Section
3
of this Agreement shall not apply to any transfers made pursuant to this
Section 5
.
6.1
Market
Stand-Off
. Each Shareholder hereby irrevocably undertakes to the Company that it will not, during the period commencing from
the issuance date of the Shares held by such Shareholder until one hundred eighty (180) days from the date of the consummation
of an initial public offering of the Shares of the Company, take any of the following actions:
(i) lend,
offer, pledge, hypothecate, hedge, encumber, sell, make any short sale of, loan, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any Equity Securities of the Company (other than those included in such offering), whether
any such transaction described in this clause (i) is to be settled by delivery of Equity Securities of the Company or such other
securities, in cash or otherwise; or
(ii) enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the Equity Securities of the Company, whether any such transaction described in this clause (ii) is to be settled by delivery
of Equity Securities of the Company or such other securities, in cash or otherwise.
The Shareholders
shall have entered into lockup agreements in the form attached hereto as
Exhibit F
. The underwriters in connection with
the Company's initial public offering are intended third party beneficiaries of
Section 6.1
hereof and shall have the right,
power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant,
the Company may place restrictive legends on the certificates and impose stop-transfer instructions with respect to the Shares
of each Shareholder (and the shares or securities of every other Person subject to the foregoing restriction) until the end of
such period. This
Section 6.1
shall terminate immediately upon an official withdrawal of the application initiated by the
Company in connection with its initial public offering, evidenced by formal cancellations of the relevant filings made with the
Commission.
6.2
Founder's
Commitment
. The Founder undertakes to the Series C Investors that, for as long as the Series C Investors hold any Share of
the Company, he will devote his working time and attention exclusively to the business of the Group, and will use his best efforts
to promote the Group Companies’ interests until the third (3rd) anniversary of a QIPO.
6.3
Non-Competition
.
The Founder undertakes to the Investors that from the Signing Date, he shall not, and he shall cause the Key Employees not to,
without the prior written consent of the Series C Investors, either on his/her own account or through any of his Affiliates, or
in conjunction with or on behalf of any other Person: (i) be engaged or invest, directly or indirectly in any business in competition
with the business engaged by any Group Company; (ii) provide service of any form to any entity engaged in any business in competition
with the business engaged by any Group Company; or (iii) solicit or entice away or attempt to solicit or entice away to a competitor
from any Group Company, any employee, consultant, supplier, customer, client, representative, or agent of such Group Company.
6.4
Memorandum
and Articles
. In the event of any conflict or inconsistency between any of the terms of this Agreement and any of the terms
of the Memorandum and Articles, the terms of this Agreement shall prevail in all respects with regard to the Parties (other than
the Company), the Parties (other than the Company) shall give full effect to and act in accordance with the provisions of this
Agreement over the provisions of the Memorandum and Articles, and the Parties (other than the Company) shall exercise all voting
and other rights and powers (including to procure any required alteration to the Memorandum and Articles to resolve such conflict
or inconsistency) to make the provisions of this Agreement effective.
6.5
Performance
Target
.
(i) Each
of the Founder Parties hereby undertakes to the Series C Investors and the Series B Investors that the audited after tax operation
net income (which shall be referred hereunder as the “
Net Income
”; for the avoidance of doubt, the after tax
operation net income shall equal to after tax operation net profits plus any tax refunds or tax return received from the relevant
Governmental Authority, plus any costs, expenses and share based compensation incurred by the Company in association with the issuance
of any employee share option, share award or other equity incentives pursuant to the ESOP) of the Group Company for the fiscal
year of 2017 and 2018 (collectively, the “
Warranty Period
”) shall equal to at least RMB500,000,000 and RMB700,000,000,
respectively (such target Net Income set for the applicable fiscal year shall be referred hereunder as the “
Net Income
Target
”).
(ii) Subject
to
Section 6.5(iv)
below, during the Warranty Period, if the Company fails to achieve any Net Income Target for a particular
fiscal year, the Founder Parties shall reimburse the Company, in the form of cash, an amount equal to the difference between the
actual Net Income realized during such fiscal year and the Net Income Target for such fiscal year, within 10 days following the
issuance of the audited annual financial statements of the Group Companies.
(iii) The
Net Income realized by the Group Companies for each fiscal year within the Warranty Period shall be determined by a qualified accounting
firm appointed by the Company, and the determination of which shall be free of material qualifications.
6.6
Confidentiality
.
(i) Each
Party shall, and shall cause any Person who is Controlled by such Party to, keep confidential the existence and content of this
Agreement, the other Transaction Documents and any related documentation, the identities of any of the Parties, and other information
of a non-public nature received from any other Party or prepared by such Party exclusively in connection herewith or therewith
(collectively, the “
Confidential Information
”) unless the Company and the Investors shall mutually agree otherwise;
provided, that any Party may disclose Confidential Information or permit the disclosure of Confidential Information (a) to the
extent required by applicable Laws or the rules of any stock exchange; provided that such Party shall, where practicable and to
the extent permitted by applicable Laws, provide the other Parties with prompt written notice of that fact and use all reasonable
efforts to seek (with the cooperation and reasonable efforts of the other Parties) a protective order, confidential treatment or
other appropriate remedy; and in such event, such Party shall furnish only that portion of the information which is legally required
to be disclosed and shall exercise reasonable efforts to keep such information confidential to the extent reasonably requested
by any such other Parties, (b) to its officers, directors, employees, and professional advisors on a need-to-know basis for the
performance of its obligations in connection herewith so long as such Party advises each Person to whom any Confidential Information
is so disclosed as to the confidential nature thereof, in each case only where such Person are under appropriate nondisclosure
obligations, (c) in the case of any Investor, to its auditors, counsel, directors, officers, employees, fund manager, shareholders,
partners or investors so long as such Investor advises each Person to whom any Confidential Information is so disclosed as to the
confidential nature thereof, in each case only where such Person are under appropriate nondisclosure obligations, and (d) to its
current or bona fide prospective investors, investment bankers and any Person otherwise providing substantial debt or equity financing
to such Party so long as such Party advises each Person to whom any Confidential Information is so disclosed as to the confidential
nature thereof, in each case only where such Person are under appropriate nondisclosure obligations. Notwithstanding anything to
the contrary, the Company shall have the right to disclose Confidential Information of any Party hereunder, at its sole discretion,
to its employees, directors, underwriters, legal counsels, tax advisors, or other professionals, agents, entities, Governmental
Authorities (including but not limited to any stock exchange), for purpose of facilitating its initial public offering endeavor.
(ii) For
the avoidance of doubt, Confidential Information does not include information that (i) was already in the possession of the receiving
Party before such disclosure by the disclosing Party, (ii) is or becomes available to the public other than as a result of disclosure
by the receiving Party in violation of this
Section 6.6
, or (iii) is or becomes available to the receiving Party from a
third party who has no confidentiality obligations to the disclosing Party. The Parties shall not make any announcement regarding
the consummation of the transaction contemplated by this Agreement, other Transaction Documents and any related documentation in
a press release, conference, advertisement, announcement, professional or trade publication, marketing materials or otherwise to
the general public without the prior written Consent of the Company and the Investors.
6.7
Put
Option
.
|
(i)
|
Put Option of the Series C Shareholders
.
|
(a) Upon
the occurrence of any of the following events (“
Series C Put Option Event
”), each of the Founder Parties irrevocably
and unconditionally undertakes and covenants to the Series C Preferred Shareholders that, at the written request of the Series
C Preferred Majority, each Series C Preferred Shareholder shall have a put option to sell to the Founder Parties all or any portion
of the Series C Preferred Shares held by such requesting Series C Preferred Shareholder, at any time after the earlier of:
(A) if
the Company fails to complete a QIPO by the end of 2019, or a Trade Sale with an implied valuation of the Group Companies of no
less than RMB15 billion by the end of 2019,
(B) the
occurrence of a material breach of the Transaction Documents by any of the Founder Parties or Group Companies, or
(C) failure
to achieve any Net Income Target as set forth in
Section 6.5
hereof.
(b) The
purchase price for each outstanding Series C Preferred Share (the "
Series C Put Option Price
") shall be determined
as follows:
(A) With
respect to the Series C Preferred Shares held by FANGWJ and Seed Field, an amount equal to the greater of the following:
(x) an amount equal to 100% of the Series C Issue Price, together with a 15% annual simple return (calculated from the Series C Issue
Date to the Put Option Price Payment Date (as defined below)), plus all declared but unpaid dividends, and minus all dividends
that have been paid on such Series C Preferred Share,
(y) an amount equal to 150% of the Series C Issue Price, or
(z) an amount equal to the quotient obtained by dividing the net assets of the Group Companies (as indicated in the audited financial
statements of the Group Companies ending on the last month immediately prior to the Series C Put Option Event prepared by a reputable
audit firm or other accounting firm selected by the Company and the Series C Preferred Majority) by the total outstanding Shares
of the Company calculated on an as-converted basis.
(B) With
respect to the Series C Preferred Shares held by New Oriental, an amount equal to 100% of the Series C Issue Price, together with
a 15% annual simple return (calculated from January 1, 2018 to the Put Option Price Payment Date (as defined below)), plus all
declared but unpaid dividends, and minus all dividends that have been paid on such Series C Preferred Share.
|
(ii)
|
Put Option of the Series B Shareholders
.
|
(a) Each
of the Founder Parties irrevocably and unconditionally undertakes and covenants to the Series B Preferred Shareholders that, at
the written request of the Series B Preferred Majority, each Series B Preferred Shareholder shall have a put option to sell to
the Founder Parties all or any portion of the Series B Preferred Shares held by such requesting Series B Preferred Shareholder,
at any time if the Company fails to achieve any Net Income Target as set forth in
Section 6.5
hereof (the “
Series
B Put Option Event
”).
(b) The
purchase price for each outstanding Series B Preferred Share (the "
Series B Put Option Price
") shall be determined
as follows:
(A) with
respect to the Series B Preferred Shares held by Handing, an amount equal to the greater of the following:
(x) 100%
of the Series B Issue Price, together with a 15% annual simple return (calculated from the Series B Issue Date 1 to the Put Option
Price Payment Date), and minus all dividends that have been paid on such Series B Preferred Share,
(y) an
amount equal to 150% of the Series B Issue Price (the “
Series B Fixed Return
”), or
(z) an
amount equal to the quotient obtained by dividing the net assets of the Group Companies (as indicated in the audited financial
statements of the Group Companies ending on the last month immediately prior to the Series B Put Option Event prepared by a reputable
audit firm or other accounting firm selected by the Company and the Series B Preferred Majority) by the total outstanding Shares
of the Company calculated on an as-converted basis (the “
Series B FMV Return
”).
(B) with
respect to the Series B Preferred Shares held by Guosheng, an amount equal to the greater of the following: (x) 100% of the Series
B Issue Price, together with a 15% annual simple return (calculated from the Series B Issue Date 2 to the Put Option Price Payment
Date), plus all declared but unpaid dividends, and minus all dividends that have been paid on such Series B Preferred Share, (y)
the Series B Fixed Return, or (z) the Series B FMV Return.
(B) with
respect to Series B Preferred Shares held by Shanan, an amount equal to the greater of the following: (x) 100% of the Series B
Issue Price, together with a 15% annual simple return (calculated from the Series B Issue Date 3 to the Put Option Price Payment
Date), and minus all dividends that have been paid on such Series B Preferred Share, (y) the Series B Fixed Return, or (z) the
Series B FMB Return.
|
(iii)
|
Put Option of the Series A+ Shareholders
.
|
(a) Each
of the Founder Parties irrevocably and unconditionally undertakes and covenants to the Series A+ Preferred Shareholders that, at
the written request of the Series A+ Preferred Majority, each Series A+ Preferred Shareholder shall have a put option to sell to
the Founder Parties all or any portion of the Series A+ Preferred Shares held by such requesting Series A+ Preferred Shareholder,
at any time after the Series A+ Issue Date (the “
Series A+ Put Option Event
”).
(b) The
purchase price for each outstanding Series A+ Preferred Share (the "
Series A+ Put Option Price
") shall equal to
100% of the Series A+ Issue Price, together with a 20% annual simple return (calculated from the Series A+ Issue Date to the Put
Option Price Payment Date).
|
(iv)
|
In the event any Preferred Shareholder decides to exercise its put option, such Preferred Shareholder
shall send a put option exercise notice (the “
Put Option Exercise Notice
”) to the Company and the Founder Parties
indicating the number of Preferred Shares it intends to sell to the Founder Parties. The Founder Parties shall pay such requesting
Preferred Shareholder the full amount of the applicable Put Option Price for each Preferred Share requested to be put to the Founder
Parties, in cash or other form of consideration agreed by such Preferred Shareholder, within 10 business days following the receipt
of the Put Option Exercise Notice (the “
Put Option Price Payment Date
”).
|
|
(v)
|
If the Founder Parties do not have sufficient funds for the full payment of Put Option Price to
all requesting Preferred Shareholders, then any funds available for distribution shall be distributed ratably among the requesting
Preferred Shareholders in proportion to the aggregate Put Option Price each such requesting Preferred Shareholder is otherwise
entitled to receive pursuant to this
Section 6.7
, provided that if the Founder Parties fail to pay the Series C Put Option
Price in full on or prior to the Put Option Price Payment Date or other time agreeable by the requesting Series C Preferred Shareholders,
then a daily interest of 0.05% shall be charged with respect to such portion of the Series C Put Option Price that is due as of
the Put Option Price Payment Date but not paid, and such interest shall commence to accrue on the next day following the Put Option
Price Payment Date until such time as the Put Option Price in respect of such Series C Preferred Shares has been paid in full.
|
7.1
Termination
.
Except for obligations set forth in
Sections 6.1
,
6.6
,
7
, and
8
, immediately upon the Company filed
its final prospectus with the U.S. Securities and Exchange Commission (the “
Termination
”), this Agreement shall
automatically, and without the need for any further action by any of the Parties herein, terminate in its entirety, whereupon this
Agreement shall cease to be of any force or effect.
7.2
Release
.
Upon Termination, each Party shall release and discharge each other Party, and its agents, partners, shareholders, officers, directors,
employees, servants, attorneys and representatives, as well as its successors and assigns, from and against any and all actions,
causes of action, suits, debts, sums of money, obligations, covenants, contracts, controversies, agreements, damages, judgments,
liabilities, rights and demands whatsoever, of whatever kind or nature, in contract or in tort, in law or equity, known or unknown,
which are based upon or arise under or in connection with this Agreement, regardless of whether any of such actions, causes of
action, suits, or claim of whatsoever nature has been asserted or not.
8.1
Governing
Law
. This Agreement shall be governed by and construed exclusively in accordance with the Laws of Hong Kong without giving
effect to any choice of law or rule that would cause the application of the Laws of any jurisdiction other than the internal Laws
of Hong Kong to the rights and duties of the Parties hereunder.
8.2
Dispute
Resolution
.
(i) Any
dispute, controversy or claim arising out of, in connection with or relating to this Agreement, including the interpretation, validity,
invalidity, breach or termination hereof, shall be settled by arbitration.
(ii) The
arbitration shall be conducted in Hong Kong at the Hong Kong International Arbitration Centre in accordance with HKIAC Administered
Arbitration Rules in effect (the “
HKIAC Rules
”). The arbitration tribunal shall consist of three (3) arbitrators
to be appointed according to the HKIAC Rules. The arbitration shall be conducted in English language.
(iii) Each
Party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents
requested by the other in connection with such arbitration proceedings, subject only to any doctrine of legal privilege or any
confidentiality obligations binding on such Party.
(iv) The
costs of arbitration shall be borne by the losing Party, unless otherwise determined by the arbitration tribunal.
(v) When
any dispute occurs and when any dispute is under arbitration, except for the matters in dispute, the Parties shall continue to
fulfill their respective obligations and shall be entitled to exercise their rights under this Agreement.
(vi) The
award of the arbitration tribunal shall be final and binding upon the Parties, and the prevailing Party may apply to a court of
competent jurisdiction for enforcement of such award.
(vii) The
Parties understand and agree that this provision regarding arbitration shall not prevent any Party from pursuing preliminary equitable
or injunctive relief in a judicial forum pending arbitration in order to compel another Party to comply with this provision, to
preserve the status quo prior to the invocation of arbitration under this provision, or to prevent or halt actions that may result
in irreparable harm. A request for such equitable or injunctive relief shall not waive this arbitration provision.
8.3
Notices
.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier
service, by facsimile or registered or certified mail (postage prepaid, return receipt requested), or electronic mail to the respective
Parties at the addresses specified on
Part VII
of
Exhibit A
(or at such other address for a Party as shall be specified
in a notice given in accordance with this
Section 8.3
).
Where a notice is sent by next-day
or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending
by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a written
confirmation of delivery, and to have been effected at the earlier of (i) delivery (or when delivery is refused) and (ii) expiration
of two (2) Business Days after the letter containing the same is sent as aforesaid. Where a notice is sent by facsimile or electronic
mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting
organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid, if such
day is a Business Day and if sent during normal business hours of the recipient, otherwise the next Business Day. Notwithstanding
the foregoing, to the extent a "with a copy to" address is designated, notice must also be given to such address in the
manner above for such notice, request, consent or other communication hereunder to be effective.
8.4
Successors
and Assigns
. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the Parties whose rights or obligations hereunder are affected by
such terms and conditions. This Agreement, and the rights and obligations hereunder, shall not be assigned without the mutual written
consents of the Investors and the Company; provided that, each Investor may assign its rights and obligations to its Affiliate
or any third party along with transfer of its Shares without consent of the other Parties under this Agreement;
provided further
that the assignee shall execute and deliver such documents and take such other actions as may be necessary for such assignee to
join in and be bound by the terms of this Agreement as an "Investor" (if not already a Party hereto) upon and after such
assignment.
8.5
Severability
.
In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected thereby. If, however, any provision of this Agreement shall be invalid,
illegal, or unenforceable under any such applicable Laws in any jurisdiction, it shall, as to such jurisdiction, be deemed modified
to conform to the minimum requirements of such Law.
8.6
Waiver
and Amendment
. This Agreement may only be amended or modified by an instrument in writing signed by the Company, the Preferred
Majority and the Ordinary Majority;
provided
that any Party may (a) extend the time for the performance of any of the obligations
or other acts of another Party, (b) waive any inaccuracies in the representations and warranties of another Party contained herein
or in any document delivered by another Party pursuant hereto or (c) waive compliance with any of the agreements of another Party
or conditions to such Party's obligations contained herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Party to be bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement. The failure of any Party to assert any of its rights hereunder shall not constitute a waiver of any of such
rights.
8.7
Interpretation
.
For all purposes of this Agreement, except as otherwise expressly provided, (a) the defined terms shall have the meanings assigned
to them in its definition and include the plural as well as the singular, and pronouns of either gender or neuter shall include,
as appropriate, the other pronoun forms; (b) all references in this Agreement to designated "Sections" and other subdivisions
are to the designated Sections and other subdivisions of the body of this Agreement unless explicitly stated otherwise, and all
references in this Agreement to designated exhibits are to the exhibits attached to this Agreement unless explicitly stated otherwise,
(c) the words "herein", "hereof", and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section or other subdivision, (d) the titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be considered in construing this Agreement, (e) any reference
in this Agreement to any "Party" or any other Person shall be construed so as to include its successors in title, permitted
assigns and permitted transferees, (f) any reference in this Agreement to any agreement or instrument is a reference to that agreement
or instrument as amended or novated and (g) this Agreement is jointly prepared by the Parties and should not be interpreted against
any Party by reason of authorship.
8.8
Further
Assurance
. Upon the terms and subject to the conditions herein, each of the Parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, to do or cause to be done, to execute such further instruments, and to assist
and cooperate with the other Parties hereto in doing, all things necessary, proper or advisable under applicable Laws or otherwise
to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.
8.9
Entire
Agreement
. This Agreement and other Transaction Documents constitute the entire agreement of the Parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both written and oral, among the Parties with respect
to the subject matter hereof and thereof.
8.10
Counterparts
.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes
of the effectiveness of this Agreement.
{The remainder of this
page has been left intentionally blank}
IN WITNESS WHEREOF, the Parties have duly
executed this Shareholders’ Agreement as of the date first above written.
Company
:
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Weidai Ltd.
|
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By:
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/s/ Yao Hong
|
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Name: Yao Hong
|
|
Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly
executed this Shareholders’ Agreement as of the date first above written.
Founder Parties
:
|
|
|
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/s/ Hong Yao
|
|
YAO Hong (姚宏)
|
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YAOH WDAI LTD
|
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By:
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/s/ Hong Yao
|
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Name: YAO Hong
|
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly
executed this Shareholders’ Agreement as of the date first above written.
Ordinary purchaser
:
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BAOYH WDAI LTD
|
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By:
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/s/ Yuhang Bao
|
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Name: Yuhang Bao
|
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
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CHENF WDAI LTD
|
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By:
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/s/ Feng Chen
|
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Name: Feng Chen
|
|
Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
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DINGDS WDAI LTD
|
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By:
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/s/ Desheng Ding
|
|
Name: Desheng Ding
|
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
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HEQQ WDAI LTD
|
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By:
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/s/ Qinqin He
|
|
Name: Qinqin He
|
|
Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
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HOUB WDAI LTD
|
|
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By:
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/s/ Bin Hou
|
|
Name: Bin Hou
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
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LISP WDAI LTD
|
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|
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By:
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/s/ Shiping Li
|
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Name: Shiping Li
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
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SHENB WDAI LTD
|
|
|
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By:
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/s/ Bo Shen
|
|
Name: Bo Shen
|
|
Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
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SUNYQ WDAI LTD
|
|
|
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By:
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/s/ Yuqun Sun
|
|
Name: Yuqun Sun
|
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
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WANGPF WDAI LTD
|
|
|
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By:
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/s/ Pengfei Wang
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Name: Pengfei Wang
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Title: Director
|
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Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
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|
WANGXP WDAI LTD
|
|
|
|
By:
|
/s/ Xiangpeng Wang
|
|
Name: Xiangpeng Wang
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
YAOH WDAI LTD
|
|
|
|
By:
|
/s/ Hong Yao
|
|
Name: YAO Hong
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
YAOBH WDAI LTD
|
|
|
|
By:
|
/s/ Binghong Yao
|
|
Name: Binghong Yao
|
|
Title: Director
|
|
|
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
YAOJH WDAI LTD
|
|
|
|
By:
|
/s/ Jianhong Yao
|
|
Name: Jianhong Yao
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
YEW WDAI LTD
|
|
|
|
By:
|
/s/ Wei Ye
|
|
Name: Wei Ye
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
ZHUHB WDAI LTD
|
|
|
|
By:
|
/s/ Huabin Zhu
|
|
Name: Huabin Zhu
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
ZHUJZ WDAI LTD
|
|
|
|
By:
|
/s/ Jianzhong Zhu
|
|
Name: Jianzhong Zhu
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
Magic Ace Capital Limited
|
|
|
|
By:
|
/s/ Yangyang Chen
|
|
Name: Yangyang Chen
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
Bestspirit Holdings Group Ltd.
|
|
|
|
By:
|
/s/ Yichun Hua
|
|
Name: Yichun Hua
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
Topspirit Holdings Group Ltd.
|
|
|
|
By:
|
/s/ Jixiang Leo Li
|
|
Name: Jixiang Leo Li
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Ordinary purchaser
:
|
|
|
|
LISP WDAI INVESTMENT LTD
|
|
|
|
By:
|
/s/ Shiping Li
|
|
Name: Shiping Li
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
Hakim Unique Technology Limited
|
|
汉鼎宇佑科技有限公司
|
|
|
|
By:
|
/s/ Jian Xiang
|
|
Name: Jian Xiang
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
HUAYY WDAI LTD
|
|
|
|
By:
|
/s/ Yeyu Hua
|
|
Name: Yeyu Hua
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
Guosheng International (Holding) Limited
|
|
國盛國際集團有限公司
|
|
|
|
By:
|
/s/ Cheong Wai Tong
|
|
Name: Cheong Wai Tong
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
Shanan Investment Holding Limited
|
|
|
|
By:
|
/s/ Haoxiang Yang
|
|
Name: Haoxiang Yang
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
FANGWJ WDAI LTD
|
|
|
|
By:
|
/s/ Wenjun Fang
|
|
Name: Wenjun Fang
|
|
Title: Director
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
New Oriental Global Investments Ltd.
|
|
新東方國際投資有限公司
|
|
|
|
By:
|
/s/ Dongbing Cai
|
|
Name: Dongbing Cai
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
IN WITNESS WHEREOF, the Parties have duly executed this Shareholders’
Agreement as of the date first above written.
Investor
:
|
|
|
|
Seed Field of Fortune Company Limited
|
|
斯福有限公司
|
|
|
|
By:
|
/s/ Yang Sun
|
|
Name: Yang Sun
|
|
Title: Authorized Signatory
|
|
Signature Page to Shareholders’ Agreement
Weidai Ltd.
EXHIBIT A
PARTIES
Part I
Series A Investor
|
1.
|
Hakim Unique Technology Limited (“
Handing
”)
|
Part II Series A
+
Investor
Part III Series B Investors
|
1.
|
Hakim Unique Technology Limited;
|
|
2.
|
Guosheng International (Holding) Limited (“
Guosheng
”); and
|
|
3.
|
Shanan Investment Holding Limited (“
Shanan
”).
|
Part IV Series C Investors
|
1.
|
FANGWJ WDAI LTD (“
FANGWJ
”);
|
|
2.
|
New Oriental Global Investments Ltd. (“
New Oriental
”); and
|
|
3.
|
Seed Field of Fortune Company Limited (“
Seed Field
”).
|
Part V Founder Parties
|
1.
|
YAO Hong (姚宏), a PRC citizen (PRC residential ID number: 330105198004040019) (the
“
Founder
”);
|
|
2.
|
YAOH WDAI LTD, a business company duly established and validly existing under the Laws of the British
Virgin Islands, which is wholly owned by Yao Hong (姚宏).
|
Part VI Ordinary Purchasers
|
17.
|
Magic Ace Capital Limited (“
Magic Ace
”);
|
|
18.
|
Bestspirit Holdings Group Ltd.;
|
|
19.
|
Topspirit Holdings Group Ltd.; and
|
|
20.
|
LISP WDAI INVESTMENT LTD.
|
Part VII Notice Address
For the purpose of the notice provisions
contained in this Agreement, the following are the initial addresses of each Party:
If to any Group Company, the Founder Parties and the Ordinary
Purchasers
:
Attn: Li Jinxiang (李晋翔)
Tel: *
Address:
*
Email: *
If to Handing
:
Attn: Wang Yan (王艳)
Tel:
*
Address:
*
Email:
*
If to HUAYY WDAI LTD
:
Attn: Hua Yeyu (华晔宇)
Tel:
*
Address:
*
Email:
*
If to Guosheng
:
Attn: Li Yingming (李英明)
Tel:
*
Address:
*
Email:
*
If to Shanan
:
Attn: Yang Haoxiang
Tel:
*
Address:
*
Email:
*
If to FANGWJ
:
Attn: Fang Wenjun
Tel:
*
Address:
*
Email:
*
If to New Oriental
:
Attn: Shan Lianqi (单连起)
Tel:
*
Address:
*
Email:
*
If to Seed Field
:
Attn: Sun Yang
Tel:
*
Address:
*
Email:
*
If to Magic Ace
:
Attn: Chen Yangyang (陈阳阳)
Tel:
*
Address:
*s
Email:
*
EXHIBIT B
DEFINITIONS
"
Affiliate
"
|
|
means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person. In the case of any individual, his spouse, child, brother, sister, parent, the relatives of such spouse, trustee of any trust in which such individual or any of his immediate family members is a beneficiary or a discretionary object, or any entity or company Controlled by any of the aforesaid Persons. In the case of an Investor, the term “Affiliate” also includes (v) any shareholder of such Investor, (w) any of such shareholder’s or such Investor’s general partners or limited partners, (x) the fund manager managing or advising such shareholder or such Investor (and general partners, limited partners and officers thereof) and other funds managed or advised by such fund manager, and (y) trusts controlled by or for the benefit of any such Person referred to in (v), (w) or (x), and (z) any fund or holding company formed for investment purposes that is promoted, sponsored, managed, advised or serviced by the such Investor.
|
|
|
|
“
Board
”
|
|
means the board of directors of the Company.
|
|
|
|
"
Business Day
"
|
|
means any day that is not a Saturday, Sunday, public holiday or other day on which commercial banks are required or authorized by Law to be closed in the Cayman Islands, New York, Hong Kong or the PRC.
|
|
|
|
"
Closing
"
|
|
has the meaning set forth in the Share Subscription Agreements.
|
|
|
|
"
Commission
"
|
|
means (i) with respect to any offering of securities in the United States, the Securities and Exchange Commission of the United States or any other federal agency at the time administering the Securities Act and (ii) with respect to any offering of securities in a jurisdiction other than the United States, the regulatory body of the jurisdiction with authority to supervise and regulate the offering and sale of securities in that jurisdiction.
|
z“
Control
”
|
|
means, with respect to a Person, the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person. The terms “
Controlled
” and “
Controlling
” have meanings correlative to the foregoing.
|
|
|
|
“
Domestic Company
”
|
|
means Weidai (Hongzhou) Financial
Information Service Co., Ltd. (微贷(杭州)金融信息服务有限公司),
a limited liability company incorporated under the laws of the PRC.
|
|
|
|
"
Equity Securities
"
|
|
means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any contract providing for the acquisition of any of the foregoing.
|
|
|
|
"
ESOP
"
|
|
shall mean the employee share option plan of the Company or other similar incentive plan to be adopted by the Board.
|
|
|
|
"
Governmental Authority
"
|
|
means any government of any nation, federation, province or state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality of the PRC or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory organization.
|
|
|
|
"
Group Company
"
|
|
means each of the Company and its Subsidiaries, and the “
Group
” refers to all of the Group Companies collectively.
|
|
|
|
"
Hong Kong
"
|
|
means the Hong Kong Special Administrative Region of the PRC.
|
|
|
|
"
Key Employees
"
|
|
means YAO HONG (姚宏).
|
"
Law
"
|
|
means any and all provisions of any applicable constitution, treaty, statute, law, regulation, ordinance, code, rule, or rule of common law, any governmental approval, concession, grant, franchise, license, agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any formally issued written interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all applicable governmental orders.
|
|
|
|
"
Memorandum and Articles
"
|
|
shall mean the amended and restated memorandum and articles of association of the Company, as amended from time to time.
|
|
|
|
"
New Shares
"
|
|
means any Equity Securities
of the Company issued after the Closing, except for:
(i) Ordinary
Shares issued upon conversion of the Preferred Shares and/or the Series A Preferred Shares, or as a dividend or distribution on
the Preferred Shares and/or the Series A Preferred Shares;
(ii) Equity
Securities of the Company issued pursuant to any existing outstanding warrants, notes or other rights to acquire any Equity Securities
of the Company as of the date hereof;
(iii) Equity
Securities of the Company issued in connection with any share split, share dividend, combination, subdivision, or similar transaction
of the Company that does not change the relative shareholding percentage of the Shareholders;
(iv) Equity
Securities of the Company issued in the QIPO of the Company;
(v) Ordinary
Shares, or any option to acquire any Ordinary Shares, issued to employees, officers, consultants or directors of the Company pursuant
to the ESOP or other similar incentive arrangement as approved by the Board; and
(vi) Equity
Securities of the Company issued in connection with any acquisition or equipment financing by the Company as approved by the Board.
|
|
|
|
“
Onshore Investment Agreement
”
|
|
means that certain investment agreement dated September 9, 2016 entered into by and among the Founder, the Domestic Company, Suzhou Weixin Zhonghua Venture Investment L.L.P (苏州维新仲华创业投资合伙企业(有限合伙)) and certain other parties named therein.
|
"
Ordinary Majority
"
|
|
means the holder(s) holding at least fifty percent (50%) of the issued and outstanding Ordinary Shares.
|
|
|
|
"
Ordinary Shareholder(s)
"
|
|
means any holder(s) of the Ordinary Shares.
|
|
|
|
"
Ordinary Shares
"
|
|
means the Company’s ordinary shares of par value US$0.0001 each, with the rights and privileges as set forth in the Transaction Documents.
|
|
|
|
"
Person
"
|
|
shall be construed as broadly as possible and shall include an individual, a partnership (including a limited liability partnership), a company, an association, a joint stock company, a limited liability company, a trust, a joint venture, a legal person, an unincorporated organization and a Governmental Authority.
|
|
|
|
"
PRC
"
|
|
means the People’s Republic of China, solely for purposes of this Agreement, excluding Hong Kong, the Macau Special Administrative Region and the islands of Taiwan.
|
|
|
|
"
Preferred Majority
"
|
|
means the Series A+ Preferred Majority, the Series B Preferred Majority, and the Series C Preferred Majority.
|
|
|
|
"
Preferred Shares
"
|
|
means the Series A+ Preferred Shares, the Series B Preferred Shares, and/or the Series C Preferred Shares, as applicable.
|
|
|
|
"
Preferred Shareholder(s)
"
|
|
means the holder(s) of the Preferred Shares.
|
|
|
|
“
Put Option Price
”
|
|
Means the Series A+ Put Option Price, the Series B Put Option Price and/or the Series C Put Option Price, as applicable.
|
|
|
|
"
QIPO
"
|
|
means an initial public offering
of the Ordinary Shares of the Company with a fully-diluted market capitalization of at least RMB 12 billion or the equivalents
in other currencies, in the U.S. or on the Hong Kong Stock Exchange, the Shanghai Stock Exchange or the Shenzhen Stock Exchange.
|
|
|
|
"
Securities Act
"
|
|
means the United States Securities Act of 1933, as amended.
|
|
|
|
"
Series A Preferred Shares
"
|
|
means the Company’s series A preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
“
Series A+ Issue Date
”
|
|
means the closing date on which
the transaction contemplated under certain investment agreement, dated as of November 6, 2014 entered into by and among Hangzhou
Ruituo Technology Co., Ltd. (杭州锐拓科技有限公司), Zhejiang
Zheshang Lihai Venture Investment LLP (浙江浙商利海创业投资合伙企业(有限合伙)),
Hanzhou Lihai Inter- Venture Investment LLP (杭州利海互联创业投资合伙企业(有限合伙))
and certain other parties thereto, was consummated.
|
|
|
|
“
Series A+ Issue Price
”
|
|
means U.S. dollar equivalent to
RMB820.01, the deemed per-share purchase price for the Series A+ Preferred Shares (as appropriately adjusted for any share split,
share division, share combination, share dividend or similar events), calculated pursuant to the exchange rate published by the
Bank of China on the date when any Series A+ Preferred Shareholder exercises its put option right pursuant to
Section 6.7
hereof.
|
|
|
|
"
Series A+ Preferred Majority
"
|
|
means the holder(s) of more than fifty percent (50%) of the issued and outstanding Series A+ Preferred Shares.
|
|
|
|
"
Series A+ Preferred Shares
"
|
|
means the Company’s series A+ preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series A+ Preferred Shareholder(s)
"
|
|
means any holder(s) of the Series A+ Preferred Shares.
|
|
|
|
“
Series B Issue Date 1
”
|
|
means the closing date on which the transaction contemplated under certain share transfer agreement entered into by and among the Domestic Company, Zhejiang Handing Yuyou Financial Service Co., Ltd. (浙江汉鼎宇佑金融服务有限公司) and Deqing Jinxiu Management Consultancy LLP (德清锦绣管理咨询合伙企业(有限合伙)) was consummated.
|
|
|
|
“
Series B Issue Date 2
”
|
|
means the date on which Shenzhen Guosheng Qianhai Investment Co., Ltd. (深圳国盛前海投资有限公司) has officially become an equity holder of the Domestic Company, as evidenced by the completion of filing of restated charter documents of the Domestic Company with the relevant Governmental Authority.
|
|
|
|
“
Series B Issue Date 3
”
|
|
means the date on which Hangzhou Shanan Investment LLP (杭州杉安投资合伙企业(有限合伙)) has officially become an equity holder of the Domestic Company, as evidenced by the completion of filing of restated charter documents of the Domestic Company with the relevant Governmental Authority.
|
“
Series B Issue Price
”
|
|
means U.S. dollar equivalent to RMB2,459.98, the deemed per-share purchase price for the Series B Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events), calculated pursuant to the exchange rate published by the Bank of China on the date when any Series B Preferred Shareholder exercises its put option right pursuant to
Section 6.7
hereof.
|
|
|
|
"
Series B Preferred Majority
"
|
|
means the holder(s) of more than fifty percent (50%) of the issued and outstanding Series B Preferred Shares.
|
|
|
|
"
Series B Preferred Shares
"
|
|
means the Company’s series B preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series B Preferred Shareholder(s)
"
|
|
means any holder(s) of the Series B Preferred Shares.
|
|
|
|
“
Series C Issue Date
”
|
|
means the closing date on which the transaction contemplated under certain investment agreement dated as of September 9, 2016 entered into by and among the Domestic Company, Suzhou Weixin Zhonghua Venture Investment LLP (苏州维新仲华创业投资合伙企业(有限合伙)) and certain other parties thereto, was consummated.
|
|
|
|
"
Series C Issue Price
"
|
|
means U.S. dollar equivalent to RMB3,903.20, the deemed per-share purchase price for the Series C Preferred Shares (as appropriately adjusted for any share split, share division, share combination, share dividend or similar events), calculated pursuant to the exchange rate published by the Bank of China on the date when any Series C Preferred Shareholder exercises its put option right pursuant to
Section 6.7
hereof.
|
|
|
|
"
Series C Preferred Majority
"
|
|
means the holder(s) of more than fifty percent (50%) of the issued and outstanding Series C Preferred Shares.
|
|
|
|
"
Series C Preferred Shares
"
|
|
means the Company’s series C preferred shares of par value US$0.0001 each, with the rights and privileges as set forth in the Memorandum and Articles.
|
|
|
|
"
Series C Preferred Shareholder(s)
"
|
|
means any holder(s) of the Series C Preferred Shares.
|
|
|
|
"
Shareholders
"
|
|
means the holder of the Shares.
|
"
Shares
"
|
|
means the Ordinary Shares, the Series A Preferred Shares, and/or the Preferred Shares, as applicable.
|
|
|
|
"
Subsidiary
"
|
|
means, as of the relevant date of determination,
with respect to any Person (the “subject entity”), (i) any Person (x) more than fifty percent (50%) of whose shares
or other interests entitled to vote in the election of directors or (y) more than a fifty percent (50%) interest in the profits
or capital of such Person are owned or controlled directly or indirectly by the subject entity or through one (1) or more subsidiaries
of the subject entity, (ii) any Person whose assets, or portions thereof, are consolidated with the net earnings of the subject
entity and are recorded on the books of the subject entity for financial reporting purposes in accordance with US GAAP, consistently
applied, or (iii) any Person with respect to which the subject entity has the power to otherwise direct the business and policies
of that entity directly or indirectly through another subsidiary.
|
|
|
|
"
Super Majority Holders
"
|
|
means the holder(s) of more than two-thirds (2/3) of the voting power of the then issued and outstanding Shares of the Company, calculated on a fully diluted and as-converted basis, which shall further include the Founder Parties and FANGWJ.
|
|
|
|
"
Trade Sale
"
|
|
means any of
the following events:
(i) the
acquisition of the Group Companies (taken as a whole) (whether by a sale of equity, merger or consolidation) in which in excess
of 50% of the Group Companies' voting power outstanding before such transaction is transferred;
(ii) the
sale, transfer or other disposition of all or substantially all of the assets, any trademarks, copyrights, domain names or any
other technology or Intellectual Properties of the Group Company (taken as a whole); or
(iii) the
exclusive licensing of all or substantially all of the Group Companies' Intellectual Properties.
|
|
|
|
“
Transaction Documents
”
|
|
has the meaning set forth in the Share Subscription Agreements.
|
|
|
|
"
U.S.
"
|
|
means the United States of America.
|
|
|
|
"
US$
"
|
|
means the lawful currency of the United States of America.
|
|
|
|
"
US GAAP
"
|
|
means the generally accepted accounting principles of U.S.
|
In addition, the following terms shall have the meanings defined
for such terms in the Sections or Exhibits set forth below:
"
Agreement
"
|
|
Preamble
|
"
Approved Sale
"
|
|
Section 5.1
|
"
CEO
"
|
|
Section 5.1
|
"
Co-Sale Shares
"
|
|
Section 3.2(i) of Exhibit E
|
"
Company
"
|
|
Preamble
|
"
Confidential Information
"
|
|
Section 6.6
|
"
Drag-Along Shareholders
"
|
|
Section 5.1
|
"
Dragged Shareholders
"
|
|
Section 5.1
|
"
FANGWJ
"
|
|
Part IV of Exhibit A
|
"
Founder
"
|
|
Part V of Exhibit A
|
"
Founder Party
" or "
Founder Parties
"
|
|
Preamble
|
“
Guosheng
”
|
|
Part III of Exhibit A
|
“
Handing
”
|
|
Part I of Exhibit A
|
"
HKIAC Rules
"
|
|
Section 8.2(ii)
|
"
Investor
" or "
Investors
"
|
|
Preamble
|
"
Investor Director(s)
"
|
|
Section 2.1(i)(c)
|
"
Issuance Notice
"
|
|
Section 1.2(i) of Exhibit E
|
"
Issuance Shares
"
|
|
Section 1.1 of Exhibit E
|
“
Net Income
”
|
|
Section 6.5
|
“
Net Income Target
”
|
|
Section 6.5
|
“
New Oriental”
|
|
Part IV of Exhibit A
|
“
Ordinary Purchaser(s)
”
|
|
Preamble
|
"
Over-Allotment Issuance Shares
"
|
|
Section 1.2(iii) of Exhibit E
|
"
Over-Allotment Transfer Shares
"
|
|
Section 2.2(iii) of Exhibit E
|
"
Party
"
|
|
Preamble
|
"
Permitted Transferee
"
|
|
Section 3.2
|
"
Potential Purchaser
"
|
|
Section 5.1
|
"
Potential Subscriber
"
|
|
Section 1.1 of Exhibit E
|
"
Potential Transferee
"
|
|
Section 2.1 of Exhibit E
|
"
PR Holder
"
|
|
Section 1.1 of Exhibit E
|
"
Preemptive Right
"
|
|
Section 1.1 of Exhibit E
|
“
Put Option Event
”
|
|
Section 6.7(i)
|
“
Put Option Exercise Notice
”
|
|
Section 6.7(iii)
|
“
Put Option Price Payment Date
”
|
|
Section 6.7(iii)
|
"
Purchasing PR Holder
"
|
|
Section 1.2(iii) of Exhibit E
|
"
Purchasing ROFR Holder
"
|
|
Section 2.2(iii) of Exhibit E
|
"
Repurchase Option
"
|
|
Section 1 of Exhibit D
|
"
Repurchase Price
"
|
|
Section 1 of Exhibit D
|
"
Restricted Shares
"
|
|
Section 4
|
"
Right of Co-Sale
"
|
|
Section 3.1 of Exhibit E
|
"
Right of First Refusal
"
|
|
Section 2.1 of Exhibit E
|
"
ROCS Holder
"
|
|
Section 3.1 of Exhibit E
|
"
ROFR Holder
"
|
|
Section 2.1 of Exhibit E
|
"
ROFR Holder Exercise Period
"
|
|
Section 2.2(ii) of Exhibit E
|
"
ROFR Holder Right of First Refusal
"
|
|
Section 2.1 of Exhibit E
|
“
Seed Field
”
|
|
Part IV of Exhibit A
|
“
Series A Investor
”
|
|
Preamble
|
“
Series A+ Investor
”
|
|
Preamble
|
“
Series A+ Put Option Event
”
|
|
Section 6.7(iii)(a)
|
“
Series A+ Put Option Price
”
|
|
Section 6.7(iii)(b)
|
“
Series B Fixed Return
”
|
|
Section 6.7(ii)(b)(A)(y)
|
“
Series B FMV Return
”
|
|
Section 6.7(ii)(b)(A)(z)
|
“
Series B Investors
”
|
|
Preamble
|
“
Series B Put Option Event
”
|
|
Section 6.7(ii)(a)
|
“
Series B Put Option Price
”
|
|
Section 6.7(ii)(b)
|
"
Series C Investors
"
|
|
Preamble
|
“
Series C Put Option Event
”
|
|
Section 6.7(i)(a)
|
“
Series C Put Option Price
”
|
|
Section 6.7(i)(b)
|
“
Shanan
”
|
|
Part III of Exhibit A
|
"
Share Subscription Agreements
"
|
|
Recitals
|
"
Signing Date
"
|
|
Preamble
|
“
Termination
”
|
|
Section 7.1
|
"
Transfer Notice
"
|
|
Section 2.2(i) of Exhibit E
|
"
Transfer Shares
"
|
|
Section 2.1 of Exhibit E
|
"
Transferor
"
|
|
Section 2.1 of Exhibit E
|
“
Warranty Period
”
|
|
Section 6.5
|
***
EXHIBIT C
PROTECTIVE PROVISIONS
Acts of the Group Requiring the Super Majority Holders
|
(a)
|
the liquidation, dissolution or winding up of any Group Company;
|
|
(b)
|
authorizing or consummating a Trade Sale;
|
|
(c)
|
any change to the Investor Directors; and
|
|
(d)
|
any agreement or commitment by any Group Company to do any of the foregoing items.
|
EXHIBIT D
TERMS OF THE RESTRICTED SHARES
All reference in this Exhibit to designated
"Sections" and other subdivisions are to the designated Sections and other subdivisions of the body of this Exhibit,
unless explicitly stated otherwise.
Until the fourth (4
th
)
anniversary of May 20
th
, 2016, subject to the approval of the majority of the Board, the Company shall have the option
(the "
Repurchase Option
") to repurchase all Restricted Shares held by the Founder at par value per share (the
“
Repurchase Price
”) upon the occurrence of any of the following events: (i) the Founder’s willful commission
of any felony or any crime involving fraud, dishonesty, embezzlement, bribery, larceny or moral turpitude under the Law of the
applicable jurisdiction; (ii) the Founder’s material violation of his duty or any contract or agreement between the Founder
and any Group Company which has not been remedied within fifteen (15) days after notice from the Company or any Investor (including
without limitation any breach of employment agreement, confidentiality agreement and non-competition agreements); (iii) gross mismanagement
or misconduct by the Founder of the business and affairs of the Company or any Subsidiary directly managed by such Founder which
directly results in a material loss by the Company; or (iv) the unilateral termination by the Founder of his employment with any
Group Company (except for disability, work related injuries or death of such Founder), provided that each of the foregoing events
set forth in
subsection (i)
to
(iii)
of this
Section 1
shall manifest materiality, willfulness or gross negligence
to the extent that the occurrence of which warrants the relevant Group Company to unilaterally terminate the employment relationship
of the Founder with such Group Company. For the avoidance of doubt, the Repurchase Option can only be exercised upon criminal misconduct
by the Founder which has been established by a court of law in Hong Kong.
For the avoidance
of doubts, the Restricted Shares shall include all Ordinary Shares indirectly owned by the Founder through one or more levels of
holding companies, and the numbers of such Ordinary Shares indirectly owned shall be equal to the number of Ordinary Shares the
Founder would receive if all such holding companies were to distribute all its assets to its shareholders in according to their
respective shareholding percentage. Each such holding companies and their respective shareholders shall take all necessary actions
to effect the repurchase of the applicable Restricted Shares indirectly owned through those holding companies and the intended
reduction of the shareholding percentage of the Founder in the Company. For the avoidance of doubts, in exercising its Repurchase
Option in respect of the applicable Restricted Shares indirectly owned by any Founder, the Company shall be entitled to repurchase
such Restricted Shares from the holding companies which directly hold such Restricted Shares and such rights shall not be affected
whether other shareholders' shareholding percentage are adversely affected in the event that the Founder also indirectly owns Ordinary
Shares through such holding companies.
EXHIBIT E
TERMS OF THE PREEMPTIVE RIGHTS, RIGHT OF
FIRST REFUSAL AND
RIGHT OF CO-SALE
All reference in this Exhibit to designated
"Sections" and other subdivisions are to the designated Sections and other subdivisions of the body of this Exhibit,
unless explicitly stated otherwise.
1.1
Preemptive
Right
. Subject to
Section 2.2
of this Agreement and other than in a QIPO, each holder of the Preferred Shares (each,
a "
PR Holder
") shall have a right (the "
Preemptive Right
") (but not an obligation) to purchase
all or part of its pro rata share, based on its percentage of the outstanding Ordinary Shares, calculated on an as-converted basis,
of any New Shares (the "
Issuance Shares
") that the Company may, from time to time after the Closing, propose to
issue to any potential purchaser (the "
Potential Subscriber
") as set forth in this
Section 1
.
1.2
Procedure
.
(i)
Issuance
Notice
. If the Company proposes to issue any New Shares, it shall give each PR Holder a written notice (an "
Issuance
Notice
") of such intention, describing (i) type and number of the New Shares to be issued, (ii) identity of the Potential
Subscriber, and (iii) price and other material terms and conditions upon which the Company proposes to issue such Issuance Shares.
(ii)
Exercise
.
Each PR Holder shall have twenty (20) Business Days after the receipt of the Issuance Notice to irrevocably elect to purchase all
or a portion of its initial pro rata share of the Issuance Shares on the same price and terms and conditions as indicated on the
Issuance Notice by notifying the Company in writing of the number of Issuance Shares to be purchased. For the purposes of the Preemptive
Right, each PR Holder's "initial pro rata share" shall be determined according to the aggregate number of all Shares
held by such PR Holder on the date of the Issuance Notice in relation to the aggregate number of Shares held by all PR Holders
on such date (calculated on a as-converted basis).
(iii)
Over-Allotment
.
If any PR Holder fails to elect to purchase all of its initial pro rata share of the Issuance Shares, then such unpurchased Issuance
Shares ("
Over-Allotment Issuance Shares
") shall be made available to each Series C Preferred Shareholder who has
elected to purchase all of its initial pro rata share of the Issuance Shares for over-allotment (the "
Purchasing PR Holder
").
The Company shall deliver an over-allotment notice to each Purchasing PR Holder to inform them of the aggregate number of Over-Allotment
Issuance Shares that are available for over-allotment. Each Purchasing PR Holder shall have five (5) days after the receipt of
such over-allotment notice to irrevocably elect to purchase all or a portion of the Over-Allotment Issuance Shares on the same
price as indicated on the Issuance Notice by notifying the Company in writing of the number of Over-Allotment Issuance Shares to
be purchased. If the aggregate number of the Over-Allotment Issuance Shares elected to be purchased by all Purchasing PR Holders
in response to such over-allotment notice exceeds the aggregate number of the Over-Allotment Issuance Shares that are available
for over-allotment, then the Over-Allotment Issuance Shares shall be allocated among Purchasing PR Holders by allocating to each
Purchasing PR Holder the lesser of (A) the difference between the number of Over-Allotment Issuance Shares it elects to purchase
and the aggregate number of Over-Allotment Issuance Shares that has already been allocated to it, and (B) its over-allotment pro
rata share of the Over-Allotment Issuance Shares that has not yet been allocated, which allocation step shall be repeated until
all Over-Allotment Issuance Shares are allocated among the Purchasing PR Holders. Each Purchasing PR Holder who has been allocated
all the Over-Allotment Issuance Shares that it has elected to purchase shall cease to participate in any subsequent allocation
step. For the purposes of determining the allocation of Over-Allotment Issuance Shares that a Purchasing PR Holder will receive
in each allocation step, such Purchasing PR Holder's "over-allotment pro rata share" shall be determined according to
the aggregate number of all Shares held by such Purchasing PR Holder on the date of the Issuance Notice in relation to the aggregate
number of all Shares held by all Purchasing PR Holders who participate in such allocation step on such date.
(iv)
Closing
.
If any PR Holder elects to purchase Issuance Shares, then payment for the Issuance Shares to be purchased shall be made by wire
transfer in immediately available funds of the appropriate currency, against delivery of such Issuance Shares to be purchased,
at a place and time agreed to by the Company and the PR Holders that have elected to purchase a majority of the Issuance Shares;
provided that the scheduled time for closing shall not be later than thirty (30) Business Days following the expiration of the
last period during which any PR Holder may elect to purchase any Issuance Share (including Over-Allotment Issuance Share).
1.3
Permitted
Issuance to Potential Subscriber
. The Company may issue any Issuance Shares with respect to which the PR Holders' Preemptive
Rights were not exercised, to the Potential Subscriber identified in the Issuance Notice and at a price and upon terms not more
favorable than those specified in the Issuance Notice.
|
2.
|
RIGHT OF FIRST REFUSAL
.
|
2.1
Right
of First Refusal
. Each holder of the Preferred Shares (the “
ROFR Holder”)
shall have a right (the "
Right
of First Refusal
") to purchase all or any portion of the Shares that an Ordinary Shareholder (a "
Transferor
")
may propose to transfer (the "
Transfer Shares
") to any other Shareholder or any potential third party transferee
(the "
Potential Transferee
") as set forth in this
Section 0
,
provided that
the applicable consent
of the Series C Investors as set forth in
Section 3.1
of this Agreement have been given.
2.2
Procedure
.
(i)
Transfer
Notice
. The Transferor shall give each ROFR Holder a written notice (the “
Transfer Notice
”) describing (i)
type and number of the Transfer Shares to be transferred, (ii) identity of the Potential Transferee, and (iii) price and other
material terms upon which the Transferor proposes to transfer such Transfer Shares. The Transfer Notice shall certify that the
Transferor has received a definitive offer from the Potential Transferee on the terms set forth in the Transfer Notice.
(ii)
ROFR
Holder’s Exercise
. Each ROFR Holder shall have twenty (20) days after the receipt of the Transfer Notice (the “
ROFR
Holder Exercise Period
”) to irrevocably elect to purchase all or portion of its initial pro rata share of the Transfer
Shares at the same price and subject to the same material terms and conditions as described in the Transfer Notice by notifying
the Transferor and the Company in writing of the number of Transfer Shares to be purchased. For the purposes of the Right of First
Refusal, each ROFR Holder’s “initial pro rata share” shall be determined according to (x) the aggregate number
of all Shares held by such ROFR Holder on the date of the Transfer Notice in relation to (y) the aggregate number of all Shares
held by all ROFR Holders on such date.
(iii)
Over-Allotment
.
If the ROFR Holders fail to elect to purchase all the Transfer Shares, then such unpurchased Transfer Shares (“
Over-Allotment
Transfer Shares
”) shall be made available to each Series C Preferred Shareholder who has elected to purchase all of its
initial pro rata share of the Transfer Shares (the "
Purchasing ROFR Holder
") for over-allotment. Upon the earlier
of (i) the expiration of the ROFR Holder Exercise Period, or (ii) the time when the Transferor has received the written notice
of each ROFR Holder in respect of its exercise of the Right of First Refusal, the Transferor shall deliver an over-allotment notice
to the Company and each Purchasing ROFR Holder to inform them of the aggregate number of Over-Allotment Transfer Shares that are
available for over-allotment. Each of Purchasing ROFR Holders shall have five (5) days after the receipt of such over-allotment
notice to irrevocably elect to purchase all or portion of the Over-Allotment Transfer Shares at the same price and subject to the
same material terms and conditions as described in the Transfer Notice by notifying the Transferor and the Company in writing of
the number of Over-Allotment Transfer Shares to be purchased. If the aggregate number of the Over-Allotment Transfer Shares elected
to be purchased by all Purchasing ROFR Holders in response to such over-allotment notice exceeds the aggregate number of the Over-Allotment
Transfer Shares that are available for over-allotment, then the number of the Over-Allotment Transfer Shares shall be allocated
to Purchasing ROFR Holders by allocating to each Purchasing ROFR Holders the lesser of (A) the difference between the number of
Over-Allotment Transfer Shares it elects to purchase and the aggregate number of Over-Allotment Transfer Shares that has already
been allocated to it, and (B) its over-allotment pro rata share of the Over-Allotment Transfer Shares that has not yet been allocated,
which allocation step shall be repeated until all Over-Allotment Transfer Shares are allocated. Each Purchasing ROFR Holder who
has been allocated all the Over-Allotment Transfer Shares that it has elected to purchase shall cease to participate in any subsequent
allocation step. For the purposes of determining the allocation of Over-Allotment Transfer Shares that a Purchasing ROFR Holders
will receive in each allocation step, such Purchasing ROFR Holder’s “over-allotment pro rata share” shall be
determined according to (x) the aggregate number of all Shares held by such Purchasing ROFR Holder on the date of the Transfer
Notice in relation to (y) the aggregate number of all Shares held by all Purchasing ROFR Holders who participate in such allocation
step on such date.
(iv)
Closing
.
If any ROFR Holder elects to purchase the Transfer Shares, then the payment for the Transfer Shares to be purchased shall be made
by wire transfer in immediately available funds of the appropriate currency, against delivery of such Transfer Shares to be purchased,
at a place and time agreed by the Transferor and the ROFR Holders that have elected to purchase a majority of the Transfer Shares
to be purchased by the ROFR Holders, provided that the scheduled time for closing shall not be later than thirty (30) Business
Days following the expiration of ROFR Holder Exercise Period or the last period during which any ROFR Holder may elect to purchase
any Transfer Share (including Over-Allotment Transfer Share) in each case, and the scheduled place shall be the business address
of the Company absent such agreement on the place.
3.1
Right
of Co-Sale
. In the event the ROFR Holders fail or do not elect to exercise their respective rights to purchase all of the Transfer
Shares subject to
Section 2
hereof, each ROFR Holder that has not exercised its Right of First Refusal (the "
ROCS
Holder
") shall have the right (the "
Right of Co-Sale
") to participate in the Transferor's sale of Transfer
Shares to the Potential Transferee as set forth in this
Section 3
.
3.2
Procedure
.
(i)
Exercise
.
If an ROCS Holder does not elect to purchase any Transfer Shares pursuant to the ROFR Holder Right of First Refusal, each such
ROCS Holder shall have twenty (20) days after the receipt of the Transfer Notice to irrevocably elect to sell all or portion of
its pro rata share of the remaining Transfer Shares that are not purchased pursuant to the Right of First Refusal at the same price
and subject to the same material terms and conditions as described in the Transfer Notice by notifying the Transferor and the Company
in writing of the number of Shares to be sold (the "
Co-Sale Shares
"). For the purposes of the Right of Co-Sale,
each ROCS Holder's "pro rata share" shall be determined according to (x) the aggregate number of all Shares held by such
ROCS Holder on the date of the Transfer Notice in relation to (y) the aggregate number of all Shares held by all ROCS Holders exercising
the Right of Co-Sale and the Transferor on such date.
(ii)
Reduction
of Shares Sold by the Transferor
. To the extent that any ROCS Holder exercises its Right of Co-Sale, the number of Transfer
Shares that the Transferor may sell to the Potential Transferee shall be correspondingly reduced by the aggregate number of the
Co-Sale Shares.
(iii)
Closing
.
The sale of the Co-Sale Shares to the Potential Transferee by the participating ROCS Holders shall be consummated simultaneously
with the sale by the Transferor. To the extent that any Potential Transferee refuses to purchase any Co-Sale Shares, the Transferor
shall not sell to such Potential Transferee any Shares unless and until, simultaneously with such sale, the Transferor shall purchase
from such participating ROCS Holder such Co-Sale Shares that such participating ROCS Holder would otherwise be entitled to sell
to the Potential Transferee pursuant to its Right of Co-Sale.
3.3
Permitted
Transfer to Potential Transferee
. Subject to the ROCS Holders' Right of Co-Sale under this
Section 3
, the Transferor
may sell any remaining Transfer Shares with respect to which the ROFR Holders' ROFR Holder Right of First Refusal was not exercised,
to the Potential Transferee identified in the Transfer Notice and at a price and upon terms not more favorable than those specified
in the Transfer Notice.
4.1
Valuation
of Non-Cash Consideration
. In the event that the Parties cannot agree on value of the consideration payable in property other
than cash, then the value of such property shall be established by an internationally reputable appraiser jointly selected by,
(i) in the case of the Preemptive Right, the Company and the PR Holders that have elected to purchase a majority of the Issuance
Shares to be purchased by the PR Holders, (ii) in the case of the Right of First Refusal, the Transferor and the ROFR Holders that
have elected to purchase a majority of the Transfer Shares to be purchased by the ROFR Holders. If such valuation is not completed
before the deadline for closing of the issuance of the Issuance Shares to the PR Holders or the sale of the Transfer Shares to
the ROFR Holders, then such deadline shall be extended to the date that is ten (10) days after such valuation is completed.
4.2
Apportion
.
Each PR Holder may apportion Issuance Shares that it is entitled to purchase pursuant to its Preemptive Right among its Affiliates;
provided that such PR Holder notifies the Company in writing. Each ROFR Holder may apportion Transfer Shares that it is entitled
to purchase pursuant to its Right of First Refusal among its Affiliates; provided that such ROFR Holder notifies the Transferor
and the Company in writing.
4.3
Effect
on Subsequent Transaction
. The exercise, non-exercise or waiver of any Preemptive Right, Right of First Refusal or Right of
Co-Sale in respect of a particularly issuance or transfer of Shares shall not adversely affect such right in respect of any subsequent
issuance or transfer of Shares.
4.4
Calculation
of Shares
. The number of Shares shall be calculated on an as-converted to Ordinary Shares basis.
EXHIBIT F
FORM OF LOCKUP AGREEMENT
LOCK-UP LETTER
_____________, 2018
Weidai Ltd.
50/F, West Building, Fortune Finance Center
No. 33 Jiefang East Road
Jianggan District, Hangzhou
Zhejiang Province
The People’s Republic of China
AND
Morgan Stanley & Co. International plc
25 Cabot Square, Canary Wharf
London E14 4QA
United Kingdom
Citigroup Global Markets Inc.
388 Greenwich Street
New York, NY 10013
United States
Credit Suisse Securities (USA) LLC
Eleven Madison Avenue
New York, N.Y. 10010
United States
as Representatives of the several Underwriters named in the
Underwriting Agreement
Ladies and Gentlemen:
The undersigned understands that Morgan
Stanley & Co. International plc, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC, as representatives (the
“
Representatives
”) of the several Underwriters, propose to enter into an Underwriting Agreement (the “
Underwriting
Agreement
”) with Weidai Ltd., a Cayman Islands Company (the “
Company
”), providing for the public offering
(the “
Public Offering
”) by the several Underwriters, including the Representatives, of American Depositary Shares
(the “
ADSs
”), representing ordinary shares, par value US$0.0001 per share, of the Company (the “
Ordinary
Shares
”). The undersigned is a record or beneficial owner of American Depositary Shares, Ordinary Shares, or securities
convertible into or exercisable or exchangeable for the American Depositary Shares or Ordinary Shares.
To induce the Underwriters that may participate
in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without
the prior written consent of the Company and the Representatives on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the final prospectus (the “
Lock-Up Period
”)
relating to the Public Offering (the “
Prospectus
”), (1) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend,
or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or ADSs beneficially owned (as such term is used
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)), by the undersigned or
any other securities so owned convertible into or exercisable or exchangeable for the Ordinary Shares or ADSs or (2) enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the Ordinary Shares or ADSs, whether any such transaction described in clause (1) or (2) above is to be settled by delivery
of Ordinary Shares or ADSs or such other securities, in cash or otherwise, or (3) publicly disclose the intention to make any such
offer, sale, pledge or disposition, or enter into any such swap or other arrangements, or (4) make any demand for or exercise any
right with respect to, the registration of any Ordinary Shares or ADSs. The foregoing sentence shall not apply to (a) transactions
relating to Ordinary Shares, ADSs or other securities acquired in open market transactions after the completion of the Public Offering,
provided
that no filing under the Exchange Act shall be required or shall be voluntarily made in connection with subsequent
sales of Ordinary Shares, ADSs or other securities acquired in such open market transactions, (b) transfers of Ordinary Shares,
ADSs or any security convertible into Ordinary Shares or ADSs as a bona fide gift or through will or intestacy, or to immediate
family members, to any trust for the direct or indirect benefit of the undersigned or any immediate family member of the undersigned,
or to any entity beneficially owned and controlled by the undersigned, or (c) if the undersigned is a partnership, limited liability
company or corporation, transfer or distributions of Ordinary Shares or ADSs or any security convertible into Ordinary Shares or
ADSs to limited partners, stockholders or “affiliates” (as such term is defined in Rule 12b-2 under the Exchange Act)
of the undersigned
;
provided
that in the case of any transfer or distribution pursuant
to clause (b) or (c), (i) each donee, transferee or distributee shall sign and deliver a lock-up letter substantially in the
form of this letter and (ii) no filing under the Exchange Act, reporting a reduction in beneficial ownership of Ordinary Shares
or ADSs, shall be required or shall be voluntarily made during the Lock-Up Period, or (d) the establishment of a trading plan pursuant
to Rule 10b5-1 under the Exchange Act for the transfer of Ordinary Shares or ADSs,
provided
that (i) such plan does not
provide for the transfer of Ordinary Shares or ADSs during the Lock-Up Period and (ii) to the extent a public announcement or filing
under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned or the Company regarding
the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Ordinary
Shares or ADSs may be made under such plan during the Lock-Up Period. In addition, the undersigned agrees that, without the prior
written consent of the Company and the Representatives on behalf of the Underwriters, it will not, during the Lock-Up Period, make
any demand for or exercise any right with respect to, the registration of any Ordinary Shares or ADSs or any security convertible
into or exercisable or exchangeable for Ordinary Shares or ADSs. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Ordinary
Shares or ADSs except in compliance with the foregoing restrictions.
If the undersigned is an officer or director
of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed
ADSs the undersigned may purchase in the Public Offering.
If the undersigned is an officer or director
of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver
of the foregoing restrictions in connection with a transfer of Ordinary Shares or ADSs, the Representatives will notify the Company
of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release
or waiver by press release through a major news service at least two business days before the effective date of the release or
waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective
two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the
release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to
be bound by the same terms described in this letter to the extent and for the duration that such terms remain in effect at the
time of the transfer.
The undersigned understands that the Company
and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned
further understands that this agreement shall be binding upon the undersigned and the undersigned’s heirs, legal representatives,
successors and assigns.
Whether or not the Public Offering actually
occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting
Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.
This letter agreement shall automatically
terminate and be of no further force and effect on the earlier of (i) the date that the Company advises the Representatives in
writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Public Offering,
(ii) subsequent to signing the Underwriting Agreement, the Underwriting Agreement (other than the provisions thereof which survive
termination) is terminated prior to payment for and delivery of the ADSs to be sold thereunder, or (iii) December 31, 2018 if the
Public Offering has not been completed by or before such date.
This letter is governed by, and to be construed
in accordance with, the internal laws of the State of New York, without regard to the conflict of laws principles thereof.
[
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Very truly yours,
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(Name)
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(Address)
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Exhibit 5.1
10 August 2018
Matter No.826322:
Doc Ref: 104402301v1
852 2842 9530
Richard.Hall@conyersdill.com
Weidai Ltd.
50/F, Western Building
Fortune Plaza
No. 33 Jiefang East Road
Jianggan District, Hangzhou
People’s Republic of China
Attn: the board of directors
Dear Sirs,
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Re:
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Weidai Ltd. (the “Company”)
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We have acted as special legal counsel
in the Cayman Islands to the Company in connection with a registration statement on form F-1 to be filed with the U.S. Securities
and Exchange Commission (the “
Commission
”) on or about the date hereof (the “
Registration Statement
”,
which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit
or schedule thereto) relating to the registration under the U.S. Securities Act of 1933, as amended, (the “
Securities
Act
”) of Class A Ordinary Shares par value US$0.0001 each (the “
Class A Ordinary Shares
”) of the Company.
For the purposes of giving
this opinion, we have examined a copy of the Registration Statement. We have also reviewed (1) the currently adopted
amended and restated memorandum and articles of association of the Company provided to us on 14 May 2018, (2) unanimous
written resolutions of the directors of the Company dated 7 August 2018 and unanimous written resolutions of the members of
the Company dated 7 August 2018 (the “
Resolutions
”),
(3) the latest drafts of the second amended and restated memorandum of association and the second amended and restated
articles of association of the Company to become effective prior to the closing of the Company’s initial
public offering of Class A Ordinary Shares represented by American Depositary Shares (the “
Listing
M&As
”), (4) a Certificate of Good Standing issued by the Registrar of Companies in relation to the Company
on 7 August 2018 (the “
Certificate Date
”), and (5) such other documents and made such enquiries as to
questions of law as we have deemed necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness
and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us
and the authenticity and completeness of the originals from which such copies were taken, (b) that where a document has been
examined by us in draft form, it will be or has been executed and/or filed in the form of that draft, and where a number of drafts
of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention, (c) the accuracy
and completeness of all factual representations made in the Registration Statement and other documents reviewed by us, (d) that
the Resolutions were passed by unanimous written resolutions,
will remain in full force and effect and will not be rescinded or amended, (e) that the Listing M&As will become effective
prior to the closing of the Company’s initial public offering of Class A Ordinary Shares represented by American Depositary
Shares, (f) that there is no provision of the law of any jurisdiction, other than the Cayman Islands, which would have a
n
y
implication in relation to the opinions expressed herein, (g) that upon issue of any Class A Ordinary Shares to be sold by
the Company, the Company will receive consideration for the full issue price thereof which shall be equal to at least the par value
thereof, and (h) the validity and binding effect under the laws of the United States of America of the Registration Statement
and that the Registration Statement will be duly filed with the Commission.
We have made no investigation of and express
no opinion in relation to the laws of any jurisdiction other than the Cayman Islands. This opinion is to be governed by and
construed in accordance with the laws of the Cayman Islands and is limited to and is given on the basis of the current law and
practice in the Cayman Islands.
On the basis of and subject to the foregoing,
we are of the opinion that:
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1.
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The Company is duly incorporated and existing under the
law of the Cayman Islands and, based on the Certificate of Good Standing, is in good standing as at the Certificate Date.
Pursuant to the Companies Law (the “
Law
”), a company is deemed to be in good standing if all fees and penalties
under the Law have been paid and the Registrar of Companies has no knowledge that the Company is in default under the Law.
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2.
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When issued and paid for as contemplated by the Registration
Statement, the Class A Ordinary Shares will be validly issued, fully paid and non-assessable (which term means when used herein
that no further sums are required to be paid by the holders thereof in connection with the issue of such shares).
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We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the references to our firm under the captions “Enforcement of
Civil Liabilities” and “Legal Matters” in the prospectus forming a part of the Registration Statement.
In giving this consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7
of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.
Yours faithfully,
/s/ Conyers Dill & Pearman
Conyers Dill & Pearman
Exhibit 8.1
10 August 2018
Matter No.826322
Doc Ref: 104402439v1
852 2842 9530
Richard.Hall@conyersdill.com
Weidai Ltd.
50/F, Western Building
Fortune Plaza
No. 33 Jiefang East Road
Jianggan District, Hangzhou
People’s Republic of China
Attn: the board of directors
Dear Sirs,
|
Re:
|
Weidai Ltd. (the “Company”)
|
We have acted as special legal counsel
in the Cayman Islands to the Company in connection with a registration statement on form F-1 to be filed with the U.S. Securities
and Exchange Commission (the “
Commission
”) on or about the date hereof (the “
Registration Statement
”,
which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit
or schedule thereto) relating to the registration under the U.S. Securities Act of 1933, as amended, (the “
Securities
Act
”) of Class A Ordinary Shares par value US$0.0001 each of the Company.
For the purposes of giving this opinion,
we have examined and relied upon copies of the following documents:
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(i)
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the Registration Statement; and
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(ii)
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a draft of the prospectus (the “
Prospectus
”)
contained in the Registration Statement which is in substantially final form.
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We have also reviewed and relied upon (1) the
currently adopted amended and restated memorandum of association and articles of association of the Company, (2) the latest
drafts of the second amended and restated memorandum of association and articles of association of the Company, adopted by
the Company and to become effective prior to the closing of the Company’s initial public offering of Class A Ordinary
Shares, par value US$0.0001 each, represented by American Depositary Shares, and (3) such other documents and made such enquiries
as to questions of law as we have deemed necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness
and authenticity of all signatures, stamps and seals and the conformity to the originals of all copies of documents (whether or
not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken; (b) the
accuracy and completeness of all factual representations made in the Prospectus and Registration Statement reviewed by us; (c) the
validity and binding effect under the laws of the United States of America of the Registration Statement and the Prospectus and
that the Registration Statement will be duly filed with or declared effective by the Commission; and (d) that the Prospectus,
when published, will be in substantially the same form as that examined by us for purposes of this opinion.
We have made no investigation of and express
no opinion in relation to the laws of any jurisdiction other than the Cayman Islands. This opinion is to be governed by and construed
in accordance with the laws of the Cayman Islands and is limited to and is given on the basis of the current law and practice in
the Cayman Islands.
On the basis of and subject to the foregoing,
we are of the opinion that the statements under the caption “
Taxation — Cayman Islands Taxation
” in the
Prospectus forming part of the Registration Statement, to the extent that they constitute statements of Cayman Islands law, are
accurate in all material respects and that such statements constitute our opinion.
We hereby consent to the use of this opinion
in, and the filing hereof as an exhibit to, the Registration Statement and further consent to the reference of our name in the
Prospectus forming part of the Registration Statement. In giving this consent, we do not hereby admit that we are experts
within the meaning of Section 11 of the Securities Act or that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.
Yours faithfully,
/s/ Conyers Dill & Pearman
Conyers Dill & Pearman
Exhibit 10.1
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICIATION
AGREEMNT (this “
Agreement
”) is made as of
,
20 by and between Weidai Ltd., an exempted company with limited liability incorporated and existing under the laws of the Cayman
Islands (the “
Company
”) and
([Passport/ID] Number
)
(the “
Indemnitee
”).
WHEREAS, the Indemnitee
has agreed to serve as a director or executive officer of the Company and in such capacity will render valuable services to the
Company; and
WHEREAS, in order to
induce and encourage highly experienced and capable persons such as the Indemnitee to render valuable services to the Company,
the board of directors of the Company (the “
Board of Directors
”) has determined that this Agreement is not only
reasonable and prudent, but necessary to promote and ensure the best interests of the Company and its shareholders;
NOW, THEREFORE, in
consideration of the premises and mutual agreements hereinafter set forth, and other good and valuable consideration, including,
without limitation, the service of the Indemnitee, the receipt of which hereby is acknowledged, and in order to induce the Indemnitee
to render valuable services the Company, the Company and the Indemnitee hereby agree as follows:
1.
Definitions.
As used in this Agreement:
(a)
“
Changes
in Control
” shall mean a change in control of the Company of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar or successor schedule or form)
promulgated under the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder
(collectively, the “
Act
”), whether or not the Company is then subject to such reporting requirement; provided,
however, that, without limitation, such a Change in Control shall be deemed to have occurred (irrespective of the applicability
of the initial clause of this definition) if (i) any “person” (as such term is used in Section 13(d) and 14(d) of the
Act, but excluding any trustee or other fiduciary holding securities pursuant to an employee benefit or welfare plan or employee
share plan of the Company or any subsidiary or affiliate of the Company, or any entity organized, appointed, established or holding
securities of the Company with voting power for or pursuant to the terms of any such plan) becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company’s then outstanding securities without the prior approval of at least two-thirds of the
Continuing Directors (as defined below) in office immediately prior to such person’s attaining such interest; (ii) the Company
is a party to a merger, consolidation, scheme of arrangement, sale of assets or other reorganization, or a proxy contest, as a
consequence of which Continuing Directors in office immediately prior to such transaction or event constitute less than a majority
of the Board of Directors of the Company (or any successor entity) thereafter; or (iii) during any period of two consecutive years,
Continuing Directors cease for any reason to constitute at least a majority of the Board of Directors of the Company.
(b)
“
Continuing
Director
” shall mean an individual (i) who served on the Board of Directors of the Company at the effective date of the
Company’s registration statement on Form F-1 relating to the Company’s initial public offering; or (ii) whose election
or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the Continuing
Directors then in office.
(c)
“
Disinterested
Director
” with respect to any request by the Indemnitee for indemnification or advancement of expenses hereunder shall
mean a director of the Company who neither is nor was a party to the Proceeding (as defined below) in respect of which indemnification
or advancement is being sought by the Indemnitee.
(d)
The
term “
Expenses
” shall mean, without limitation, expenses of Proceedings, including attorneys’ fees, disbursement
and retainers, accounting and witness fees, expenses related to preparation for service as a witness and to service as a witness,
travel and deposition costs, expenses of investigations, judicial or administrative proceedings and appeals, amounts paid in settlement
of a Proceeding by or on behalf of the Indemnitee, costs of attachment or similar bonds, any expenses of attempting to establish
or establishing a right to indemnification or advancement of expenses, under this Agreement, the Company’s Memorandum of
Association and Articles of Association as currently in effect (the “
Articles
”), applicable law or otherwise,
and reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding
or action for indemnification for which the Indemnitee is not otherwise compensated by the Company or any third party. The term
“Expenses” shall not include the amount of judgments, fines, interest or penalties, which are actually levied against
or sustained by the Indemnitee to the extent sustained after final adjudication.
(e)
The
term “
Independent Legal Counsel
” shall mean any firm of attorneys reasonably selected by the Board of Directors
of the Company, so long as such firm has not represented the Company, the Company’s subsidiaries or affiliates, the Indemnitee,
any entity controlled by the Indemnitee, or any party adverse to the Company, within the preceding five (5) years. Notwithstanding
the foregoing, the term “Independent Legal Counsel” shall not include any person who, under applicable standards of
professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in
an action to determine the Indemnitee’s right to indemnification or advancement of expenses under this Agreement, the Company’s
Articles, applicable law or otherwise.
(f)
The
term “
Proceeding
” shall mean any threatened, pending or completed action, suit, arbitration, alternate dispute
resolution mechanism, or other proceeding (including, without limitation, an appeal therefrom), formal or informal, whether brought
in the name of the Company or otherwise, whether of a civil, criminal, administrative or investigative nature, and whether by,
in or involving a court or an administrative, other governmental or private entity or body (including, without limitation, an investigation
by the Company or its Board of Directors), by reason of (i) the fact that the Indemnitee is or was a director or officer of the
Company, or is or was serving at the request of the Company as an agent of another enterprise, whether or not the Indemnitee is
serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement is to be provided
under this Agreement, (ii) any actual or alleged act or omission or neglect or breach of duty, including, without limitation, any
actual or alleged error or misstatement or misleading statement, which the Indemnitee commits or suffers while acting in any such
capacity, or (iii) the Indemnitee attempting to establish or establishing a right to indemnification or advancement of expenses
pursuant to this Agreement, the Company’s Articles, applicable law or otherwise.
(g)
The
phrase “
serving at the request of the Company as an agent of another enterprise
” or any similar terminology
shall mean, unless the context otherwise requires, serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, limited liability company, trust, employee benefit or welfare plan or other
enterprise, foreign or domestic. The phrase “serving at the request of the Company” shall include, without limitation,
any service as a director/an executive officer of the Company which imposes duties on, or involves services by, such director/executive
officer with respect to the Company or any of the Company’s subsidiaries, affiliates, employee benefit or welfare plans,
such plan’s participants or beneficiaries or any other enterprise, foreign or domestic. In the event that the Indemnitee
shall be a director, officer, employee or agent of another corporation, partnership, joint venture, limited liability company,
trust, employee benefit or welfare plan or other enterprise, foreign or domestic, 50% or more of the ordinary shares, combined
voting power or total equity interest of which is owned by the Company or any subsidiary or affiliate thereof, then it shall be
presumed conclusively that the Indemnitee is so acting at the request of the Company.
2.
Services by the Indemnitee
. The
Indemnitee agrees to serve as a director or officer of the Company under the terms of the Indemnitee’s agreement with the
Company for so long as the Indemnitee is duly elected or appointed or until such time as the Indemnitee tenders a resignation in
writing or is removed from the Indemnitee's position; provided, however, that the Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or other obligation imposed by operation of law).
3.
Proceedings
by or in the Right of the Company
. The Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened
to be made a party to or is otherwise involved in any Proceeding by or in the right of the Company to procure a judgment in its
favor by reason of the fact that the Indemnitee is or was a director or officer of the Company, or is or was serving at the request
of the Company as an agent of another enterprise, against all Expenses, judgments, fines, interest or penalties, which are actually
and reasonably incurred by the Indemnitee in connection with the defense or settlement of such a Proceeding, if the Indemnitee
acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company;
except
that no indemnification under this section shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudicated by final judgment by a court of competent jurisdiction to be liable to the Company for willful
misconduct in the performance of his/her duty to the Company, unless and only to the extent that the court in which such Proceeding
was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such amounts which such other court shall deem proper.
4.
Proceeding
Other Than a Proceeding by or in the Right of the Company
. The Company shall indemnify the Indemnitee if the Indemnitee is
a party to or threatened to be made a party to or is otherwise involved in any Proceeding (other than a Proceeding by or in the
right of the Company) by reason of the fact that the Indemnitee is or was a director or officer of the Company, or is or was serving
at the request of the Company as an agent of another enterprise, against all Expenses, judgments, fines, interest or penalties,
which are actually and reasonably incurred by the Indemnitee in connection with such a Proceeding, to the fullest extent permitted
by applicable law; provided, however, that any settlement of a Proceeding must be approved in advance in writing by the Company
(which approval shall not be unreasonably withheld).
5.
Indemnification
for Costs, Charges and Expenses of Witness or Successful Party
. Notwithstanding any other provision of this Agreement (except
as set forth in subparagraph 9(a) hereof), and without a requirement for determination as required by Paragraph 8 hereof, to the
extent that the Indemnitee (a) has prepared to serve or has served as a witness in any Proceeding in any way relating to (i) the
Company or the Company’s subsidiaries, affiliates, employee benefit or welfare plans or such plan’s participants or
beneficiaries or (ii) anything done or not done by the Indemnitee as a director or officer of the Company or in connection with
serving at the request of the Company as an agent of another enterprise, or (b) has been successful in defense of any Proceeding
or in defense of any claim, issue or matter therein, on the merits or otherwise, including the dismissal of a Proceeding without
prejudice or the settlement of a Proceeding without an admission of liability, the Indemnitee shall be indemnified against all
Expenses actually and reasonably incurred by the Indemnitee in connection therewith to the fullest extent permitted by applicable
law.
6.
Partial
Indemnification
. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for
a portion of the Expenses, judgments, fines, interest or penalties, which are actually and reasonably incurred by the Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding, but not, however, for the total amount of the Indemnitee’s
Expenses, judgments, fines, interest or penalties, then the Company shall nevertheless indemnify the Indemnitee for the portion
of such Expenses, judgments, fines, interest or penalties to which the Indemnitee is entitled.
7.
Advancement
of Expenses
. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in advance of
the final disposition of the Proceeding at the written request of the Indemnitee, to the fullest extent permitted by applicable
law; provided, however, that the Indemnitee shall set forth in such request reasonable evidence that such Expenses have been incurred
by the Indemnitee in connection with such Proceeding, a statement that such Expenses do not relate to any matter described in subparagraph
9(a) of this Agreement, and an undertaking in writing to repay any advances if it is ultimately determined as provided in subparagraph
8(b) of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement.
8.
Indemnification
Procedure; Determination of Right to Indemnification
.
(a)
Promptly
after receipt by the Indemnitee of notice of the commencement of any Proceeding, the Indemnitee shall, if a claim for indemnification
or advancement of Expenses in respect thereof is to be made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The failure and delay to so notify the Company will not relieve the Company from any liability
which the Company may have to the Indemnitee under this Agreement unless the Company shall have lost significant substantive or
procedural rights with respect to the defense of any Proceeding as a result of such omission to so notify.
(b)
The
Indemnitee shall be conclusively presumed to have met the relevant standards of conduct, if any, as defined by applicable law,
for indemnification pursuant to this Agreement and shall be absolutely entitled to such indemnification, unless a determination
is made that the Indemnitee has not met such standards by (i) the Board of Directors by a majority vote of a quorum thereof consisting
of Disinterested Directors, (ii) the shareholders of the Company by majority vote of a quorum thereof consisting of shareholders
who are not parties to the Proceeding due to which a claim for indemnification is made under this Agreement, (iii) Independent
Legal Counsel as set forth in a written opinion (it being understood that such Independent Legal Counsel shall make such determination
only if the quorum of Disinterested Directors referred to in clause (i) of this subparagraph 8(b) is not obtainable or if the Board
of Directors of the Company by a majority vote of a quorum thereof consisting of Disinterested Directors so directs), or (iv) a
court of competent jurisdiction; provided, however, that if a Change in Control shall have occurred and the Indemnitee so requests
in writing, such determination shall be made only by a court of competent jurisdiction.
(c)
If
a claim for indemnification or advancement of Expenses under this Agreement is not paid by the Company within thirty (30) days
after receipt by the Company of written notice thereof, the rights provided by this Agreement shall be enforceable by the Indemnitee
in any court of competent jurisdiction. Such judicial proceeding shall be made de novo. The burden of proving that indemnification
or advances are not appropriate shall be on the Company. Neither the failure of the directors or shareholders of the Company or
Independent Legal Counsel to have made a determination prior to the commencement of such action that indemnification or advancement
of Expenses is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, if any, nor an actual
determination by the directors or shareholders of the Company or Independent Legal Counsel that the Indemnitee has not met the
applicable standard of conduct shall be a defense to an action by the Indemnitee or create a presumption for the purpose of such
an action that the Indemnitee has not met the applicable standard of conduct. The termination of any Proceeding by judgment, order,
settlement or conviction, or upon a plea of
nolo contendere
or its equivalent, shall not, of itself (i) create a presumption
that the Indemnitee did not act in good faith and in a manner which he reasonably believed to be in the best interests of the Company
and/or its shareholders, and, with respect to any criminal Proceeding, that the Indemnitee had reasonable cause to believe that
his conduct was unlawful or (ii) otherwise adversely affect the rights of the Indemnitee to indemnification or advancement of Expenses
under this Agreement, except as may be provided herein.
(d)
If
a court of competent jurisdiction shall determine that the Indemnitee is entitled to any indemnification or advancement of Expenses
hereunder, the Company shall pay all Expenses actually and reasonably incurred by the Indemnitee in connection with such adjudication
(including, but not limited to, any appellate proceedings).
(e)
With
respect to any Proceeding for which indemnification or advancement of Expenses is requested, the Company will be entitled to participate
therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the
defense thereof, with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its
election to assume the defense of a Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any Expenses
subsequently incurred by the Indemnitee in connection with the defense thereof, other than as provided below. The Company shall
not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee’s
written consent. The Indemnitee shall have the right to employ his/her own counsel in any Proceeding, but the fees and expenses
of such counsel incurred after notice from the Company of its assumption of the defense of the Proceeding shall be at the expense
of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct
of the defense of a Proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of a proceeding,
in each of which cases the fees and expenses of the Indemnitee’s counsel shall be advanced by the Company. The Company shall
not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee has
reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee.
9.
Limitations
on Indemnification
. No payments pursuant to this Agreement shall be made by the Company:
(a)
To
indemnify or advance funds to the Indemnitee for Expenses with respect to (i) Proceedings initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification
under this Agreement or any other statute or law or otherwise as required under applicable law or (ii) Expenses incurred by the
Indemnitee in connection with preparing to serve or serving as a witness in cooperation with any party or entity who or which has
threatened or commenced any action or proceeding against the Company, or any director, officer, employee, trustee, agent, representative,
subsidiary, parent corporation or affiliate of the Company, but such indemnification or advancement of Expenses in each such case
may be provided by the Company if the Board of Directors finds it to be appropriate;
(b)
To
indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties sustained in any Proceeding for which payment
is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount
of payment under such insurance;
(c)
To
indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties sustained in any Proceeding for an accounting
of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section
16(b) of the Act or similar provisions of any foreign or United States federal, state or local statute or regulation;
(d)
To
indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties for which the Indemnitee is indemnified by the
Company otherwise than pursuant to this Agreement;
(e)
To
indemnify the Indemnitee for any Expenses (including without limitation any Expenses relating to a Proceeding attempting to enforce
this Agreement), judgments, fines, interest or penalties on account of the Indemnitee’s conduct if such conduct shall be
finally adjudged to have been knowingly fraudulent or deliberately dishonest or to have constituted willful misconduct, including,
without limitation, breach of the duty of loyalty; or
(f)
If
a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful. In this respect, the Company
and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities
arising under securities laws is against public policy and is, therefore, unenforceable;
(g)
To
indemnify the Indemnitee in connection with Indemnitee’s personal tax matter; or
(h)
To
indemnify the Indemnitee with respect to any claim related to any dispute or breach arising under any contract or similar obligation
between the Company or any of its subsidiaries or affiliates and such Indemnitee.
10.
Continuation
of Indemnification
. All agreements and obligations of the Company contained herein shall continue during the period that the
Indemnitee is a director or officer of the Company (or is or was serving at the request of the Company as an agent of another enterprise,
foreign or domestic) and shall continue thereafter so long as the Indemnitee shall be subject to any possible Proceeding by reason
of the fact that the Indemnitee was a director or officer of the Company or serving in any other capacity referred to in this Paragraph
10.
11.
Indemnification
Hereunder Not Exclusive
. The indemnification provided by this Agreement shall not be deemed to be exclusive of any other rights
to which the Indemnitee may be entitled under the Company’s Articles, any agreement, vote of shareholders or vote of Disinterested
Directors, provisions of applicable law, or otherwise, both as to action or omission in the Indemnitee’s official capacity
and as to action or omission in another capacity on behalf of the Company while holding such office.
12.
Successors
and Assigns
.
(a)
This
Agreement shall be binding upon the Indemnitee, and shall inure to the benefit of, the Indemnitee and the Indemnitee’s heirs,
executors, administrators and assigns, whether or not the Indemnitee has ceased to be a director or officer, and the Company and
its successors and assigns. Upon the sale of all or substantially all of the business, assets or share capital of the Company to,
or upon the merger of the Company into or with, any corporation, partnership, joint venture, trust or other person, this Agreement
shall inure to the benefit of and be binding upon both the Indemnitee and such purchaser or successor person. Subject to the foregoing,
this Agreement may not be assigned by either party without the prior written consent of the other party hereto.
(b)
If
the Indemnitee is deceased and is entitled to indemnification under any provision of this Agreement, the Company shall indemnity
the Indemnitee’s estate and the Indemnitee’s spouse, heirs, executors, administrators and assigns against, and the
Company shall, and does hereby agree to assume, any and all Expenses actually and reasonably incurred by or for the Indemnitee
or the Indemnitee’s estate, in connection with the investigation, defense, appeal or settlement of any Proceeding. Further,
when requested in writing by the spouse of the Indemnitee, and/or the Indemnitee’s heirs, executors, administrators and assigns,
the Company shall provide appropriate evidence of the Company’s agreement set out herein to indemnify the Indemnitee against
and to itself assume such Expenses.
13.
Subrogation
.
In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such
rights and to enable the Company effectively to bring suit to enforce such rights.
14.
Severability
.
Each and every paragraph, sentence, term and provision of this Agreement is separate and distinct so that if any paragraph, sentence,
term or provision thereof shall be held to be invalid, unlawful or unenforceable for any reason, such invalidity, unlawfulness
or unenforceability shall not affect the validity, unlawfulness or enforceability of any other paragraph, sentence, term or provision
hereof. To the extent required, any paragraph, sentence, term or provision of this Agreement may be modified by a court of competent
jurisdiction to preserve its validity and to provide the Indemnitee with the broadest possible indemnification permitted under
applicable law. The Company’s inability, pursuant to a court order or decision, to perform its obligations under this Agreement
shall not constitute a breach of this Agreement.
15.
Savings
Clause
. If this Agreement or any paragraph, sentence, term or provision hereof is invalidated on any ground by any court of
competent jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any Expenses, judgments, fines, interest
or penalties, which are incurred with respect to any Proceeding to the fullest extent permitted by any (a) applicable paragraph,
sentence, term or provision of this Agreement that has not been invalidated or (b) applicable law.
16.
Interpretation;
Governing Law
. This Agreement shall be construed as a whole and in accordance with its fair meaning and any ambiguities shall
not be construed for or against either party. Headings are for convenience only and shall not be used in construing meaning. This
Agreement shall be governed and interpreted in accordance with the laws of the State of New York.
17.
Amendments
.
No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights
and may not be diminished, eliminated or otherwise affected by amendments to the policies, of the Company.
18.
Counterparts
.
This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each party and delivered to the other.
19.
Notices
.
Any notice required to be given under this Agreement shall be directed to the Chief Financial Officer of the Company at 50/F, West
Building, Fortune Finance Center, No. 33 Jiefang East Road, Jianggan District, Hangzhou, Zhejiang Province, The People’s
Republic of China, and to the Indemnitee at
or to such other address as either shall designate to the other in writing.
[The remainder of this page is intentionally
left blank.]
IN WITNESS WHEREOF, the parties have executed
this Indemnification Agreement as of the date first written above.
INDEMNITEE
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|
|
|
|
|
|
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Name:
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|
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Weidai Ltd.
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[
Signature Page to Indemnification Agreement
]
Exhibit 10.2
WEIDAI LTD.
DIRECTOR AGREEMENT
This Director Agreement (the “
Agreement
”)
is made and entered into as of _______________, 2018, by and between Weidai Ltd., a Cayman Islands company (the “
Company
”
), and ___________________ ([Passport/ID] Number _________________) (“
Director
”).
1.1
Board
of Directors
. Director is appointed as a member of the Company’s Board of Directors (the “
Board
”),
effective upon [the date of this agreement]/[the declaration by the United States Securities and Exchange Commission of the effectiveness
of the Company’s registration statement on Form F-1 as to the Company’s initial public offering] (the “
Effective
Date
”), until the earlier of the date on which Director ceases to be a member of the Board for any reason or the date
of termination of this Agreement in accordance with Section 5.2 hereof (such earlier date being the “
Expiration Date
”).
1.2
Director
Services
. Director’s services to the Company hereunder shall include service on the Board and service on the _____________________________
committee of the Board in accordance with applicable law and stock exchange rules and the memorandum and articles of association
of the Company, and such other services mutually agreed to by Director and the Company (the “
Director Services
”).
2.1
Expense
Reimbursement
. The Company shall reimburse Director for all reasonable travel and other out-of-pocket expenses incurred in
connection with the Director Services rendered by Director.
2.2
Director
Compensation
. The Company agrees to pay Director an annual retainer of US$[·] (the “
Annual Retainer
”),
payable in arrears, in equal installments quarterly. In the event Director ceases to serve on the Board, Director shall be entitled
to the pro rata portion of the Annual Retainer for the number of months he has served on the Board in a given year.
2.3
Equity
Compensation
. Director is entitled to participate in the Company’s 2018 Share Incentive Plan (the “
Plan
”).
The Company agrees to grant [·] [
type of ESOP award
] (the “
Award
”) to Director pursuant to the terms
of the [
name of award agreement
] to be entered by and between the Company and Director (the “
Award Agreement
”).
The Award shall in all respects be subject to the terms and conditions of the Plan and the Award Agreement.
2.4
Director
and Officer Liability Insurance
. The Company agrees to purchase, prior to the Effective Date, a policy of insurance with a
reputable insurance company providing Director with coverage for losses incurred in lawsuits or other legal proceedings brought
against Director in connection with Director Services.
2.5
No
Other Compensation
. Except for the compensation provided in this Section II, Director shall not be entitled to any other compensation,
whether in cash or in kind, for the Director Services.
3.1
Fiduciary
Duties
. In fulfilling his/her responsibilities, Director shall be charged with a fiduciary duty to the Company. Director shall
be attentive and inform himself/herself of all material facts regarding a decision before taking action. In addition, Director’s
actions shall be motivated solely by the best interests of the Company.
3.2
Confidentiality
.
During the Term of this Agreement, and for a period of one (1) year after the Expiration Date, Director shall maintain in strict
confidence all information he/she has obtained or shall obtain from the Company that the Company has designated as confidential
or that is by its nature confidential, relating to the Company s business, operations, properties, assets, services, condition
(financial or otherwise), liabilities, employee relations, customers (including customer usage statistics), suppliers, prospects,
technology, or trade secrets, except to the extent such information (i) is in the public domain through no act or omission of the
Director, (ii) is required to be disclosed by law or a valid order by a court or other governmental body, or (iii) is independently
learned by Director outside of this relationship (the “
Confidential Information
”).
3.3
Nondisclosure
and Nonuse Obligations
. Director will use the Confidential Information solely to perform the Director Services for the benefit
of the Company. Director will treat all Confidential Information of the Company with the same degree of care as Director treats
his/her own confidential information, and Director will use his/her best efforts to protect the Confidential Information. Director
will not use the Confidential Information for his/her own benefit or the benefit of any other person or entity, except as may be
specifically permitted in this Agreement. Director will immediately give notice to the Company of any unauthorized use or disclosure
by or through him/her, or of which he/she becomes aware, of the Confidential Information. Director agrees to assist the Company
in remedying any such unauthorized use or disclosure of the Confidential Information.
3.4
Return
of The Company Property
. All materials furnished to Director by the Company, whether delivered to Director by the Company or
made by Director in the performance of any Director Services under this Agreement (the “
Company Property
”),
are the sole and exclusive property of the Company. Director agrees to promptly deliver the original and any copies of the Company
Property to the Company at any time upon the Company’s request. Upon termination of this Agreement by either party for any
reason, Director agrees to promptly deliver to the Company or destroy, at the Company s option, the original and any copies of
the Company Property. Director agrees to certify in writing that Director has so returned or destroyed all such Company Property.
|
IV.
|
COVENANTS OF DIRECTOR
|
4.1
No
Conflict of Interest
. During the Term of this Agreement, and for a period of one (1) year after the Expiration Date, Director
shall not be employed by, own, manage, control or participate in the ownership, management, operation or control of any business
entity that is competitive with the Company or otherwise undertake any obligation inconsistent with the terms hereof, provided
that Director may continue his current affiliation or other current relationships with the entity or entities described on Exhibit
A (all of which entities are referred to collectively as “
Current Affiliations
”). This Agreement is subject
to the current terms and agreements governing Director s relationship with Current Affiliations, and nothing in this Agreement
is intended to be or will be construed to inhibit or limit any of Director s obligations to Current Affiliations. Director represents
that nothing in this Agreement conflicts with Director s obligations to Current Affiliations. A business entity shall be deemed
to be competitive with the Company for purpose of this Article IV only if and to the extent it engages in the business substantially
similar to the Company s business.
4.2
Noninterference
with Business
. During the Term of this Agreement, and for a period of one (1) year after the Expiration Date, Director agrees
not to interfere with the business of the Company in any manner. By way of example and not of limitation, Director agrees not to
solicit or induce any employee, independent contractor, customer or supplier of the Company to terminate or breach his/her/its
employment, contractual or other relationship with the Company.
5.1
Term
.
This Agreement is effective as of the Effective Date and will continue until the Expiration Date (the “
Term
”).
5.2
Termination
.
Either party may terminate this Agreement at any time upon thirty (30) days prior written notice to the other party, or such shorter
period as the parties may agree upon.
5.3
Survival
.
The rights and obligations contained in Articles III and IV will survive any termination or expiration of this Agreement.
6.1
Assignment
.
Except as expressly permitted by this Agreement, neither party shall assign, delegate, or otherwise transfer any of its rights
or obligations under this Agreement without the prior written consent of the other party. Subject to the foregoing, this Agreement
will be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors
and assigns.
6.2
No
Waiver
. The failure of any party to insist upon the strict observance and performance of the terms of this Agreement shall
not be deemed a waiver of other obligations hereunder, nor shall it be considered a future or continuing waiver of the same terms.
6.1
Notices
.
Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given
as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt;
(iii) by facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail,
return receipt requested, upon verification of receipt. Notice shall be sent to the Company at 50/F, West Building, Fortune Finance
Center, No. 33 Jiefang East Road, Jianggan District, Hangzhou, Zhejiang Province, The People’s Republic of China, and to
the Director at_____________________________ or to such other address as either party may designate to the other in writing.
6.2
Governing
Law
. This Agreement shall be governed in all respects by the laws of the State of New York.
6.3
Severability
.
Should any provisions of this Agreement be held by a court of law to be illegal, invalid or unenforceable, the legality, validity
and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.
6.4
Entire
Agreement
. This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes
all prior or contemporaneous oral or written agreements concerning such subject matter. The terms of this Agreement will govern
all Director Services undertaken by Director for the Company.
6.5
Amendments
.
This Agreement may only be amended, modified or changed by an agreement signed by the Company and Director. The terms contained
herein may not be altered, supplemented or interpreted by any course of dealing or practices.
6.6
Counterparts
.
This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[Signature page to follow]
IN WITNESS WHEREOF
, the parties have
executed this Agreement as of the date first
written above.
COMPANY:
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Weidai Ltd.
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Address:
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a Cayman Islands exempted company
|
50/F, West Building, Fortune Finance Center
|
|
No. 33 Jiefang East Road
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Jianggan District, Hangzhou
|
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Zhejiang Province
|
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The People’s Republic of China
|
By:
|
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Name:
|
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Title:
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DIRECTOR:
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Address:
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Name:
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[Signature Page to Director Agreement]
Exhibit 10.3
Power of Attorney
Date: April 10, 2018
We, Yao Hong (with
Identification Card No.: ***),Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership)(with Unified
Social Credit Code No.: ***), Deqing Jinxiu Management Consulting Partnership (Limited Partnership)(with Unified Social
Credit Code No.: ***), Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership)(with Unified Social
Credit Code No.: ***), Zhejiang Hakim Unique Finance Service Co., Ltd.(with Unified Social Credit Code No.: ***), Zhejiang
Zheshang Lihai Venture Investment Partnership (Limited Partnership)(with Unified Social Credit Code No.: ***), Shenzhen
Guosheng Qianhai Investment Co., Ltd.(with Unified Social Credit Code No.: ***), Qingdao Oriental Capital Investment Co.,
Ltd.(with Unified Social Credit Code No.: ***), Beijing Dongyitianzheng Investment Co., Ltd.(with Unified Social Credit Code
No.: ***) and Hangzhou Shanan Investment Partnership (Limited Partnership)(with Unified Social Credit Code No.: ***), a
citizen of the People's Republic of China (“
China
”) or an entity established and existing under the laws
of the PRC, and joint holders of 100% of the entire registered capital in Weidai (Hangzhou) Financial Information Service
Ltd. (“
Domestic Company
”) (“
Our Shareholding
”), hereby irrevocably authorize Weidai
Co., Ltd. (the “
WFOE
”) to exercise the following rights relating to Our Shareholding during the term of
this Power of Attorney:
The WFOE
is hereby authorized to act on behalf of ourselves as our exclusive agent and attorney with respect to all matters concerning our
Shareholding, including without limitation to: 1) propose, convene and attend shareholders' meetings of Domestic Company; 2) exercise
all the shareholder's rights and shareholder's voting rights we are entitled to under the laws of China and Domestic Company’
Articles of Association, including but not limited to the sale or transfer or pledge or disposition of our Shareholding in part
or in whole; 3) designate and appoint on behalf of ourselves the legal representative (chairperson), the director, supervisor,
the chief executive officer (or general manager) and other senior management members of Domestic Company; and 4) obtain the information
with respect to the operation, business, clients, finance, employees and other relevant information of Domestic Company and inspect
related records and materials.
Without limiting
the generality of the powers granted hereunder, the WFOE shall have the power and authority under this Power of Attorney to execute
the Transfer Contracts stipulated in Exclusive Option Agreement, to which we are required to be a party, on behalf of ourselves,
and to effect the terms of the Share Pledge Agreement and Exclusive Option Agreement, both dated the date hereof, to which we are
parties.
All the actions
associated with Our Shareholding conducted by the WFOE shall be deemed as our own actions, and all the documents related to Our
Shareholding executed by the WFOE shall be deemed to be executed by me. When acting in respect of any and all of the aforementioned
matters, the WFOE may act at its own discretion and does not need to seek our prior consent. We hereby acknowledge and ratify those
actions and/or documents by the WFOE.
Power of Attorney
The WFOE
is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion
and without giving prior notice to we or obtaining our consent.
So long as
we are shareholders of Domestic Company, this Power of Attorney shall be irrevocably and continuously valid and effective from
the date of its execution, unless the WFOE issues adverse instructions in writing. Once the WFOE instructs me in writing to terminate
this Power of Attorney in whole or in part, we will immediately withdraw the authorization herein granted to the WFOE and execute
power(s) of attorney in the same format of this Power of Attorney, granting to other persons nominated by the WFOE the same authorization
under this Power of Attorney.
During the
term of this Power of Attorney, we hereby waive all the rights associated with Our Shareholding, which have been authorized to
the WFOE through this Power of Attorney, and shall not exercise such rights by ourselves
This Power
of Attorney is written in Chinese and English with equal legal validity; in case there is any conflict between the Chinese version
and the English version, the Chinese version shall prevail.
[The space below is intentionally left blank.]
Power of Attorney
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Weidai Co., Ltd. (Company Seal)
(Seal of Weidai Co., Ltd.)
By:
|
/s/ Yao Hong
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Name:
|
Yao Hong
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Yao Hong
Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Suzhou Weixin Zhonghua Venture Investment Partnership (Limited
Partnership) (Company Seal)
(Seal of Suzhou Weixin Zhonghua Venture Investment Partnership
(Limited Partnership))
By
:
|
/s/ Wei Zhe
|
|
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Name:
|
Wei Zhe
|
|
Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Deqing Jinxiu Management Consulting Partnership (Limited Partnership)
(Company Seal)
(Seal of Deqing Jinxiu Management Consulting Partnership (Limited
Partnership))
By:
|
/s/ He Qinqin
|
|
|
|
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Name:
|
He Qinqin
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Hangzhou Lihai Internet Venture Investment Partnership (Limited
Partnership) (Company Seal)
(Seal of Hangzhou Lihai Internet Venture Investment Partnership
(Limited Partnership)
By:
|
/s/ Chen Yuemeng
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|
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Name:
|
Chen Yuemeng
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Zhejiang Hakim Unique Finance Service Co., Ltd. (Company Seal)
(Seal of Zhejiang Hakim Unique Finance Service Co., Ltd.)
By
:
|
/s/ Zhu Chun
|
|
|
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Name:
|
Zhu Chun
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Zhejiang Zheshang Lihai Venture Investment Partnership (Limited
Partnership) (Company Seal)
(Seal of Zhejiang Zheshang Lihai Venture Investment Partnership
(Limited Partnership))
By:
|
/s/ Xu Yabo
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|
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Name:
|
Xu Yabo
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Shenzhen Guosheng Qianhai Investment Co., Ltd. (Company Seal)
(Seal of Shenzhen Guosheng Qianhai Investment Co., Ltd.)
By:
|
/s/ Li Yingming
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|
|
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Name:
|
Li Yingming
|
|
Power
of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Qingdao Oriental Capital Investment Co., Ltd. (Company Seal)
(Seal of Qingdao Oriental Capital Investment Co., Ltd.)
By:
|
/s/ Cai Dongbing
|
|
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Name:
|
Cai Dongbing
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Party B: Beijing Dongyitianzheng
Investment Co., Ltd.
(Company Seal)
(Seal of Beijing Dongyitianzheng Investment Co., Ltd.)
By:
|
/s/ Chen Hui
|
|
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Name:
|
Chen Hui
|
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Power of Attorney-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Power of Attorney as of the date first written above.
Party B: Hangzhou Shanan
Investment Partnership (Limited Partnership)
(Company Seal)
(Seal of Hangzhou Shanan Investment Partnership (Limited Partnership))
By:
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/s/ Yang Haoxiang
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Name:
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Yang Haoxiang
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Power of Attorney-Signature Page
Exhibit 10.4
Share Pledge Agreement
This Share Pledge Agreement (this “
Agreement
”)
has been executed by and among the following Parties on April 10, 2018 in Hangzhou:
Party A:
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Weidai Co., Ltd. (hereinafter “Pledgee”)
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Address:
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Room A-B102-1102, No. 198 of Qidi Road, Xiaoshan Economic-technical Development Zone, Xiaoshan District, Hangzhou, Zhejiang Province
|
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Party B:
|
Yao Hong
(hereinafter “
Pledgor
”)
|
ID Number:
|
***
|
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Party C:
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
Address:
|
Room 283, No. 22 Baiyun Road, Shangcheng District.
|
Legal Representative:
|
Yao Hong
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In this Agreement, each of Pledgee, Pledgor and Party C shall
be referred to as a “
Party
” respectively, and they shall be collectively referred to as the “
Parties
”.
Whereas,
1. Pledgor is the citizen
of the People's Republic of China (“
China
”), and holds 60.11% of the equity interest in Party C. Party C is
a limited liability company registered in Hangzhou, China. Party C acknowledges the respective rights and obligations of Pledgor
and Pledgee under this Agreement, and agrees to provide any necessary assistance in registering the Pledge;
2. Pledgee is a Wholly
Foreign Owned Enterprise registered in Hangzhou, China. Pledgee and Party C have executed an Exclusive Business Cooperation Agreement
on April 10, 2018 (the “
Exclusive Business Cooperation Agreement
”); Pledgee, Pledgor and Party C entered into
the Exclusive Call Option Contract on April 10, 2018 (the “
Exclusive Call Option Contract
”), and Pledgor executed
the Power of Attorney to authorize Pledgee on April 10, 2018 (the “
Power of Attorney
”; together with the Exclusive
Business Cooperation Agreement, the Exclusive Call Option Contract and this Contract, the “
Control Agreements
”).
3. To
ensure that Pledgee collects all payments due by Party C, including without limitation the consulting and service fees regularly
from Party C, and guarantee the performance by Party C and Pledgor of other obligations under the Control Agreements, Pledgor hereby
pledge all of the equity interest he/she holds in Party C as security for the obligations under the Control Agreements.
Unless otherwise provided herein, the terms
below shall have the following meanings:
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1.1
|
“
Pledge
” shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this
Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of
the Equity Interest.
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1.2
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“
Equity Interest
” shall refer to all of the equity interest lawfully now held and hereafter acquired by
Pledgor in Party C.
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1.3
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“
Term of Pledge
” shall refer to the term set forth in Section 3 of this Agreement.
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股权质押协议
Share Pledge Agreement
|
1.4
|
“
Contractual Obligations
” shall mean all obligations of the Pledgor and Party C under the Exclusive Business
Cooperation Agreement, the Exclusive Call Option Contract, the Power of Attorney and this Contract (including, without limitation,
the obligation to pay consulting and service fees to the Pledgee when they fall due and payable (whether on the specified due date,
by early repayment or otherwise) in accordance with the Exclusive Business Cooperation Agreement).
|
|
1.5
|
“
Secured Indebtedness
” shall mean all direct, indirect and consequential losses and loss of foreseeable
profits suffered by the Pledgee due to any Event of Default of the Pledgor and/or Party C. The basis for the amounts of such losses
includes, but is not limited to, reasonable business plans and profit forecasts of the Pledgee, and all costs incurred by the Pledgee
in connection with its enforcement of the Contractual Obligations against the Pledgor and/or Party C.
|
|
1.6
|
“
Event of Default
” shall refer to any of the circumstances set forth in Article 7 of this Agreement.
|
|
1.7
|
“
Notice of Default
” shall refer to the notice issued by Pledgee in accordance with this Agreement declaring
an Event of Default.
|
|
2.1
|
As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration
or otherwise) of any or all the payments due by Party C, including without limitation the consulting and services fees payable
to the Pledgee under the Exclusive Business Cooperation Agreement (collectively, the “
Secured Obligations
”),
Pledgor hereby pledges to Pledgee a first security interest in the 60.11% Equity Interest of Party C owned by the Pledgor (including
the 60.11% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest,
as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by
the Pledgor in the future).
|
|
2.2
|
The Parties understand and agree that the monetary valuation arising from, relating to or in connection with the Secured Obligations
shall be a variable and floating valuation until the Settlement Date (as defined below).
|
|
2.3
|
Upon the occurrence of any of the events below (each an “
Event of Settlement
”), the Secured Obligations
shall be fixed at a value of the sum of all Secured Obligations that are due, outstanding and payable to the Pledgee on or immediately
prior to the date of such occurrence (the “
Fixed Obligations
”):
|
|
(a)
|
any other Control Agreement expires or is terminated pursuant to the stipulations thereunder;
|
|
(b)
|
the occurrence of an Event of Default pursuant to Section 7 that is not resolved, which results in the Pledgee serving a Notice
of Default to the Pledgor pursuant to Section 7.3;
|
|
(c)
|
the Pledgee reasonably determines (having made due enquiries) that the Pledgor and/or Party C is insolvent or could potentially
be made insolvent; or
|
|
(d)
|
any other event that requires the settlement of the Secured Obligations in accordance with relevant laws of the PRC.
|
股权质押协议
Share Pledge Agreement
|
2.4
|
For the avoidance of doubt, the day of the occurrence of an Event of Settlement shall be the settlement date (the “
Settlement
Date
”). On or after the Settlement Date, the Pledgee shall be entitled, at the election of the Pledgee, to enforce the
Pledge in accordance with Section 8.
|
|
2.5
|
The Pledgee is entitled to collect dividends or other distributions, if any, arising from the Equity Interest during the Term
of the Pledge (as defined below).
|
|
2.6
|
The Pledgor may increase the capital of Party C only with the prior written consent of the Pledgee. Any increase in the capital
contributed by the Pledgor to the registered capital of Party C as a result of any capital increase shall also be deemed as the
Equity Interest pledged hereunder.
|
|
2.7
|
If Party C is required to be dissolved or liquidated in accordance with the mandatory provisions of the laws of the PRC, after
Party C completes dissolution or liquidation procedures in accordance with law, any interests distributed to the Pledgor by Party
C in accordance with law shall be, as requested by the Pledgee, (1) deposited into an account designated by the Pledgee, placed
under the custody of the Pledgee, used to provide security for the Contractual Obligations and first applied towards the satisfaction
of the Secured Indebtedness; or (2) unconditionally donated to the Pledgee or the person designated by the Pledgee subject to the
laws of the PRC.
|
|
3.1
|
The Pledge shall become effective as of the date when the pledge of the Equity Interest is registered with the local administration
of industry and commerce (the “
Registration Authority
”). The Term of the Pledge (the “
Term of Pledge
Authority
”) shall end when the Contractual Obligations and the Secured Indebtedness secured by the Pledge are paid or
fully fulfilled. The Parties agree that, promptly after the execution of this Agreement (but in no event later than 20 days from
the execution date of this Agreement), Pledgor and Party A shall submit their application for pledge registration to the Registration
Authority in accordance with
the Measures on Share Pledge Registration with the Administration of Industry and Commerce
.
The Parties also agree that within fifteen (15) days as of the Registration Authority officially commences the acceptance of equity
pledge application, Pledgor and Party C shall complete the pledge registration procedure, obtain the pledge registration notice
and completely and accurately register the Pledge of Equity Interest on the Pledge Registration Book of the Registration Authority.
The Parties jointly acknowledge that, for the purpose of completing equity pledge registration formalities, the Parties shall submit
this Contract or an equity pledge contract which is executed in the form requested by the administrative authority for industry
and commerce in the locality of Party C and truly reflects the information regarding the Pledge hereunder (the “
Pledge
Contract for Industrial and Commercial Registration
”) to the administrative authority for industry and commerce. This
Contract shall apply to the matters not mentioned in the Pledge Contract for Industrial and Commercial Registration.
|
|
3.2
|
During the Term of Pledge, in the event Party C fails to perform the Contractual Obligations or repay the Secured Indebtedness,
Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement.
|
|
4.
|
Custody of Records for Equity Interest subject to Pledge
|
|
4.1
|
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution
certificate for the Equity Interest and the shareholders' register containing the Pledge (and other documents reasonably requested
by the Pledgee, including without limitation the notice of registration of the Pledge issued by relevant administration of industry
and commerce) within one week from the date the Pledge is registered. Pledgee shall have custody of such items during the entire
Term of Pledge set forth in this Agreement.
|
股权质押协议
Share Pledge Agreement
|
5.
|
Representations and Warranties of Pledgor and Party C
|
The Pledgor Represent and Warrant to the Pledgee
that:
|
5.1
|
Pledgor is the sole legal and beneficial owners of the Equity Interest. Except for being subject to other agreements entered
into by the Pledgor and the Pledgee, the Pledgor enjoys legal and complete ownership of the Equity Interest.
|
|
5.2
|
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in
this Agreement.
|
|
5.3
|
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest. There are
no controversies over the ownership of the Equity Interest. The Equity Interest is not seized or subject to any other legal proceedings
or similar threats, and is good for transfer and pledging according to applicable laws.
|
|
5.4
|
The Pledgor's execution of this Agreement and exercise of its rights under this Agreement (or fulfillment of its obligations
under this Agreement) will not breach any laws, regulations, and agreements or contracts to which the Pledgor is a party, or any
promise the Pledgor has made to any third parties.
|
|
5.5
|
All documents, materials, statements and certificates provided by the Pledgor to the Pledgee are accurate, true, complete and
valid.
|
Party C Represent and
Warrant to the Pledgee that:
|
5.6
|
Party C is a limited liability company registered under the laws of China and legally exists. Party C has the qualification
of an independent legal person, enjoys complete and independent legal status and the legal capacity to sign, deliver and fulfill
this Agreement.
|
|
5.7
|
Upon due execution of Party C, this Agreement constitute legal, effective and binding obligation on Party C.
|
|
5.8
|
Party C has the complete internal right and authorization to sign and deliver this Agreement and all other documents relating
to the transactions contemplated under this Agreement. Party C has the complete right and authorization to complete the transactions
contemplated under this Agreement.
|
|
5.9
|
Regarding the assets owned by Party C, there are not any guarantee interests or any other encumbrance on property rights that
are substantial and may impact the Pledgee's right and interests in the Equity Interest (including without limitation transfer
of any of Party C's intellectual properties or any assets with an a value equaling or over RMB 100,000, or any encumbrance on the
ownership or right to use of such assets).
|
|
5.10
|
Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt,
except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained;
|
股权质押协议
Share Pledge Agreement
|
5.11
|
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of
Party C and refrain from any action/omission that may affect Party C's operating status and asset value;
|
|
5.12
|
In any court or arbitration tribunal, there are no pending (or, as far as Party knows, threatening) litigation, arbitration
or other legal proceedings against the Equity Interest, Party C or its assets, and in any governmental agencies or departments,
there are no pending (or, as far as Party knows, threatening) administrative proceedings or penalties against the Equity Interest,
Party C or its assets, which may substantially and adversely impact Party C's economic condition or the Pledgor's ability to fulfill
their obligations and guarantee liabilities under this Agreement.
|
|
5.13
|
Party C hereby agrees that it is jointly and severally liable to the Pledgee for all representations and warranties made by
any and all of the Pledgor under this Agreement.
|
|
5.14
|
Party C hereby warrants to the Pledgee that, at any time and under any circumstances prior to complete fulfillment of the obligations
under this Agreement or the secured debts being fully repaid, the aforementioned representations and warranties are true and accurate
and will be fully complied with.
|
|
6.
|
Covenants and Further Agreements of Pledgor
|
The covenants and further agreements of the Pledgor
are set forth below.
|
6.1
|
Pledgor hereby covenants to the Pledgee, that during the term of this Agreement, Pledgor shall:
|
|
6.1.1
|
not transfer (or agree to others' transfer of) all or any part of the Equity Interest, place or permit the existence of any
security interest or other encumbrance that may affect the Pledgee's rights and interests in the Equity Interest, without the prior
written consent of Pledgee, except for the performance of the Exclusive Option Agreement executed by Pledgor, Pledgee and Party
C on April 10, 2018;
|
|
6.1.2
|
comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of receipt of
any notice, order or recommendation issued or prepared by relevant competent authorities (or any other relevant parties) regarding
the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned
notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's
reasonable request or upon consent of Pledgee;
|
|
6.1.3
|
promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity
Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and
other obligations of Pledgor arising out of this Agreement.
|
|
6.2
|
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be
interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
|
股权质押协议
Share Pledge Agreement
|
6.3
|
To protect or perfect the security interest granted by this Agreement, Pledgor hereby undertakes to execute in good faith and
to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required
by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions
required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural/legal
persons). Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge
that are required by Pledgee.
|
|
6.4
|
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under
this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions,
Pledgor shall indemnify Pledgee for all losses resulting therefrom.
|
|
6.5
|
If the Equity Interest pledged under this Agreement is, for any reason, subject to mandatory measures imposed by the court
of law or other governmental departments, the Pledgor shall try their best to release such mandatory measures imposed by the court
of law or other governmental departments, including without limitation providing to the court of law other kinds of security or
other measures.
|
|
6.6
|
If there is a possibility that the value of the Equity Interest will be decreased and such decrease is sufficient to harm the
rights and interests of the Pledgee, the Pledgee may request the Pledgor to provide additional collateral or security. If the Pledgor
refuses to provide such security, the Pledgee may, at any time, sell the Equity Interest or put it up for auction, and use the
monies obtained from such sale or auction to settle the secured obligations in advance or put such monies under custody; all expenses
therefore occurred shall be borne by the Pledgor.
|
|
6.7
|
Without the prior written consent from the Pledgee, the Pledgor and/or Party C shall not (by themselves or assisting others
to) increase, decrease or transfer the registered capital of Party C (or their capital contribution to Party C) or impose any encumbrances
on it, including the Equity Interest. Subject to the forgoing provision, any Equity Interest which is registered and obtained by
the Pledgor subsequent to the date of this Agreement shall be called "Additional Equity Interest". The Pledgor and Party
C shall, immediately after the Pledgor obtains the Additional Equity Interest, enter with the Pledgee supplemental share pledge
agreement for the Additional Equity Interest, make the board of directors and shareholders meeting of Party C approve the supplemental
share pledge agreement, and deliver to the Pledgee all documents necessary for the supplemental share pledge agreement, including
without limitation (a) the original certificate issued by Party C about shareholders' capital contribution relating to the Additional
Equity Interest; and (b) the verified photocopy of the capital contribution verification report (issued by certified public accountant
in China) regarding the Additional Equity Interest. The Pledgor and Party C shall, according to Article 3.1 of this Agreement,
handle the pledge registration procedures relating to the Additional Equity Interest.
|
|
6.8
|
Unless otherwise instructed by the Pledgee in writing, the Pledgor and/or Party C agree that, if part of or all of the Equity
Interest is transferred between the Pledgor and any third parties in violation of this Agreement ("Transferee of the Equity
Interest"), then the Pledgor and/or Party C shall ensure that the Transferee or the Equity Interest will unconditionally recognize
the Pledge and follow necessary procedures for modification of the registration of the Pledge (including without limitation signing
relevant documents) so as to ensure the continued existence of the Pledge.
|
|
6.9
|
If the Pledgee provides to Party C loan of monies, the Pledgor and/or the Party C agree to pledge the Equity Interest to the
Pledgee for security of such additional loan of monies, and to follow procedures as soon as possible according to relevant laws,
regulations or local practice (if any), including without limitation executing relevant documents and completing registration procedures
for setting up (or modification) of a pledge.
|
股权质押协议
Share Pledge Agreement
The covenants and further
agreements of Party C are set forth below.
|
6.10
|
If, for the execution of this Agreement and Pledge under this Agreement, it is necessary to obtain any third party consent,
approval, waiver or authorization, any governmental approval, license or waiver, or complete registration procedures in any governmental
departments (as required by the law), then Party C will try its best to assist in obtainning the same and cause it to remain in
effect during the term of this Agreement.
|
|
6.11
|
Without prior written consent of the Pledgee, Party C will not provide any person with any loan or credit or guarantee in any
form; assist or allow the Pledgor to set up any new pledges or grant other security over the Equity Interest, nor will Party C
assist or allow the Pledgor to transfer the Equity Interest.
|
|
6.12
|
Party C agrees to, jointly with the Pledgor, strictly comply with Article 6.7, Article 6.8 and Article 6.9 of this Agreement.
|
|
6.13
|
Without prior written consent of the Pledgee, Party C shall not transfer its assets or set up (or allow the existence of) any
security or encumbrances on property rights that may affect the Pledgee's rights and interests in the Equity Interest (including
without limitation transfer of any of Party C's intellectual properties or any assets with an a value equaling or over RMB 100,000,
or any encumbrance on the ownership or right to use of such assets).
|
|
6.14
|
Where there are any litigations, arbitrations or any other claims, which may adversely impact party C, the Equity Interest,
or the Pledgee's interests under the Control Agreements, Party C shall, as soon as possible, send timely notice to the Pledgee
and according to reasonable requests of the Pledgee take all necessary measures to protect the Pledgee's interests in the Equity
Interest.
|
|
6.15
|
Party C shall not conduct or allow any acts or actions that may adversely impact the Equity Interest or Pledgee's interest
under the Control Agreements.
|
|
6.16
|
Party C shall, during the first month of each quarter, provide to the Pledgee its financial statements for the preceding quarter,
including without limitation its balance sheets, profit statements and cash flow statements.
|
|
6.17
|
Party C shall, pursuant to the Pledgee's reasonable requests, take all necessary measures and sign all necessary documents
so as to ensure and protect the Pledgee's rights over the Equity Interest and realization of them.
|
|
6.18
|
If the exercise of the Pledge under this Agreement results to any transfer of the Equity Interest, Party C agrees and warrants
that it will take all measures to effect such transfer.
|
|
6.19
|
Party B shall ensure and cause the other shareholders of Party C to ensure that Party C will complete the operation term extension
registration formalities within three (3) months prior to the expiration of its operation term so that the validity of this Contract
shall be maintained.
|
|
7.1
|
The following circumstances shall be deemed Event of Default:
|
|
7.1.1
|
Party C fails to pay in full any of the consulting and service fees payable under the Exclusive Business Cooperation Agreement,
or fail to repay its loan or breaches any other obligations of Party C under the Control Agreements;
|
股权质押协议
Share Pledge Agreement
|
7.1.2
|
Any representation or warranty by Pledgor in Article 5 of this Agreement contains material misrepresentations or errors, and/or
Pledgor violates any of the warranties in Article 5 of this Agreement;
|
|
7.1.3
|
Pledgor and Party C fail to complete the registration of the Pledge with Registration Authority;
|
|
7.1.4
|
Pledgor and Party C breach any provisions of this Agreement;
|
|
7.1.5
|
Except as expressly stipulated in Section 6.1.1, Pledgor transfers or purports to transfer or abandons the Equity Interest
pledged or assigns the Equity Interest pledged without the written consent of Pledgee;
|
|
7.1.6
|
Any of Pledgor's own loans, guarantees, indemnifications, promises or other debt liabilities to any third party or parties
(1) become subject to a demand of early repayment or performance due to default on the part of Pledgor; or (2) become due but are
not capable of being repaid or performed in a timely manner;
|
|
7.1.7
|
Any approval, license, permit or authorization of government agencies that makes this Agreement enforceable, legal and effective
is withdrawn, terminated, invalidated or substantively changed;
|
|
7.1.8
|
The promulgation of applicable laws renders this Agreement illegal or renders it impossible for Pledgor to continue to perform
its obligations under this Agreement;
|
|
7.1.9
|
Adverse changes in properties owned by Pledgor, which lead Pledgee to believe that that Pledgor's ability to perform its obligations
under this Agreement has been affected;
|
|
7.1.10
|
The successor or custodian of Party C is capable of only partially performing or refuses to perform the payment obligations
under the Exclusive Business Cooperation Agreement; and
|
|
7.1.11
|
Any other circumstances occur where Pledgee is or may become unable to exercise its right with respect to the Pledge.
|
|
7.2
|
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances
described in Section 7.1, Pledgor shall immediately notify Pledgee in writing accordingly.
|
|
7.3
|
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within thirty
(30) days of the Pledgee’s notice, Pledgee may issue a Notice of Default to Pledgor in writing upon the occurrence of the
Event of Default or at any time thereafter and demand that Pledgor immediately pays all outstanding payments due under the Control
Agreements, and/or repays loans and all other payments due to Pledgee, and/or disposes of the Pledge in accordance with the provisions
of Article 8 of this Agreement.
|
|
8.1
|
Pledgor shall not assign the Pledge or the Equity Interest in Party C without the Pledgee's written consent.
|
|
8.2
|
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
|
股权质押协议
Share Pledge Agreement
|
8.3
|
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge concurrently with the issuance
of the Notice of Default in accordance with Section 7.2 or at any time after the issuance of the Notice of Default. Once Pledgee
elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.
|
|
8.4
|
In the event of default, to the extent permitted, Pledgee is entitled to take possession of the Equity Interest pledged hereunder
and to dispose of the Equity Interest pledged and exercise all of its remedies and rights for breach of contract in accordance
with law; if, after satisfying all obligations secured, there is any balance in the monies collected by the Pledgee by enforcing
the Pledge, then such balance shall be, without calculation of interests, paid to the Pledgor or other parties entitled to receive
such balance. The Pledgee shall not be liable for any loss caused by its reasonable exercise of its remedies and rights for breach
of contract. The Pledgee shall have the right, at its option, to exercise any of its remedies for breach of contract simultaneously
or successively. The Pledgee shall not be required to exercise other remedies for breach of contract before its exercise of the
right to be repaid in priority out of the proceeds from the conversion, auction or sale of the Equity Interest pledged hereunder.
|
|
8.5
|
When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance
to enable Pledgee to enforce the Pledge in accordance with this Agreement.
|
|
8.6
|
Unless otherwise provided by the law, all expenses, tax, charges and all legal fees relating to the establishment of the Pledge
and enforcement of it shall be borne by the Pledgor.
|
|
9.1
|
Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations
under this Agreement.
|
|
9.2
|
This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee
and each of its successors and assigns.
|
|
9.3
|
At any time, Pledgee may assign any and all of its rights and obligations under the Exclusive Business Cooperation Agreement
to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of Pledgee under this
Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Exclusive
Business Cooperation Agreement, upon Pledgee's request, Pledgor shall execute relevant agreements or other documents relating to
such assignment.
|
|
9.4
|
In the event of a change in Pledgee due to an assignment, Pledgor shall, at the request of Pledgee, execute a new pledge agreement
with the new pledgee on the same terms and conditions as this Agreement.
|
|
9.5
|
Pledgor shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the
Parties hereto or any of them, including the Exclusive Option Agreement and the Power of Attorney granted to Pledgee, perform the
obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability
thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor
except in accordance with the written instructions of Pledgee.
|
Upon the full performance and payment of
the consulting and service fees under the Exclusive Business Cooperation Agreement and upon termination of Party C's obligations
under the Control Agreements, this Agreement shall be terminated, and Pledgee shall then cancel or terminate this Agreement as
soon as reasonably practicable.
股权质押协议
Share Pledge Agreement
Unless otherwise provided by laws, in no
event shall the Pledgor or Party C have the right to terminate or rescind this Contract.
|
11.
|
Handling Fees and Other Expenses
|
All fees and out of pocket expenses relating
to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall
be borne by Party C. If Applicable Laws requires that Pledgee should bear some related taxes and fees, Pledgor shall cause Party
C to fully repay Pledgee the paid taxes and fees.
The Parties acknowledge that any oral or
written information exchanged among them with respect to this Agreement is confidential information. Each Party shall maintain
the confidentiality of all such information, and without obtaining the written consent of other Parties, it shall not disclose
any relevant information to any third parties, except in the following circumstances: (a) such information is or will be in the
public domain (provided that this is not the result of a public disclosure by the receiving party); (b) information disclosed as
required by applicable laws or rules or regulations of any stock exchange; or (c) information required to be disclosed by any Party
to its legal counsel or financial advisor regarding the transaction contemplated hereunder, and such legal counsel or financial
advisor are also bound by confidentiality duties similar to the duties in this section. Disclosure of any confidential information
by the staff members or agency hired by any Party shall be deemed disclosure of such confidential information by such Party, which
Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement for any reason.
|
13.
|
Governing Law and Resolution of Disputes
|
|
13.1
|
The execution, effectiveness, construction, performance, and the resolution of disputes hereunder shall be governed by the
formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws
of China shall be governed by international legal principles and practices.
|
|
13.2
|
In the event of any dispute with respect to the construction and performance of the provisions of this Agreement, the Parties
shall negotiate in good faith to resolve the dispute. In the event the Parties fail to reach an agreement on the resolution of
such a dispute within 30 days after any Party's request for resolution of the dispute through negotiations, any Party may submit
the relevant dispute to the China International Economic and Trade Arbitration Commission (“
CIETAC
”) for arbitration,
in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language used during
arbitration shall be Chinese. The arbitration ruling shall be final and binding on all Parties.
|
|
13.3
|
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration
of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective
rights under this Agreement and perform their respective obligations under this Agreement.
|
|
14.1
|
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally
or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such
party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed
to have been effectively given shall be determined as follows:
|
股权质押协议
Share Pledge Agreement
|
14.1.1
|
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively
given on the date of delivery or refusal at the address specified for notices.
|
|
14.1.2
|
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced
by an automatically generated confirmation of transmission).
|
|
14.2
|
For the purpose of notices, the addresses of the Parties are as follows:
|
Party A:
|
Weidai Co., Ltd.
|
Address:
|
50/F, Fortune Financial Center, No. 37 Jiefang East Rd., Jiangan District, Hangzhou City, Zhejiang Province.
|
Attn:
|
Li Jinxiang
|
Phone:
|
***
|
|
|
Party B:
|
Yao Hong
|
Address:
|
50/F, Fortune Financial Center, No. 37 Jiefang East Rd., Jiangan District, Hangzhou City, Zhejiang Province.
|
Attn:
|
Li Jinxiang
|
Phone:
|
***
|
|
|
Party C:
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
Address:
|
Room 283, No. 22 Baiyun Road, Shangcheng District
|
Attn:
|
Li Jinxiang
|
Phone:
|
***
|
|
14.3
|
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the
terms hereof.
|
In the event that one or several of the
provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations,
the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in
any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of
such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
The attachments set forth herein shall be an integral part of
this Agreement.
|
17.1
|
Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of
the governmental registration procedures (if applicable) after the affixation of the signatures or seals of the Parties.
|
股权质押协议
Share Pledge Agreement
|
17.2
|
This Agreement is written in Chinese and English in four (4) copies. Each of the Pledgor, Pledgee and Party C shall hold one
(1) copy, respectively; and one (1) copy shall be submitted to the Registration Authority. Each copy of this Agreement shall have
equal validity. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
|
|
17.3
|
With the execution of this Agreement on the date hereof, the Pledgor shall cause his/her spouse to execute and deliver to the
Pledgee a spousal consent letter.
|
[The space below is intentionally left blank.]
股权质押协议
Share Pledge Agreement
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Share Pledge Agreement as of the date first written above.
Party A: Weidai Co., Ltd.
|
|
|
|
(Seal of Weidai Co., Ltd.)
|
|
|
|
By:
|
/s/ Yao Hong
|
|
Name: Yao Hong
|
|
|
|
|
股权质押协议
-
签字页
Share Pledge Agreement-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Share Pledge Agreement as of the date first written above.
Party B: Yao Hong
|
|
|
|
|
By:
|
/s/ Yao Hong
|
|
股权质押协议
-
签字页
Share Pledge Agreement-Signature Page
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Share Pledge Agreement as of the date first written above.
Party C:
Weidai (Hangzhou) Financial Information Service
Ltd. (Company Seal)
(Seal of Weidai (Hangzhou) Financial Information Service Ltd.)
By:
|
/s/ Yao Hong
|
|
Name:
|
Yao Hong
|
|
股权质押协议
-
签字页
Share Pledge Agreement-Signature Page
Schedule A
The following schedule sets forth all other similar agreements
the registrant entered into with the relevant variable interest entity of the registrant. Other than the information set forth
below, there is no material difference between such other agreements and this exhibit.
VIE
|
|
Executing
Parties
|
|
The Pledge
|
|
|
|
|
|
|
|
|
|
|
Deqing Jinxiu Management Consulting Partnership (Limited Partnership)
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Deqing Jinxiu Management Consulting Partnership (Limited
Partnership) (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 13.20% Equity Interest of Party C owned by the Pledgor (including the 13.20% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership)
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Hangzhou Lihai Internet Venture Investment Partnership
(Limited Partnership) (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 1.90% Equity Interest of Party C owned by the Pledgor (including the 1.90% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Beijing Dongyitianzheng Investment Co., Ltd.
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Beijing Dongyitianzheng Investment Co., Ltd. Co., Ltd.
(“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 0.2% Equity Interest of Party C owned by the Pledgor (including the 0.2% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
股权质押协议
Share Pledge Agreement
Hangzhou Shanan Investment Partnership (Limited Partnership)
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Hangzhou Shanan Investment Partnership (Limited Partnership)
(“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 1.5% Equity Interest of Party C owned by the Pledgor (including the 1.5% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Zhejiang Hakim Unique Finance Service Co., Ltd.
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Zhejiang Hakim Unique Finance Service Co., Ltd. (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 15.54% Equity Interest of Party C owned by the Pledgor (including the 15.54% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Zhejiang Zheshang Lihai Venture Investment Partnership (Limited Partnership)
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Zhejiang Zheshang Lihai Venture Investment Partnership
(Limited Partnership) (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 0.95% Equity Interest of Party C owned by the Pledgor (including the 0.95% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Shenzhen Guosheng Qianhai Investment Co., Ltd.
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Shenzhen Guosheng Qianhai Investment Co., Ltd. (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 2.00% Equity Interest of Party C owned by the Pledgor (including the 2.00% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
股权质押协议
Share Pledge Agreement
Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership)
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Suzhou Weixin Zhonghua Venture Investment Partnership
(Limited Partnership) (“Pledgor”)
Party C; Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 4% Equity Interest of Party C owned by the Pledgor (including the 4% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
|
|
|
|
|
Qingdao Oriental Capital Investment Co., Ltd.
|
|
Party A: Weidai Co., Ltd. (“Pledgee”)
Party B: Qingdao Oriental Capital Investment Co., Ltd. (“Pledgor”)
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Pledgor pledges to Pledgee a first security interest in the 0.60% Equity Interest of Party C owned by the Pledgor (including the 0.60% registered capital (amount of capital contribution) currently owned by the Pledgor and all relevant equity interest, as well as other registered capital (amount of capital contribution) and all relevant equity interest, which may be obtained by the Pledgor in the future).
|
股权质押协议
Share Pledge Agreement
Exhibit 10.5
Exclusive Business Cooperation Agreement
This Exclusive Business Cooperation Agreement
(this “
Agreement
”) is made and entered into by and between the following Parties on April 10, 2018 in Hangzhou,
China.
|
Party A:
|
Weidai Co., Ltd.,
|
|
Address:
|
Room A-B102-1102, No. 198 of Qidi Road, Xiaoshan Economic-technical Development Zone, Xiaoshan District, Hangzhou, Zhejiang
Province.
|
|
Party B:
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Address:
|
Room 283, No. 22 Baiyun Road, Shangcheng District
|
Each of Party A and Party B shall be hereinafter referred to as
a “
Party
” respectively, and as the “
Parties
” collectively.
Whereas,
|
1.
|
Party A is a Wholly Foreign Owned Enterprise established in the People's Republic of China (“
China
”),
and has the necessary resources to provide technical services and business consulting services;
|
|
2.
|
Party B is a company with exclusively domestic capital registered in China;
|
|
3.
|
Party A is willing to provide Party B, on an exclusive basis, with technical, consulting and other
services (the detailed scope set forth below) during the term of this Agreement, utilizing its own advantages in human resources,
technology and information, and Party B is willing to accept such services provided by Party A or Party A's designee(s), each on
the terms set forth herein.
|
Now, therefore, through mutual discussion,
Party A and Party B have reached the following agreements:
|
1.
|
Services Provided by Party A
|
|
1.1
|
Party B hereby appoints Party A as Party B's exclusive services provider to provide Party B with
complete business support and technical and consulting services during the term of this Agreement, in accordance with the terms
and conditions of this Agreement, which may include all or part of the services within the business scope of Party B as may be
determined from time to time by Party A, including, but not limited to, technical services, network support, business consultations,
intellectual property licenses, equipment or leasing, marketing consultancy, system integration, product research and development,
and system maintenance(“
Service
”).
|
Exclusive Business Agreement
1
|
1.2
|
Party B agrees to accept all the consultations and services provided by Party A. Party B further
agrees that unless with Party A's prior written consent, during the term of this Agreement, Party B shall not accept any consultations
and/or services provided by any third party and shall not cooperate with any third party regarding the matters contemplated by
this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.4 with Party B,
to provide Party B with the consultations and/or services under this Agreement.
|
|
1.3
|
To ensure that the cash flow requirements of Party B’s ordinary operations are met and/or
to set off any loss accrued during such operations, Party A may elect to, only to the extent permissible under the laws of PRC,
provide financing support for Party B, whether or not Party B actually incurs any such operational loss. If Party A elects to provide
financing support for Party B, Party B shall accept such financing support provided by Party A. Party A’s financing support
for Party B may take the form of bank entrusted loans or borrowings. Contracts for any such entrusted loans or borrowings shall
be executed separately.
|
|
1.4
|
Service Providing Methodology
|
|
1.4.1
|
Party A and Party B agree that during the term of this Agreement, both Parties, directly or through
their respective affiliates, may enter into further technical service agreements or consulting service agreements, which shall
provide the specific contents, manner, personnel, and fees for the specific technical services and consulting services.
|
|
1.4.2
|
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both
Parties, directly or through their respective affiliates, may enter into intellectual property (including, but not limited to,
software, trademark, patent and know-how) license agreements, which shall permit Party B to use Party A's relevant intellectual
property rights, at any time and from time to time based on the needs of the business of Party B.
|
|
1.4.3
|
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both
Parties, directly or through their respective affiliates, may enter into equipment or property leases which shall permit Party
B to use Party A's relevant equipment or property based on the needs of the business of Party B.
|
|
1.4.4
|
Party A may, at its own discretion, subcontract to third parties part of the services Party A provides
to Party B under this Agreement.
|
Exclusive Business Agreement
2
|
1.4.5
|
Party B hereby grants to Party A an irrevocable exclusive right, pursuant to which Party A may,
at its sole discretion, within the limits permitted by PRC laws and regulations, purchase any part or all of Party B’s assets
and business at the lowest price permitted by PRC laws, and the Parties shall enter into a separate transfer agreement of asset
or business at that time.
|
|
2.
|
Calculation and Payment of the Service Fees, Financial Reports, Audit and Tax
|
|
2.1
|
Both Parties agree that, in consideration of the services provided by Party A, subject to applicable
laws of China, Party A is entitled to receive fees (the “
Service Fees
”) from Party B equal to the total net
income of Party B. The Service Fees shall be due and payable on a monthly basis. During the term of this Agreement, Party A shall
have the right to adjust the above Service Fees at its sole discretion without the consent of Party B. Party B shall (a) deliver
to Party A the management accounts and operating statistics of Party B for such month, including the net income of Party B during
such month (the “
Monthly Net Income
”), and (b) pay all of such Monthly Net Income or any other amount as adjusted
by Party A, to Party A (each such payment, a “
Monthly Payment
”). Within 7 days of receipt of such management
accounts and operating statistics, Party A shall issue to Party B a corresponding technical service invoice, and Party B shall
make payment of the amount of such invoice within 7 days of receipt of the same. All payments shall be transferred into the bank
accounts designated by Party A through remittance or in any other way acceptable by the Parties. The Parties agree that such payment
instruction may be changed by a notice given by Party A to Party B from time to time.
|
|
2.2
|
Within ninety (90) days after the end of each fiscal year, Party B shall (a) deliver to Party A
audited financial statements of Party B for such fiscal year, which shall be audited and certified by an independent certified
public accountant approved by Party A, and (b) pay an amount to Party A equal to the shortfall, if any, of the net income of Party
B for such fiscal year, as shown in such audited financial statements, as compared to the aggregate amount of the Monthly Payments
paid by Party B to Party A in such fiscal year.
|
|
2.3
|
Party B shall prepare its financial statements in satisfaction of Party A's requirements and in
accordance with law and commercial practices.
|
|
2.4
|
Subject to a notice given by Party A 5 working days in advance, Party B shall allow Party A and/or
its appointed auditor to review, and make photocopies of, the relevant books and records of Party B at the principal office of
Party B to verify the accuracy of the income amounts and statements of Party B.
|
|
2.5
|
The Parties undertake to each file and pay, in accordance with law, the taxes involved in the transaction
hereunder.
|
Exclusive Business Agreement
3
|
3.
|
Intellectual Property Rights; Confidentiality Clauses; Non-competition
|
|
3.1
|
Party A shall have exclusive and proprietary rights and interests in all rights, ownership, interests
and intellectual properties arising out of or created during the performance of this Agreement, including, but not limited to,
copyrights, patents, patent applications, trademarks, software, technical secrets, trade secrets and others, regardless of whether
they have been developed by Party A or Party B.
|
|
3.2
|
The Parties acknowledge that any oral or written information exchanged among them with respect
to this Agreement is confidential information. Each Party shall maintain the confidentiality of all such information, and without
obtaining the written consent of the other Party, it shall not disclose any relevant information to any third parties, except in
the following circumstances: (a) such information is or will be in the public domain (provided that this is not the result of a
public disclosure by the receiving Party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding
the transaction contemplated hereunder, and such legal counsel or financial advisor is also bound by confidentiality duties similar
to the duties in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall
be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement.
This Section shall survive the termination of this Agreement for any reason.
|
|
3.3
|
Party B shall not engage in any business activities other than those falling within the scope permitted
by its Business License and Business Permit, whether directly or indirectly. Unless approved in writing by Party A, Party B shall
not engage in any businesses in China, which compete with the businesses of Party A, whether directly or indirectly, including
investing in entities operating in businesses which compete with the businesses of Party A, or any other businesses beyond the
scope approved in writing by Party A.
|
|
3.4
|
The Parties agree that this Section shall survive changes to, and rescission or termination of,
this Agreement.
|
|
4.
|
Representations and Warranties
|
|
4.1
|
Party A hereby represents and warrants as follows:
|
|
4.1.1
|
Party A is a company legally registered and validly existing in accordance with the laws of China.
|
Exclusive Business Agreement
4
|
4.1.2
|
Party A's execution and performance of this Agreement is within its corporate capacity and the
scope of its business operations; Party A has taken necessary corporate actions and been given appropriate authorization and has
obtained the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise
binding or having an impact on Party A.
|
|
4.1.3
|
This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance
with its terms.
|
|
4.2
|
Party
B hereby represents and warrants as follows:
|
|
4.2.1
|
Party B is a company legally registered and validly existing in accordance with the laws of China;
|
|
4.2.2
|
Party B's execution and performance of this Agreement is within its corporate capacity and the
scope of its business operations; Party B has taken necessary corporate actions and given appropriate authorization and has obtained
the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise
binding or having an impact on Party B.
|
|
4.2.3
|
This Agreement constitutes Party B's legal, valid and binding obligations, and shall be enforceable
against it.
|
|
5.
|
Effectiveness and Term
|
|
5.1
|
This Agreement has been entered into as of the date first written above and shall come into force
as from such date. This Agreement shall be perpetually valid unless early terminated upon written decision of Party A in accordance
with this Agreement or otherwise required in the laws of the PRC.
|
|
6.1
|
If any Party’s term of operation expires within the term hereof, such Party shall promptly
extend its term of operation to the greatest extent permitted by the laws of the PRC in order for this Agreement to continue to
be valid and performed. If a Party’s application for extension of term of operation is not approved or consented to by any
competent authority, this Agreement shall terminate on the date when such Party’s term of operation expires.
|
|
6.2
|
The rights and obligations of the Parties under Articles 3, 7 and 8 shall survive the termination
of this Agreement.
|
Exclusive Business Agreement
5
|
6.3
|
In case of early termination, for whatever reason, or due expiration of this Agreement, payment
obligations of either Party outstanding as of the date of such termination or expiration, including without limitation the Service
Fees, shall not be waived, nor shall any default liability accrued as of the termination of this Agreement be waived. The Service
Fees accrued as of the termination of this Agreement shall be paid to Party A within 15 working days of the termination of this
Agreement.
|
|
7.
|
Governing Law and Resolution of Disputes
|
|
7.1
|
The execution, effectiveness, construction, performance, amendment and termination of this Agreement
and the resolution of disputes hereunder shall be governed by the laws of China.
|
|
7.2
|
In the event of any dispute with respect to the construction and performance of the provisions
of this Agreement, the Parties shall negotiate in good faith to resolve the dispute. In the event the Parties fail to reach an
agreement on the resolution of such a dispute within 30 days after any Party's request for resolution of the dispute through negotiations,
any Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission (“CIETAC”)
for arbitration, in accordance with its then-effective arbitration rules. The arbitration shall be conducted in Beijing, and the
language used during arbitration shall be Chinese. The arbitration ruling shall be final and binding on both Parties.
|
|
7.3
|
Upon the occurrence of any disputes arising from the construction and performance of this Agreement
or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue
to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
|
|
7.4
|
In case of promulgation or , or any change to or in any Chinese law, regulation or rule, or any
change to or in the interpretation or application of the same any time after execution of this Agreement, the following agreement
shall apply: (a) if any Party would enjoy more benefits under any changed or new law than under the relevant law, regulation or
rule in effect at the date of this Agreement, without any adverse effect upon the other Party, the Parties shall promptly apply
for such benefits. The Parties shall make best efforts to procure the approval of such application; and (b) if the aforementioned
law change or promulgation causes any direct or indirect material adverse effect to either Party, this Agreement shall be implemented
in its original terms and conditions. However, the Parties shall try all lawful means to procure exemption from compliance with
such changed or new law provisions. In the event such adverse effect on the economic interest of either Party is unable to be resolved
pursuant to this Agreement, the affected Party may give notice to other Party(s), and the Parties shall hold prompt discussion
and make all necessary amendments to this Agreement so as to maintain the economic benefits otherwise enjoyed by the affected Party.
|
Exclusive Business Agreement
6
Party B shall indemnify and hold
harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or other demands against Party
A arising from or caused by the consultations and services provided by Party A at the request of Party B, except where such losses,
injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.
|
9.1
|
All notices and other communications required or permitted to be given pursuant to this Agreement
shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission
to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which
notices shall be deemed to have been effectively given shall be determined as follows:
|
|
9.1.1
|
Notices given by personal delivery, by courier service or by registered mail, postage prepaid,
shall be deemed effectively given on the date of delivery or refusal at the address specified for notices.
|
|
9.1.2
|
Notices given by facsimile transmission shall be deemed effectively given on the date of successful
transmission (as evidenced by an automatically generated confirmation of transmission).
|
|
9.2
|
For the purpose of notices, the addresses of the Parties are as follows:
|
|
Party A:
|
Weidai Co., Ltd.
|
|
Address:
|
50/F, Fortune Financial Center, No. 37 Jiefang East Rd., Jiangan District, Hangzhou City, Zhejiang Province.
|
|
Attn:
|
Li Jinxiang
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Address:
|
Room 283, No. 22 Baiyun Road, Shangcheng District
|
|
Attn:
|
Li Jinxiang
|
|
Phone:
|
***
|
Exclusive Business Agreement
7
|
9.3
|
Any Party may at any time change its address for notices by a notice delivered to the other Party
in accordance with the terms hereof.
|
|
10.1
|
Without Party A's prior written consent, Party B shall not assign its rights and obligations under
this Agreement to any third party.
|
|
10.2
|
Party B agrees that Party A may assign its obligations and rights under this Agreement to any third
party upon a prior written notice to Party B but without the consent of Party B.
|
In the event that one or several
of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws
or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions
with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic
effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable
provisions.
|
12.
|
Amendments and Supplements
|
Any amendments and supplements to
this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties
and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
|
13.
|
Language and Counterparts
|
This Agreement is written in both
Chinese and English language in two copies, each Party having one copy with equal legal validity; in case there is any conflict
between the Chinese version and the English version, the Chinese version shall prevail.
[The space below is intentionally left blank.]
Exclusive Business Agreement
8
IN WITNESS WHEREOF, the Parties have caused
their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first written above.
Party
A:
Weidai Co., Ltd.
(Seal of Weidai Co., Ltd.)
Name: Yao Hong
Exclusive Business Agreement-Signature Page
IN WITNESS WHEREOF, the Parties have caused
their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first written above.
Party B: Weidai (Hangzhou) Financial Information
Service Ltd.
(Company Seal)
(Seal of Weidai (Hangzhou) Financial Information Service Ltd.)
Name: Yao Hong
Exclusive Business Agreement-Signature Page
Exhibit 10.6
Exclusive Call Option Contract
This Exclusive Call Option Contract (this “
Contract
”)
is entered into in Hangzhou, the People’s Republic of China (the “
PRC
” or “
China
”)
on April 10, 2018 by and among:
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Party A:
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Weidai Co., Ltd.
, a wholly foreign-owned limited liability company established and existing
under the laws of the PRC, with its registered address at Room A-B102-1102, No. 198 of Qidi Road, Xiaoshan Economic-technical Development
Zone, Xiaoshan District, Hangzhou, Zhejiang Province.
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Party B
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Yao Hong,
a Chinese citizen, ID No. ***;
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Suzhou Weixin Zhonghua Venture
Investment Partnership (Limited Partnership),
a limited partnership established and existing under the laws of the PRC,
with its registered address at Room 244, F/2, No. 19 Building, Dongsha Lake Equity Investment Center, Suhong East Road, Suzhou
Industrial Park;
Deqing Jinxiu Management Consulting
Partnership (Limited Partnership)
, a limited partnership established and existing under the laws of the PRC, with its
registered address at No.425 Zhiyuan South Road, Wukang Town, Deqing County;
Hangzhou Lihai Internet Venture
Investment Partnership (Limited Partnership)
, a limited partnership established and existing under the laws of the PRC,
with its registered address at Room 377, Cultural Center, No. 460 Wenyi West Road, Xihu District, Hangzhou;
Zhejiang Hakim Unique Finance
Service Co., Ltd.
, a limited liability company established and existing under the laws of the PRC, with its registered
address at Room 1206, F/12, No.536 Shaoxing Road, Xiacheng District, Hangzhou;
Zhejiang Zheshang Lihai Venture
Investment Partnership (Limited Partnership)
, a limited partnership established and existing under the laws of the PRC,
with its registered address at Room 629, Hangzhou Yuquan Hotel, No.138 Yugu Road, Xihu District, Hangzhou;
Shenzhen Guosheng Qianhai Investment
Co., Ltd.,
a limited liability company established and existing under the laws of the PRC, with its registered address at Room
201, Building A, No. 1 Qianwan First Road, Qianhai Shenzhen-Hong Kong Cooperation Zone, Shenzhen;
Qingdao Oriental Capital Investment
Co., Ltd.,
a limited liability company established and existing under the laws of the PRC, with its registered address
at Room 505, Building D, No. 122 Nanjing Road, Shinan District, Qingdao;
Beijing Dongyitianzheng Investment
Co., Ltd. Co., Ltd.,
a limited liability company established and existing under the laws of the PRC, with its registered
address at No. A 18, Guangju Avenue, Changgou, Fangshan District, Beijing;
Hangzhou Shanan Investment Partnership
(Limited Partnership),
a limited partnership established and existing under the laws of the PRC, with its registered
address at Room 106, Building No.15, Micro Enterprises Innovation Park, Yinfeng, Jiangjiazhen, Chunan County, Hangzhou, Zhejiang
Province.
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Party C:
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Weidai (Hangzhou) Financial Information Service Ltd.,
a limited liability company established
and existing under the laws of the PRC, with its registered address at Room 283, No. 22 Baiyun Road, Shangcheng District.
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In this Contract, Party A, Party B and Party
C may be hereinafter referred to individually as a “
Party
” and collectively as the “
Parties
.”
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1.
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The Persons of Party B are all the currently registered shareholders of Party C and hold 100% equity
interest in Party C in the aggregate;
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2.
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Subject to the laws of the PRC, Party B intends to transfer to Party A and/or any other entity
or individual designated by it, and Party A intends to accept such transfer of, all the equity interest in Party C held by Party
B;
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3.
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Subject to the laws of the PRC, Party C intends to transfer to Party A and/or any other entity
or individual designated by it, and Party A intends to accept such transfer of, the assets owned by Party C;
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4.
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In order to consummate the aforesaid equity or asset transfer, Party B and Party C agree to grant,
on an exclusive basis, respectively to Party A irrevocable Equity Call Option (as defined below) and Asset Purchase Option (as
defined below), Party C agrees that Party B grants the Equity Call Option to Party A in accordance with this Contract, and Party
B agrees that Party C grants the Asset Purchase Option to Party A in accordance with this Contract.
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NOW, THEREFORE, through mutual consultation,
the Parties agree as follows:
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1.
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Equity Call Option and Asset Purchase Option
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Party B hereby
irrevocably grants to Party A an irrevocable and exclusive option to purchase, or cause one or more designated Persons (each, a
“
Designee
”) to purchase, all or any part of equity interest in Party C held by any Person of Party B now or
hereafter from such Person at any time, one or more times, at the price set forth in Article 1.3 hereof according to the steps
for exercise as determined by Party A in its sole discretion (the “
Equity Call Option
”). No third Person other
than Party A and the Designees shall have the right to purchase equity interest in Party C held by Party B or other rights related
to equity interest in Party C held by Party B. Party C hereby agrees that Party B grants the Equity Call Option to Party A in accordance
with this Contract. “
Person
” referred to in this article and this Contract means individual, company, joint
venture, partnership, enterprise, trust or unincorporated organization.
Party C hereby
irrevocably grants to Party A an irrevocable and exclusive option to purchase, or cause the Designee(s) to purchase, all or any
part of assets owned by Party C now or hereafter from Party C at any time, one or more times, at the price set forth in Article
1.3 hereof according to the steps for exercise as determined by Party A in its sole discretion (the “
Asset Purchase Option
”).
No third Person other than Party A and the Designees shall have the right to purchase assets of Party C or other rights related
to assets of Party C. Party B hereby agrees that Party C grants the Asset Purchase Option to Party A in accordance with this Contract.
Party A agrees
to accept the aforesaid Equity Call Option and the Asset Purchase Option. For the avoidance of doubt, Party A may exercise any
rights hereunder, including the Equity Call Option and/or the Asset Purchase Option, at any time after the execution and effectiveness
of this Contract. To the fullest extent permitted by the laws of the PRC, Party A shall have the right to exercise the rights hereunder,
including the Equity Call Option and/or the Asset Purchase Option, against Party B or its successor or successor entity and Party
C and its successor entity in accordance with the terms of this Contract.
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1.2.1
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Subject to the terms and conditions of this Contract, to the extent permitted by the laws of the
PRC, Party A shall determine the timing, method and times of its exercise of the Equity Call Option and the Asset Purchase Option
in its absolute and sole discretion and shall have the right to request at any time Party B to transfer all or any part of its
equity interest in Party C, or Party C to transfer all or any part of its assets, to it or the Designee(s).
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1.2.2
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With respect to the Equity Call Option, Party A shall have the right to determine in its sole discretion
the amount of equity interest to be transferred by each Person of Party B to Party A and/or the Designee(s) in each exercise, and
Party B shall transfer such amount of the Purchased Equity (as defined below) as requested by Party A to Party A and/or the Designee(s).
Party A and/or the Designee(s) shall pay the transfer price to the transferring Person of Party B for the Purchased Equity acquired
in each exercise.
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1.2.3
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With respect to the Asset Purchase Option, Party A shall have the right to determine the specific
assets of Party C to be transferred by Party C to Party A and/or the Designee(s) in each exercise, and Party C shall transfer the
Purchased Assets (as defined below) as requested by Party A to Party A and/or the Designee(s). Party A and/or the Designee(s) shall
pay the transfer price to Party C for the Purchased Assets acquired in each exercise.
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1.2.4
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When Party A exercises the Equity Call Option or the Asset Purchase Option, it shall give a written
notice (the “
Equity Purchase Notice
” or the “
Asset Purchase Notice
”) to Party B, specifying
(a) decision made by Party A or the Designee(s) on exercise of the Equity Call Option/the Asset Purchase Option; (b) the percentage
of equity interest proposed to be purchased by Party A or the Designee(s) from Party B (the “
Purchased Equity
”),
or the specific assets proposed to be purchased from Party C (the “
Purchased Assets
”); and (c) the purchase
date/transfer date of the purchased equity or assets. After the receipt of such notice, Party B or Party C shall, pursuant to such
notice, promptly transfer the Purchased Equity or the Purchased Assets to Party A and/or the Designee(s) in such way as described
in this Contract.
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1.3.1
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With respect to the Equity Call Option hereunder, the transfer price corresponding to the Purchased
Equity in each exercise by Party A shall be the lowest price permitted by the laws of the PRC applicable at the time of exercise;
with respect to the Asset Purchase Option hereunder, the transfer price corresponding to the Purchased Assets in each exercise
by Party A shall be the net book value of the Purchased Assets; if the lowest price permitted by the then applicable laws of the
PRC is higher than the net book value of the Purchased Assets, the transfer price shall be the lowest price permitted by the laws
of the PRC.
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1.3.2
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The Parties hereby agree that, after Party A exercises the Equity Call Option and/or the Asset
Purchase Option, Party B and/or Party C shall pay all the transfer price collected thereby to Party A or another party designated
by it without compensation.
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1.4
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Transfer of the Purchased Equity/the Purchased Assets
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When Party A exercises
the Equity Call Option and/or the Asset Purchase Option each time:
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1.4.1
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Party C shall, and Party B shall cause Party C to, promptly hold a shareholders’ meeting,
at which a resolution shall be adopted on the approval of the transfer of the Purchased Equity by Party B, or the transfer of the
Purchased Assets by Party C, to Party A and/or the Designee(s);
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1.4.2
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each Person of Party B shall obtain consent from its respective shareholders’ meeting, board
of directors or other internal decision-making bodies having similar functions in connection with its transfer of the Purchased
Equity to Party A and/or the Designee(s);
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1.4.3
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with respect to the transfer of the Purchased Equity to Party A and/or the Designee(s), Party B
shall obtain a written statement from the other shareholders of Party C, in which they approve such transfer and waive the right
of first refusal; meantime, when Party A exercises the Equity Call Option to purchase equity interest in Party C held by several
Persons of Party B, the other Persons of Party B shall issue a written statement, in which they approve such transfer and waive
the right of first refusal;
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1.4.4
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Party B shall enter into an equity transfer contract for each equity transfer with Party A and/or
the Designee(s) (as applicable) in accordance with this Contract and the Equity Purchase Notice, in the form and substance satisfactory
to Party A; Party C shall enter into an asset transfer contract for each asset transfer with Party A and/or the Designee(s) (as
applicable) in accordance with this Contract and the Asset Purchase Notice, in the form and substance satisfactory to Party A;
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1.4.5
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the relevant Parties shall execute all other necessary contracts, agreements or documents (including,
without limitation, amendment to the articles of association), obtain all necessary governmental licenses and permits (including,
without limitation, business license) and take all necessary actions to transfer the valid title of the Purchased Equity and/or
the Purchased Assets to Party A and/or the Designee(s), free and clear of any Security Interest, and cause Party A and/or the Designee(s)
to become the registered owner(s) of the Purchased Equity and/or the Purchased Assets, if applicable. For the purpose of this article
and this Contract, “
Security Interest
” includes security, mortgage, third party rights or interests, any call
option, right to acquire, right of first refusal, right of set-off, ownership detainment or other security arrangements, for the
sake of clarity, excluding any Security Interest created under this Contract, the Equity Pledge Contract of Party B and the Power
of Attorney of Party B. The “
Equity Pledge Contract of Party B
” referred to in this article and this Contract
means the Equity Pledge Contract entered into by Party A, Party B and Party C on the date hereof, as amended, modified or restated;
the “
Power of Attorney of Party B
” referred to in this article and this Contract means the Power of Attorney
executed by Party B to authorize Party A on the date hereof, as amended, modified or restated.
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2.1
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Covenants Concerning Party C
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Party B (as the
shareholders of Party C) and Party C hereby covenant that:
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2.1.1
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without the prior written consent of Party A, they shall not supplement, modify or amend the articles
of association or bylaws of Party C in any form, increase or decrease its registered capital or otherwise change its registered
capital structure;
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2.1.2
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they shall maintain the corporate existence of Party C according to good financial and business
standards and practices, conduct its business and transact its affairs prudently and effectively and cause Party C to perform its
obligations under the Exclusive Business Cooperation Agreement executed by it on the date hereof;
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2.1.3
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without the prior written consent of Party A, they shall not sell, transfer, mortgage or otherwise
dispose of lawful or beneficial interest in any assets, business or income of Party C or permit the encumbrance thereon of any
Security Interest at any time from the date hereof (including without limitation transfer of any of Party C's intellectual properties,
or any encumbrance on the ownership or right to use of such assets);
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2.1.4
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after the statutory liquidation described in Article 3.2.6, Party B will fully pay Party A any
remaining residual value collected on the basis of non-bidirectional payment or procure such payment; if such payment is prohibited
by the laws of the PRC, Party B will pay such income to Party A or the party designated by Party A to the extent permitted by the
laws of the PRC;
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2.1.5
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without the prior written consent of Party A, they shall not incur, inherit, guarantee or permit
the existence of any debts, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii)
debts disclosed to and approved by Party A in writing;
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2.1.6
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they shall always conduct all the business of Party C in the ordinary course of business to maintain
the asset value of Party C and refrain from any act/omission that may affect the operation status and asset value of Party C;
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2.1.7
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without the prior written consent of Party A, they shall not cause Party C to enter into any material
contract, except for the contracts entered into in the ordinary course of business (for the purpose of this paragraph, a contract
shall be deemed as a material contract if its value exceeds RMB100,000);
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2.1.8
|
without the prior written consent of Party A, they shall not cause Party C to provide any Person
with loan or credit or any form of security;
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2.1.9
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upon request by Party A, they shall provide Party A with all information regarding the operation
and financial status of Party C, including but without limitation, the balance sheet, profit statement and cash flow statement
;
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2.1.10
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if requested by Party A, they shall procure and maintain insurance on assets and business of Party
C, the amounts and types of which shall be consistent with those of the companies operating similar business, with an insurer acceptable
to Party A;
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2.1.11
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without the prior written consent of Party A, they shall not cause or allow Party C to merge or
consolidate with any Person or acquire or invest in any Person, or cause or allow Party C to sell its assets with value of more
than RMB100,000;
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2.1.12
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they shall promptly notify Party A of any litigation, arbitration or administrative proceeding
initiated or threatened in relation to the assets, business or income of Party C;
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2.1.13
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to retain Party C’s title to all of its assets, they shall execute all necessary or appropriate
documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or make necessary and appropriate
defenses against all claims;
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2.1.14
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without the prior written consent of Party A, they shall ensure that Party C shall not distribute
dividends to its shareholders in any form; provided, however, that Party C shall promptly distribute all distributable profits
to its shareholders upon written request by Party A;
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2.1.15
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upon request by Party A, they shall appoint any Person designated by Party A as the director of
Party C and/or remove the incumbent director of Party C; and
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2.1.16
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without the written consent of Party A, Party C shall not be dissolved or liquidated, unless mandatorily
required by the laws of the PRC.
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2.2
|
Acknowledgements and Covenants of Party B
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Party B hereby acknowledges
that:
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2.2.1
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to the fullest extent permitted by the laws of the PRC, any equity interest in Party C held by
Party B now or hereafter shall not belong to community property of Party B (in the event that Party B is a natural Person) or hereditament
and shall not be divided or inherited, nor shall Party B use its equity interest in Party C to assume debt repayment liability
or security liability. If, due to any reason, such equity interest is divided, transferred or inherited, successor(s) or transferee(s)
shall execute all documents requested by Party A (including, without limitation, this Contract, the Equity Pledge Contract of Party
B and the Power of Attorney of Party B).
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Party B hereby covenants
that:
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2.2.2
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without the prior written consent of Party A, it shall not sell, transfer, mortgage or otherwise
dispose of any lawful or beneficial interest in its equity interest in Party C or permit the encumbrance thereon of any Security
Interest, other than the pledge created on such equity interest in accordance with the Equity Pledge Contract of Party B;
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2.2.3
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it shall not request Party C to distribute dividends or make other forms of profit distribution
in connection with its equity interest in Party C, propose a resolution thereon to the shareholders’ meeting or vote in favor
of such resolution at the shareholders’ meeting. In any event, if Party B receives any proceeds, profit distribution or dividends
from Party C, to the extent permitted by the laws of the PRC, Party B shall promptly pay or transfer such proceeds, profit distribution
or dividends to Party A or the party designated by Party A for the benefit of Party C as the service fee payable by Party C to
Party A under the Exclusive Business Cooperation Agreement;
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2.2.4
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it shall cause the shareholders’ meeting and/or the board of directors of Party C not to
approve the sale, transfer, mortgage or other disposal of any lawful or beneficial interest in its equity interest in Party C or
permit the encumbrance thereon of any Security Interest without the prior written consent of Party A, other than the pledge created
on such equity interest in accordance with the Equity Pledge Contract of Party B;
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2.2.5
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it shall cause the shareholders’ meeting or the board of directors of Party C not to approve
merger or consolidation with any Person or acquisition of or investment in any Person without the prior written consent of Party
A;
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2.2.6
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it shall promptly notify Party A of any litigation, arbitration or administrative proceeding initiated
or threatened in relation to its equity interest in Party C;
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2.2.7
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it shall cause the shareholders’ meeting or the board of directors of Party C to approve
the transfer of the Purchased Equity hereunder and take any and all other actions that Party A may request;
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2.2.8
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to retain its ownership of its equity interest in Party C, it shall execute all necessary or appropriate
documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or make necessary and appropriate
defenses against all claims;
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2.2.9
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upon request by Party A, it shall appoint any Person designated by Party A as the director of Party
C;
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2.2.10
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upon request by Party A at any time, it shall promptly and unconditionally transfer its equity
interest in Party C to the Designee(s) of Party A based on the Equity Call Option hereunder, and Party B hereby waives the right
of first refusal, if any, with respect to the equity transfer by another existing shareholder of Party C; and
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2.2.11
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it shall strictly comply with this Contract and other contracts entered into by Party B, Party
C and Party A jointly or severally, perform its obligations hereunder and thereunder and refrain from any act/omission that may
affect the validity and enforceability hereof and thereof. If Party B has any remaining rights with respect to the equity interest
under this Contract or the Equity Pledge Contract among the Parties hereto or the Power of Attorney granted in favor of Party A,
Party B shall not exercise such rights, unless according to the written instructions given by Party A.
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2.2.12
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it shall make sure its structure and identity, and the structure and identity of any direct and
indirect equity holder of Party B, will not cause any adverse effect on Party’s C’s capacity to obtain and maintain
any license in connection with Party C’s business. If the structure or identity of Party B or the direct and indirect equity
holder of Party B has caused or is expected to cause such aforesaid adverse effect, as required by Party A, Party B shall take
all necessary actions at its own cost to eliminate such adverse effect, including but not limited to conducting necessary internal
reorganization.
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Party C hereby
covenants that:
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2.3.1
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if the execution and performance of this Contract and the grant of the Equity Call Option or the
Asset Purchase Option hereunder require consent, permit, waiver or authorization of any third party or approval, permit or exemption
of any governmental authority or completion of registration or filing procedures with any governmental authority (if required in
accordance with law), Party C will use its best efforts to assist the satisfaction of such conditions.
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2.3.2
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without the prior written consent of Party A, Party C will not assist or permit Party B to transfer
or otherwise dispose of, or create any Security Interest or other third party rights on, any equity interest in Party C held by
Party B.
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2.3.3
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without the prior written consent of Party A, Party C will not transfer or otherwise dispose of
any material assets of Party C, or create any Security Interest or other third party rights on any assets of Party C.
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2.3.4
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Party C will not do or permit to be done any act or action likely to have adverse effect on the
interests of Party A hereunder; and
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2.3.5
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Party C covenants that upon issuance of the Asset Purchase Notice by Party A for the exercise of
the Asset Purchase Option: Party C shall immediately cause Party B to hold a shareholders’ meeting and adopt a resolution
of the shareholders’ meeting and take all other necessary actions to approve the transfer by Party C of the Purchased Assets
to Party A and/or the Designee(s) at the transfer price set forth herein; it shall immediately execute an asset transfer agreement
with Party A and/or the Designee(s) to transfer all the Purchased Assets to Party A and/or the Designee(s) at the transfer price
set forth herein, and shall cause all shareholders of Party C to provide necessary supports to Party A in accordance with requirements
of Party A, laws and regulations (including provision and execution of all relevant legal documents, completion of all governmental
approval and registration formalities and assumption of all relevant obligations), such that Party A and/or the Designee(s) shall
obtain the ownership of the Purchased Assets, free and clear of any legal defects and any Security Interest, third party rights
or any other restrictions.
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3.
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Representations and Warranties
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|
3.1
|
Each Person of Party B hereby severally but not jointly represents and warrants that, as of the
date hereof and each transfer date of the Purchased Equity:
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3.1.1
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with respect to a natural Person, he is a PRC citizen with full capacity to act, has full and independent
legal status and capacity to execute, deliver and perform this Contract and may sue or be sued as an independent party. With respect
to a Person other than a natural Person, it is a legal entity validly established and lawfully existing under the laws of the PRC,
has full and independent legal status and capacity to execute, deliver and perform this Contract and may sue or be sued as an independent
party.
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3.1.2
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he or it has full power and authority to execute, deliver and perform this Contract and all other
documents to be executed by him or it in connection with the transactions contemplated hereby, and has full power and authority
to consummate the transactions contemplated hereby.
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3.1.3
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this Contract has been lawfully and duly executed and delivered by him or it. This Contract constitutes
his or its legal and binding obligations enforceable against him or it in accordance with the terms hereof.
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3.1.4
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he or it is the registered shareholder of the Purchased Equity; other than the pledge right created
under the Equity Pledge Contract of Party B and the proxy rights created under the Power of Attorney of Party B, the Purchased
Equity held by him or it is free and clear of any lien, pledge right, claim right and other Security Interest and third party rights.
In accordance with this Contract, Party A and/or the Designee(s) may, upon exercise of option, obtain good title to the Purchased
Equity, free and clear of any lien, pledge right, claim right and other Security Interest or third party rights.
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3.2
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Party C hereby represents and warrants as follows:
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3.2.1
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It is a limited liability company duly registered and lawfully existing under the laws of the PRC
with independent legal person status. It has full and independent legal status and capacity to execute, deliver and perform this
Contract and may sue or be sued as an independent party.
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3.2.2
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It has full internal power and authority to execute, deliver and perform this Contract and all
other documents to be executed by it in connection with the transactions contemplated hereby, and has full power and authority
to consummate the transactions contemplated hereby.
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3.2.3
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本合同由丙方合法、适当地签署并交付。本合同构成对其合法的、具有约束力的义务。
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This Contract
has been lawfully and duly executed and delivered by it. This Contract constitutes its legal and binding obligations.
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3.2.4
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The assets of Party C are free and clear of any lien, mortgage right, claim right and other Security
Interest and third party rights. In accordance with this Contract, Party A and/or the Designee(s) may, upon exercise of option,
obtain good title to the assets of Party C, free and clear of any lien, mortgage right, claim right and other Security Interest
or third party rights.
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3.2.5
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Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course
of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.
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3.2.6
|
If the laws of PRC requires it to be dissolved or liquidated, Party C shall sell all of its assets
to the extent permitted by the laws of PRC to Party A or its Designee(s), at the lowest selling price permitted by applicable the
laws of PRC. Any obligation for Party A to pay Party C as a result of such transaction shall be forgiven by Party C or any proceeds
from such transaction shall be paid to Party A or its Designee(s) in partial satisfaction of the service fees under the Exclusive
Business Corporation Agreement, as applicable under then-current the laws of PRC.
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4.1
|
This Contract shall become effective from the date on which it is duly executed by the Parties.
This Contract shall be terminated after all assets of Party C and all equity interest in Party C held by Party B have been lawfully
transferred to Party A and/or another Person designated by it in accordance with the provisions hereof.
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4.2
|
Notwithstanding the foregoing, Party A shall have the right to terminate this Agreement by giving
written notice to Party B at any time 30 days in advance and Party A shall not be liable for any breach of contract in respect
of its unilateral termination of this Agreement.
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5.
|
Governing Law and Resolution of Disputes
|
The execution,
effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the formally published and publicly available laws of China. Matters not covered by formally published and
publicly available laws of China shall be governed by international legal principles and practices.
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5.2
|
Methods of Resolution of Disputes
|
In the event of any dispute with
respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations.
In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties
for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic
and Trade Arbitration Commission (“CIETAC”) for arbitration, in accordance with its then effective arbitration rules.
The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall
be final and binding on all Parties.
Each Party shall pay any and all transfer
and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with
the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated
under this Agreement and the Transfer Contracts.
|
7.1
|
All notices and other communications required or permitted to be given pursuant to this Agreement
shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission
to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which
notices shall be deemed to have been effectively given shall be determined as follows:
|
|
7.1.1
|
Notices given by personal delivery, by courier service or by registered mail, postage prepaid,
shall be deemed effectively given on the date of delivery or refusal at the address specified for notices.
|
|
7.1.2
|
Notices given by facsimile transmission shall be deemed effectively given on the date of successful
transmission (as evidenced by an automatically generated confirmation of transmission).
|
|
7.2
|
For the purpose of notices, the addresses of the Parties are as follows:
|
|
Party A:
|
Weidai Co., Ltd.
|
|
Address:
|
50/F, Fortune Financial Center, No. 37 Jiefang East Rd., Jiangan District, Hangzhou City, Zhejiang Province.
|
|
Attn:
|
Li Jinxiang
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Yao Hong
|
|
Address:
|
50/F, Fortune Financial Center, No. 37 Jiefang East Rd., Jiangan District, Hangzhou City, Zhejiang Province.
|
|
Attn:
|
Li Jinxiang
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership)
|
|
Address:
|
Room 3301, Kerry Center, No.1155 of Fangdian Road, Pudong New Area, Shanghai
|
|
Attn:
|
Wenjun Fang
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Deqing Jinxiu Management Consulting Partnership (Limited Partnership)
|
|
Address:
|
50F, FFC, No.37 of Jiefangdong Road, Jianggan District, Hangzhou, Zhejiang Province
|
|
Attn:
|
Yao Hong
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership)
|
|
Address:
|
9F, Building B, Qiangjiang Zheshang VC Center, No.527 of Xixi Road, West lake District, Hangzhou
|
|
Attn:
|
Li Meng
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Zhejiang Hakim Unique Finance Service Co., Ltd.
|
|
Address:
|
Handing International Building, No.5 Yongfuqiao Road, Xiacheng District, Hangzhou City, Zhejiang province.
|
|
Attn:
|
Wang Yan
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Zhejiang Zheshang Lihai Venture Investment Partnership (Limited Partnership)
|
|
Address:
|
9F, Building B, Qiangjiang Zheshang VC Center, No.527 of Xixi Road, West lake District, Hangzhou
|
|
Attn:
|
Li Meng
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Shenzhen Guosheng Qianhai Investment Co., Ltd.
|
|
Address:
|
201, Building 202, Jinzhong Industrial Zone, No. 2, North Jinxiu Street, Huaqiao City, Shenzhen.
|
|
Attn:
|
Li Yingming
|
|
Phone:
|
***
|
|
Party B:
|
Qingdao Oriental Capital Investment Co., Ltd.
|
|
Address:
|
Room 509, Building D, No.122 of Nanjing Road, Shinan District, Qingdao, Shandong Province
|
|
Attn:
|
Lianqi Shan
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Beijing Dongyitianzheng Investment Co., Ltd.
|
|
Address:
|
Floor A20, Shangdu International Center, No.8 of Dongdaqiao Road, Chaoyang District, Beijing
|
|
Attn:
|
Yang Sun
|
|
Phone:
|
***
|
|
|
|
|
Party B:
|
Hangzhou Shanan Investment Partnership (Limited Partnership)
|
|
Address:
|
2/F, building G,11 Financial Street, Xicheng, Beijing
|
|
Attn:
|
Yang Haoxiang
|
|
Phone:
|
***
|
|
|
|
|
Party C:
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
|
Address:
|
50/F, West Building, Fortune Finance Center, No. 37 Jiefang East Road, Jianggan District, Hangzhou, Zhejiang Province
|
|
Attn:
|
Li Jinxiang
|
|
Phone:
|
***
|
|
7.3
|
Any Party may at any time change its address for notices by a notice delivered to the other Parties
in accordance with the terms hereof.
|
The Parties
acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information.
Each Party shall maintain the confidentiality of all such information, and without obtaining the written consent of other Parties,
it shall not disclose any relevant information to any third parties, except in the following circumstances: (a) such information
is or will be in the public domain (provided that this is not the result of a public disclosure by the receiving Party); (b) information
disclosed as required by applicable laws or rules or regulations of any stock exchange; or (c) information required to be disclosed
by any Party to its legal counsel or financial advisor regarding the transaction contemplated hereunder, and such legal counsel
or financial advisor are also bound by confidentiality duties similar to the duties in this Section. Disclosure of any confidential
information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential information by such
Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement
for any reason.
The Parties agree
to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes
of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions
and purposes of this Agreement.
|
10.
|
Liabilities for Breach of Contract
|
|
10.1
|
If Party B or Party C materially violates any provision of this Contract, Party A shall have the
right to terminate this Contract and/or claim damages against Party B or Party C; this Article 10 shall not prejudice any other
rights of Party A hereunder.
|
|
10.2
|
Unless otherwise provided by laws, in no event shall Party B or Party C have the right to terminate
or rescind this Contract.
|
|
11.1
|
Amendment, change and supplement
|
Any amendment, change and supplement
to this Agreement shall require the execution of a written agreement by all of the Parties.
Except for the
amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the
entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior
oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
The headings of
this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions
of this Agreement.
This Agreement
is written in both Chinese and English language in five (5) copies, Party A, Party B and Party C having one (1) copy with equal
legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
In the event that
one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not
be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable
provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties,
and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal
or unenforceable provisions.
This Agreement
shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
|
11.7.1
|
Any obligations that occur or that are due as a result of this Agreement upon the expiration or
early termination of this Agreement shall survive the expiration or early termination thereof.
|
|
11.7.2
|
The provisions of Sections 5, 7, 8 and this Section 11.8 shall survive the termination of this
Agreement.
|
Any Party may waive
the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures
of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver
by such a Party with respect to any similar breach in other circumstances.
With the execution
of this Agreement on the date hereof, each of Party B shall cause his/her spouse to execute and deliver to Party A a spousal consent
letter (if applicable).
[The space below is intentionally
left blank.]
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
|
Party A:
|
Weidai Co., Ltd.
|
(Seal of Weidai Co., Ltd.)
Name: Yao Hong
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Yao Hong
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
|
Party B:
|
Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership)
(Company Seal)
|
(Seal of Suzhou Weixin Zhonghua
Venture Investment Partnership (Limited Partnership))
Name: Wei Zhe
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
|
Party B:
|
Deqing Jinxiu Management Consulting Partnership (Limited Partnership)
(Company Seal)
|
(Seal of : Deqing Jinxiu Management
Consulting Partnership (Limited Partnership))
Name: He Qinqin
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Hangzhou Lihai
Internet Venture Investment Partnership (Limited Partnership)
(Company Seal)
(Seal of Hangzhou Lihai Internet
Venture Investment Partnership (Limited Partnership))
Name: Chen Yuemeng
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Zhejiang Hakim
Unique Finance Service Co., Ltd.
(Company Seal)
(Seal of Zhejiang Hakim Unique
Finance Service Co., Ltd.)
Name: Zhu Chun
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Zhejiang Zheshang Lihai
Venture Investment Partnership (Limited Partnership)
(Company Seal)
(Seal of Zhejiang Zheshang Lihai
Venture Investment Partnership (Limited Partnership))
Name: Xu Yabo
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Shenzhen Guosheng Qianhai
Investment Co., Ltd.
(Company Seal)
(Seal of Shenzhen Guosheng Qianhai
Investment Co., Ltd.)
Name: Li Yingming
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Qingdao Oriental Capital
Investment Co., Ltd.
(Company Seal)
(Seal of Qingdao Oriental Capital
Investment Co., Ltd.)
Name: Cai Dongbing
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Beijing Dongyitianzheng
Investment Co., Ltd.
(Company Seal)
(Seal of Beijing Dongyitianzheng
Investment Co., Ltd.)
Name: Chen Hui
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party B: Hangzhou Shanan Investment
Partnership (Limited Partnership)
(Company Seal)
(Seal of Hangzhou Shanan Investment
Partnership (Limited Partnership))
Name: Yang Haoxiang
IN WITNESS WHEREOF, the Parties have caused their authorized representatives
to execute this Exclusive Call Option Contract as of the date first written above.
Party C: Weidai (Hangzhou) Financial Information Service Ltd.
(Company Seal)
(Seal of Weidai (Hangzhou) Financial
Information Service Ltd.)
Name: Yao Hong
Exhibit 10.7
Spouse Consent Letter
Date:
April 10
, 2018
To: Weidai Co., Ltd.
Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership)
Deqing Jinxiu Management Consulting Partnership (Limited Partnership)
Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership)
Zhejiang Hakim Unique Finance Service Co., Ltd.
Zhejiang Zheshang Lihai Venture Investment Partnership (Limited Partnership)
Shenzhen Guosheng Qianhai Investment Co., Ltd.
Qingdao Oriental Capital Investment Co., Ltd.
Beijing Dongyitianzheng Investment Co., Ltd.
Hangzhou Shanan Investment Partnership (Limited Partnership)
The undersigned, He Qinqin (ID card No. ***),
is the lawful spouse of Yao Hong (ID card No. ***). I hereby unconditionally and irrevocably agree to the execution of the following
documents (hereinafter referred to as the “
Transaction Documents
”) by Yao Hong on April 10, 2018 and the disposal
of the equity interests of Weidai (Hangzhou) Financial Information Service Ltd. (hereinafter referred to as the “
Weidai
”)
held by Yao Hong and registered in Yao Hong’s name according to the following documents:
|
·
|
Share Pledge Agreement entered into with Weidai Co. Ltd. (hereinafter referred to as the “
WFOE
”) and Weidai;
|
|
·
|
Exclusive Call Option Contract entered into with WFOE and Weidai;
|
|
·
|
Power of Attorney executed by Yao Hong
|
I hereby undertake not to make any assertions
in connection with the equity interests of Weidai which are held by Yao Hong. I hereby further confirm that Yao Hong can perform
the Transaction Documents and further amend or terminate the Transaction Documents absent authorization or consent from me.
I hereby undertake to execute all necessary
documents and take all necessary actions to ensure appropriate performance of the Transaction Documents (as amended from time to
time).
I hereby agree and undertake that if I obtain
any equity interests of Weidai which are held by Yao Hong for any reasons, I shall be bound by the Transaction Documents and the
Exclusive Business Cooperation Agreement entered into between the WFOE and Weidai as of
April 10
, 2018 (“
Exclusive
Business Cooperation Agreement
”) (as amended from time to time) and comply with the obligations thereunder as a shareholder
of Weidai. For this purpose, upon the WFOE’s request, I shall sign a series of written documents in substantially the same
format and content as the Transaction Documents and Exclusive Business Cooperation Agreement (as amended from time to time).
The execution, effectiveness, construction,
performance, amendment and termination of this consent letter and the resolution of disputes hereunder shall be governed by the
laws of China. In the event of any dispute with respect to the construction and performance of this consent letter, the related
parties shall first resolve the dispute through friendly negotiations. In the event the related parties fail to reach an agreement
on the dispute within 30 days after either party's request to the other parties for resolution of the dispute through negotiations,
either party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission (Shanghai
International Arbitration Center) for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted
in Shanghai, and the arbitration proceedings shall be conducted in Chinese. The arbitration award shall be final and binding on
all Parties. Upon the occurrence of any disputes arising from the construction and performance of this consent letter or during
the pending arbitration of any dispute, except for the matters under dispute, I shall continue to exercise my rights under this
consent letter and perform my obligations under this consent letter.
This consent letter is written in Chinese and
English. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
[The space below is intentionally
left blank.]
(There is no text on this page, but signature
for Spouse Consent Letter)
Name: He Qinqin
Exhibit
10.8
April 10, 2018
To: Weidai (Hangzhou) Financial
Information Service Ltd. (the “VIE Entity”)
To Whom It May Concern:
To ensure the cash flow requirements
of the VIE Entity’s operations are met and/or to set off any loss accrued during such operations, the undersigned, Weidai
Ltd. (the “Company”), in consideration of the benefits to the Company accruing from the VIE Entity, is obligated and
hereby undertakes to provide unlimited financial support to the VIE Entity, to the extent permissible under the applicable PRC
laws and regulations, whether or not any such operational loss is actually incurred. The form of financial support shall include,
but not limited to, extension of cash, entrusted loans and borrowings. The Company will not request repayment of the loans or borrowings
if the VIE Entity or its shareholders do not have sufficient funds or are unable to repay.
The undersigned agrees and acknowledges
such undertaking shall be irrevocable and continuously valid from April 10, 2018 until the earlier of (1) the date on which all
of the equity interests of the VIE Entity have been acquired directly or indirectly by the Company or its designated representative
(individual or legal person); or (2) the date of unilateral termination by the Company, at its sole and absolution discretion,
by giving thirty (30) days prior written notice to the VIE Entity of its intention to terminate this letter.
Please confirm receipt of this
letter by returning a signed copy of this letter to the undersigned.
|
Weidai Ltd.
|
|
|
|
/s/ Hong Yao
|
|
Name: Hong Yao
|
|
Title: Authorized Signatory
|
E
xhibit
10.9
WEIDAI
ltd.
2018 SHARE INCENTIVE PLAN
Article
1
PURPOSE
The purpose of this
2018 Share Incentive Plan (the “
Plan
”) is to promote the success and enhance the value of Weidai Ltd., an exempted
company formed under the laws of the Cayman Islands (the “
Company
”), by linking the personal interests of the
Directors, Employees and Consultants to those of the Company’s shareholders and by providing such individuals with an incentive
for outstanding performance to generate superior returns to the Company’s shareholders. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the services of the Directors, Employees, and Consultants
upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
Article
2
DEFINITIONS AND CONSTRUCTION
Wherever the following
terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular
pronoun shall include the plural where the context so indicates.
2.1 “
Administrator
”
means the administrator of the Plan described in Article 10.
2.2 “
Applicable
Laws
” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate,
securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national
market system, of any jurisdiction applicable to Awards granted to residents therein.
2.3 “
Award
”
means an Option, Restricted Share or Restricted Share Unit award granted to a Participant pursuant to the Plan.
2.4 “
Award
Agreement
” means any written agreement, contract, or other instrument or document evidencing an Award, including through
electronic medium.
2.5 “
Board
”
means the Board of Directors of the Company.
2.6 “
Cause
”
with respect to a Participant means (unless otherwise expressly provided in the applicable Award Agreement, or another applicable
contract with the Participant that defines such term for purposes of determining the effect that a “for cause” termination
has on the Participant’s Awards) a termination of employment or service based upon a finding by the Service Recipient, acting
in good faith and based on its reasonable belief at the time, that the Participant:
(a) has
been negligent in the discharge of his or her duties to the Service Recipient, has refused to perform stated or assigned duties
or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;
(b) has
been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized
disclosure or use of inside information, customer lists, trade secrets or other confidential information;
(c) has
breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Service
Recipient; or has been convicted of, or plead guilty or nolo contendere to, a felony or misdemeanor (other than minor traffic violations
or similar offenses);
(d) has
materially breached any of the provisions of any agreement with the Service Recipient;
(e) has
engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets
of, the Service Recipient; or
(f) has
improperly induced a vendor or customer to break or terminate any contract with the Service Recipient or induced a principal for
whom the Service Recipient acts as agent to terminate such agency relationship.
A termination for Cause
shall be deemed to occur (subject to reinstatement upon a contrary final determination by the Administrator) on the date on which
the Service Recipient first delivers written notice to the Participant of a finding of termination for Cause.
2.7 “
Code
”
means the Internal Revenue Code of 1986 of the United States, as amended.
2.8 “
Consultant
” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to
a Service Recipient; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities
in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities;
and (c) the consultant or adviser is a natural person who has contracted directly with the Service Recipient to render such services.
2.9 “
Corporate
Transaction
”, unless otherwise defined in an Award Agreement, means any of the following transactions, provided, however,
that the Administrator shall determine under (d) and (e) whether multiple transactions are related, and its determination shall
be final, binding and conclusive:
(a) an
amalgamation, statutory merger, arrangement or consolidation or scheme of arrangement (i) in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated
or (ii) following which the holders of the voting securities of the Company do not continue to hold more than 50% of the combined
voting power of the voting securities of the surviving entity;
(b) the
sale, transfer or other disposition of all or substantially all of the assets of the Company;
(c) the
complete liquidation or dissolution of the Company;
(d) any
reverse takeover or series of related transactions culminating in a reverse takeover (including, but not limited to, a tender offer
followed by a reverse takeover) in which the Company is the surviving entity but (A) the Company’s equity securities outstanding
immediately prior to such takeover are converted or exchanged by virtue of the takeover into other property, whether in the form
of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held
such securities immediately prior to such takeover or the initial transaction culminating in such takeover, but excluding any such
transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or
(e) acquisition
in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored
employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any
such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.
2.10 “
Director”
,
means a member of the Board or a member of the board of directors of any Subsidiary of the Company.
2.11 “
Disability
”,
unless otherwise defined in an Award Agreement, means that the Participant qualifies to receive long-term disability payments under
the Service Recipient’s long-term disability insurance program, as it may be amended from time to time, to which the Participant
provides services regardless of whether the Participant is covered by such policy. If the Service Recipient to which the Participant
provides service does not have a long-term disability plan in place, “Disability” means that a Participant is unable
to carry out the responsibilities and functions of the position held by the Participant by reason of any medically determinable
physical or mental impairment for a period of not less than ninety (90) consecutive days. A Participant will not be considered
to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its
discretion.
2.12 “
Effective
Date
” shall have the meaning set forth in Section 11.1.
2.13 “
Employee
”
means any person, including an officer or a Director, who is in the employment of a Service Recipient, subject to the control and
direction of the Service Recipient as to both the work to be performed and the manner and method of performance. The payment of
a director’s fee by a Service Recipient shall not be sufficient to constitute “employment” by the Service Recipient.
2.14 “
Exchange
Act
” means the Securities Exchange Act of 1934 of the United States, as amended.
2.15 “
Fair
Market Value
” means, as of any date, the value of Shares determined as follows:
(a) If
the Shares are listed on one or more established stock exchanges or national market systems, including without limitation, the
New York Stock Exchange or the NASDAQ Stock Market, its Fair Market Value shall be the closing sales price for such shares (or
the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Shares are listed (as determined
by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was reported), as reported on the website maintained
by such exchange or market system or such other source as the Administrator deems reliable;
(b) If
the Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities
dealer, its Fair Market Value shall be the closing sales price for such Shares as quoted on such system or by such securities dealer
on the date of determination, but if selling prices are not reported, the Fair Market Value of a Share shall be the mean between
the high bid and low asked prices for the Shares on the date of determination (or, if no such prices were reported on that date,
on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(c) In
the absence of an established market for the Shares of the type described in (a) and (b), above, the Fair Market Value thereof
shall be determined by the Administrator in good faith and in its discretion by reference to (i) the placing price of the latest
private placement of the Shares and the development of the Company’s business operations and the general economic and market
conditions since such latest private placement, (ii) other third party transactions involving the Shares and the development of
the Company’s business operation and the general economic and market conditions since such transaction, (iii) an independent
valuation of the Shares, or (iv) such other methodologies or information as the Administrator determines to be indicative of Fair
Market Value.
2.16 “
Group
Entity” means any of the Company and Subsidiaries of the Company.
2.17 “
Incentive
Share Option
” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision
thereto.
2.18 “
Independent
Director
” means (i) if the Shares or other securities representing the Shares are not listed on a stock exchange, a Director
of the Company who is a Non-Employee Director; and (ii) if the Shares or other securities representing the Shares are listed on
one or more stock exchange, a Director of the Company who meets the independence standards under the applicable corporate governance
rules of the stock exchange(s).
2.19 “
Non-Employee
Director
” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3)
of the Exchange Act, or any successor definition adopted by the Board.
2.20 “
Non-Qualified
Share Option
” means an Option that is not intended to be an Incentive Share Option.
2.21 “
Option
”
means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of Shares at a specified
price during specified time periods. An Option may be either an Incentive Share Option or a Non-Qualified Share Option.
2.22 “
Participant
”
means a person who, as a Director, Consultant or Employee, has been granted an Award pursuant to the Plan.
2.23 “
Parent
”
means a parent corporation under Section 424(e) of the Code.
2.24 “
Plan
”
means this 2018 Share Incentive Plan of Weidai Ltd., as amended and/or restated from time to time.
2.25 “
Related
Entity
” means any business, corporation, partnership, limited liability company or other entity in which the Company,
a Parent or Subsidiary of the Company holds a substantial ownership interest, directly or indirectly, or controls through contractual
arrangements and consolidates the financial results according to applicable accounting standards, but which is not a Subsidiary
and which the Board designates as a Related Entity for purposes of the Plan.
2.26 “
Restricted
Share
” means a Share awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be
subject to risk of forfeiture.
2.27 “
Restricted
Share Unit
” means an Award granted pursuant to Article 7.
2.28 “
Securities
Act
” means the Securities Act of 1933 of the United States, as amended.
2.29 “
Service
Recipient
” means the Company or Subsidiary of the Company to which a Participant provides services as an Employee, a
Consultant or a Director.
2.30 “
Share
”
means the ordinary shares of the Company (or upon the completion of the Company’s initial public offering, the Class A ordinary
shares of the Company), par value US$0.0001 per share, and such other securities of the Company that may be substituted for Shares
pursuant to Article 9.
2.31 “
Subsidiary
”
means any corporation or other entity of which a majority of the outstanding voting shares or voting power is beneficially owned
directly or indirectly by the Company.
2.32 “
Trading
Date
” means the closing of the first sale to the general public of the Shares pursuant to a registration statement filed
with and declared effective by the U.S. Securities and Exchange Commission under the Securities Act.
Article
3
SHARES SUBJECT TO THE PLAN
3.1
Number
of Shares
.
(a) Subject
to the provisions of Article 9 and Section 3.1(b), the maximum aggregate number of Shares which may be issued pursuant to all Awards
(including Incentive Share Options) (the “Award Pool”) shall be 66,000 Shares, as adjusted for any share splits. The
size of the Award Pool will be equitably adjusted in the event of any share dividend, subdivision, reclassification, recapitalization,
split, reverse split, combination, consolidation or similar transactions.
(b) To
the extent that an Award terminates, expires, or lapses for any reason, any Shares subject to the Award shall again be available
for the grant of an Award pursuant to the Plan. To the extent permitted by Applicable Laws, Shares issued in assumption of, or
in substitution for, any outstanding awards of any entity acquired in any form or combination by a Group Entity shall not be counted
against Shares available for grant pursuant to the Plan. Shares delivered by the Participant or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3.1(a). If any Restricted Shares are forfeited by the Participant
or repurchased by the Company, such Shares may again be optioned, granted or awarded hereunder, subject to the limitations of Section
3.1(a). Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action
would cause an Incentive Share Option to fail to qualify as an incentive share option under Section 422 of the Code.
3.2
Shares Distributed
.
Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury Shares
(subject to Applicable Laws) or Shares purchased on the open market. Additionally, at the discretion of the Administrator, any
Shares distributed pursuant to an Award may be represented by American Depository Shares. If the number of Shares represented
by an American Depository Share is other than on a one-to-one basis, the limitations of Section 3.1 shall be adjusted to reflect
the distribution of American Depository Shares in lieu of Shares.
Article
4
ELIGIBILITY AND PARTICIPATION
4.1
Eligibility
.
Persons eligible to participate in this Plan include Employees, Consultants, and Directors, as determined by the Administrator.
4.2
Participation
.
Subject to the provisions of the Plan, the Administrator may, from time to time, select from among all eligible individuals, those
to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to
be granted an Award pursuant to this Plan.
4.3
Jurisdictions
.
In order to assure the viability of Awards granted to Participants employed in various jurisdictions, the Administrator may provide
for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom
applicable in the jurisdiction in which the Participant resides, is employed, operates or is incorporated. Moreover, the Administrator
may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose;
provided,
however
, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained
in Section 3.1 of the Plan. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards
shall be granted, that would violate any Applicable Laws.
Article
5
OPTIONS
5.1
General
.
The Administrator is authorized to grant Options to Participants on the following terms and conditions:
(a)
Exercise
Price
. Provided that the exercise price per Share shall not be less than the par value of any such Shares, the exercise price
per Share subject to an Option shall be determined by the Administrator and set forth in the Award Agreement which may be a fixed
price or a variable price related to the Fair Market Value of the Shares. The exercise price per Share subject to an Option may
be amended or adjusted in the absolute discretion of the Administrator, the determination of which shall be final, binding and
conclusive. For the avoidance of doubt, to the extent not prohibited by Applicable Laws or any exchange rule, a downward adjustment
of the exercise prices of Options mentioned in the preceding sentence shall be effective without the approval of the Company’s
shareholders or the approval of the affected Participants.
(b)
Time
and Conditions of Exercise
. The Administrator shall determine the time or times at which an Option may be exercised in whole
or in part, including exercise prior to vesting;
provided
that the term of any Option granted under the Plan shall not exceed
ten years, except as provided in Section 12.1. The Administrator shall also determine any conditions, if any, that must be satisfied
before all or part of an Option may be exercised.
(c)
Payment
.
The Administrator shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including,
without limitation (i) cash or check denominated in U.S. Dollars, (ii) to the extent permissible under the Applicable Laws, cash
or check in Chinese Renminbi, (iii) cash or check denominated in any other local currency as approved by the Administrator, (iv)
Shares held for such period of time as may be required by the Administrator in order to avoid adverse financial accounting consequences
and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion
thereof, (v) after the Trading Date the delivery of a notice that the Participant has placed a market sell order with a broker
with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Company in satisfaction of the Option exercise price;
provided
that payment of such
proceeds is then made to the Company upon settlement of such sale, (vi) other property acceptable to the Administrator with a Fair
Market Value equal to the exercise price, or (vii) any combination of the foregoing. Notwithstanding any other provision of the
Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the
meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would
violate Section 13(k) of the Exchange Act.
(d)
Evidence
of Grant
. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement
shall include such additional provisions as may be specified by the Administrator.
(e)
Effects
of Termination of Employment or Service on Options
. Termination of employment or service shall have the following effects on
Options granted to the Participants:
(i)
Dismissal
for Cause
. Unless otherwise provided in the Award Agreement, if a Participant’s employment by or service to the Service
Recipient is terminated by the Service Recipient for Cause, the Participant’s Options will terminate upon such termination,
whether or not the Option is then vested and/or exercisable;
(ii)
Death
or Disability
. Unless otherwise provided in the Award Agreement, if a Participant’s employment by or service to the Service
Recipient terminates as a result of the Participant’s death or Disability:
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(a)
|
the Participant (or his or her legal representative or beneficiary, in the case of the Participant’s Disability or death,
respectively), will have until the date that is 12 months after the Participant’s termination of Employment to exercise the
Participant’s Options (or portion thereof) to the extent that such Options were vested and exercisable on the date of the
Participant’s termination of Employment on account of death or Disability;
|
|
(b)
|
the Options, to the extent not vested and exercisable on the date of the Participant’s termination of Employment or service,
shall terminate upon the Participant’s termination of Employment or service on account of death or Disability; and
|
|
(c)
|
the Options, to the extent exercisable for the 12-month period following the Participant’s termination of Employment
or service and not exercised during such period, shall terminate at the close of business on the last day of the 12-month period.
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(iii)
Other
Terminations of Employment or Service
. Unless otherwise provided in the Award Agreement, if a Participant’s employment
by or service to the Service Recipient terminates for any reason other than a termination by the Service Recipient for Cause or
because of the Participant’s death or Disability:
|
(a)
|
the Participant will have until the date that is 90 days after the Participant’s termination of Employment or service
to exercise his or her Options (or portion thereof) to the extent that such Options were vested and exercisable on the date of
the Participant’s termination of Employment or service;
|
|
(b)
|
the Options, to the extent not vested and exercisable on the date of the Participant’s termination of Employment or service,
shall terminate upon the Participant’s termination of Employment or service; and
|
|
(c)
|
the Options, to the extent exercisable for the 90-day period following the Participant’s termination of Employment or
service and not exercised during such period, shall terminate at the close of business on the last day of the 90-day period.
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5.2
Incentive
Share Options
. Incentive Share Options may be granted to Employees of the Company or a Subsidiary of the Company. Incentive
Share Options may not be granted to employees of a Related Entity or to Independent Directors or Consultants. The terms of any
Incentive Share Options granted pursuant to the Plan, in addition to the requirements of Section 5.1, must comply with the following
additional provisions of this Section 5.2:
(a)
Individual
Dollar Limitation
. The aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect
to which Incentive Share Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other
limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Share Options are
first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Share Options.
(b)
Exercise
Price
. The exercise price of an Incentive Share Option shall be equal to the Fair Market Value on the date of grant, provided
that the exercise price per Share shall not be less than the par value of any such share. However, the exercise price of any Incentive
Share Option granted to any individual who, at the date of grant, owns Shares possessing more than ten percent of the total combined
voting power of all classes of shares of the Company or any Parent or Subsidiary of the Company may not be less than 110% of Fair
Market Value on the date of grant and such Option may not be exercisable for more than five years from the date of grant.
(c)
Transfer
Restriction
. The Participant shall give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive
Share Option within (i) two years from the date of grant of such Incentive Share Option or (ii) one year after the transfer of
such Shares to the Participant.
(d)
Expiration
of Incentive Share Options
. No Award of an Incentive Share Option may be made pursuant to this Plan after the tenth anniversary
of the Effective Date.
(e)
Right
to Exercise
. During a Participant’s lifetime, an Incentive Share Option may be exercised only by the Participant.
Article
6
RESTRICTED SHARES
6.1
Grant
of Restricted Shares
. The Administrator, at any time and from time to time, may grant Restricted Shares to Participants as
the Administrator, in its sole discretion, shall determine. The Administrator, in its sole discretion, shall determine the number
of Restricted Shares to be granted to each Participant.
6.2
Restricted
Shares Award Agreement
. Each Award of Restricted Shares shall be evidenced by an Award Agreement that shall specify the period
of restriction, the number of Restricted Shares granted, and such other terms and conditions as the Administrator, in its sole
discretion, shall determine. Unless the Administrator determines otherwise, Restricted Shares shall be held by the Company as escrow
agent until the restrictions on such Restricted Shares have lapsed.
6.3
Issuance
and Restrictions
. Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the
Administrator may impose (including, without limitation, limitations on the right to vote Restricted Shares or the right to receive
dividends on the Restricted Shares). These restrictions may lapse separately or in combination at such times, pursuant to such
circumstances, in such installments, or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter.
6.4
Forfeiture/Repurchase
.
Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon termination of employment
or service during the applicable restriction period, Restricted Shares that are at that time subject to restrictions shall be
forfeited or repurchased in accordance with the Award Agreement;
provided, however
, the Administrator may (a) provide in
any Restricted Share Award Agreement that restrictions or forfeiture and repurchase conditions relating to Restricted Shares will
be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole
or in part restrictions or forfeiture and repurchase conditions relating to Restricted Shares.
6.5
Certificates
for Restricted Shares
. Restricted Shares granted pursuant to the Plan may be evidenced in such manner as the Administrator
shall determine. If certificates representing Restricted Shares are registered in the name of the Participant, certificates must
bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and the
Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.
6.6
Removal
of Restrictions
. Except as otherwise provided in this Article 6, Restricted Shares granted under the Plan shall be released
from escrow as soon as practicable after the last day of the period of restriction. The Administrator, in its discretion, may
accelerate the time at which any restrictions shall lapse or be removed. After the restrictions have lapsed, the Participant shall
be entitled to have any legend or legends under Section 6.5 removed from his or her Share certificate, and the Shares shall be
freely transferable by the Participant, subject to applicable legal restrictions. The Administrator (in its discretion) may establish
procedures regarding the release of Shares from escrow and the removal of legends, as necessary or appropriate to minimize administrative
burdens on the Company.
Article
7
RESTRICTED SHARE UNITS
7.1
Grant
of Restricted Share Units
. The Administrator, at any time and from time to time, may grant Restricted Share Units to Participants
as the Administrator, in its sole discretion, shall determine. The Administrator, in its sole discretion, shall determine the number
of Restricted Share Units to be granted to each Participant.
7.2
Restricted
Share Units Award Agreement
. Each Award of Restricted Share Units shall be evidenced by an Award Agreement that shall specify
any vesting conditions, the number of Restricted Share Units granted, and such other terms and conditions as the Administrator,
in its sole discretion, shall determine.
7.3
Form
and Timing of Payment of Restricted Share Units
. At the time of grant, the Administrator shall specify the date or dates on
which the Restricted Share Units shall become fully vested and nonforfeitable. Upon vesting, the Administrator, in its sole discretion,
may pay Restricted Share Units in the form of cash, Shares or a combination thereof.
7.4
Forfeiture/Repurchase
.
Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon termination of employment
or service during the applicable restriction period, Restricted Share Units that are at that time unvested shall be forfeited
or repurchased in accordance with the Award Agreement;
provided, however
, the Administrator may (a) provide in any Restricted
Share Unit Award Agreement that restrictions or forfeiture and repurchase conditions relating to Restricted Share Units will be
waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole
or in part restrictions or forfeiture and repurchase conditions relating to Restricted Share Units.
Article
8
PROVISIONS APPLICABLE TO AWARDS
8.1
Award
Agreement
. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations
for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment
or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind
an Award.
8.2 No
Transferability; Limited Exception to Transfer Restrictions.
8.2.1 Limits
on Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 8.2, by applicable law and by the Award Agreement,
as the same may be amended:
|
(a)
|
all Awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment,
pledge, encumbrance or charge;
|
|
(b)
|
Awards will be exercised only by the Participant; and
|
|
(c)
|
amounts payable or shares issuable pursuant to an Award will be delivered only to (or for the account of), and, in the case
of Shares, registered in the name of, the Participant.
|
In addition, the shares shall be
subject to the restrictions set forth in the applicable Award Agreement.
8.2.2
Further
Exceptions to Limits on Transfer
. The exercise and transfer restrictions in Section 8.2.1 will not apply to:
|
(a)
|
transfers to the Company or a Subsidiary;
|
|
(b)
|
transfers by gift to “immediate family” as that term is defined in SEC Rule 16a-1(e) promulgated under the Exchange
Act;
|
|
(c)
|
the designation of a beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to
or exercises by the Participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will
or the laws of descent and distribution; or
|
|
(d)
|
if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by the Participant’s
duly authorized legal representative; or
|
|
(e)
|
subject to the prior approval of the Administrator, transfer to one or more natural persons who are the Participant’s
family members or entities owned and controlled by the Participant and/or the Participant’s family members, including but
not limited to trusts or other entities whose beneficiaries or beneficial owners are the Participant and/or the Participant’s
family members, or to such other persons or entities as may be expressly approved by the Administrator, pursuant to such conditions
and procedures as the Administrator or may establish. Any permitted transfer shall be subject to the condition that the Administrator
receives evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes and on a basis consistent
with the Company’s lawful issue of securities.
|
Notwithstanding anything else in
this Section 8.2.2 to the contrary, but subject to compliance with all Applicable Laws, Incentive Share Options, Restricted Shares
and Restricted Share Units will be subject to any and all transfer restrictions under the Code applicable to such Awards or necessary
to maintain the intended tax consequences of such Awards. Notwithstanding clause (b) above but subject to compliance with all Applicable
Laws, any contemplated transfer by gift to “immediate family” as referenced in clause (b) above is subject to the condition
precedent that the transfer be approved by the Administrator in order for it to be effective.
8.3
Beneficiaries
.
Notwithstanding Section 8.2, a Participant may, in the manner determined by the Administrator, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions
of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married
and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary
with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written
consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be
made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation
is filed with the Administrator.
8.4
Performance
Objectives and Other Terms
. The Administrator, in its discretion, shall set performance objectives or other vesting criteria
which, depending on the extent to which they are met, will determine the number or value of the Awards that will be granted or
paid out to the Participants.
8.5
Share
Certificates
.
(a) Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing the Shares pursuant
to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel, that the issuance and
delivery of such certificates is in compliance with all Applicable Laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the Shares are listed or traded. All Share certificates delivered pursuant to the Plan
are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with
all Applicable Laws, and the rules of any national securities exchange or automated quotation system on which the Shares are listed,
quoted, or traded. The Administrator may place legends on any Share certificate to reference restrictions applicable to the Shares.
In addition to the terms and conditions provided herein, the Administrator may require that a Participant make such reasonable
covenants, agreements, and representations as the Administrator, in its discretion, deems advisable in order to comply with any
such laws, regulations, or requirements. The Administrator shall have the right to require any Participant to comply with any timing
or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be
imposed in the discretion of the Administrator.
(b) Notwithstanding
anything herein to the contrary, unless otherwise determined by the Administrator or required by Applicable Laws, the Company shall
not deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares shall
be recorded on the books of the Company or, as applicable, its transfer agent or share plan administrator.
8.6
Paperless
Administration
. Subject to Applicable Laws, the Administrator may make Awards and provide applicable disclosure and procedures
for exercise of Awards by an internet website or interactive voice response system for the paperless administration of Awards.
8.7
Foreign
Currency
. A Participant may be required to provide evidence that any currency used to pay the exercise price of any Award was
acquired and taken out of the jurisdiction in which the Participant resides in accordance with Applicable Laws, including foreign
exchange control laws and regulations. In the event the exercise price for an Award is paid in Chinese Renminbi or other foreign
currency, as permitted by the Administrator, the amount payable will be determined by conversion from U.S. dollars at the official
rate promulgated by the People’s Bank of China for Chinese Renminbi, or for jurisdictions other than the People’s Republic
of China, the exchange rate as selected by the Administrator on the date of exercise.
Article
9
changes
in capital structure
9.1
Adjustments
.
In the event of any dividend, share split, combination or exchange of Shares, amalgamation, arrangement or consolidation, spin-off,
recapitalization or other distribution (other than normal cash dividends) of Company assets to its shareholders, or any other change
affecting the Shares or the share price of a Share, the Administrator shall make such proportionate adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and type of
shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1); (b) the
terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with
respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan.
9.2
Corporate
Transactions
. Except as may otherwise be provided in any Award Agreement or any other written agreement entered into by and
between the Company and a Participant, if the Administrator anticipates the occurrence, or upon the occurrence, of a Corporate
Transaction, the Administrator may, in its sole discretion, provide for (i) any and all Awards outstanding hereunder to terminate
at a specific time in the future and shall give each Participant the right to exercise the vested portion of such Awards during
a period of time as the Administrator shall determine, or (ii) the purchase of any Award for an amount of cash equal to the amount
that could have been attained upon the exercise of such Award (and, for the avoidance of doubt, if as of such date the Administrator
determines in good faith that no amount would have been attained upon the exercise of such Award, then such Award may be terminated
by the Company without payment), or (iii) the replacement of such Award with other rights or property selected by the Administrator
in its sole discretion or the assumption of or substitution of such Award by the successor or surviving corporation, or a Parent
or Subsidiary thereof, with appropriate adjustments as to the number and kind of Shares and prices, or (iv) payment of such Award
in cash based on the value of Shares on the date of the Corporate Transaction plus reasonable interest on the Award through the
date as determined by the Administrator when such Award would otherwise be vested or have been paid in accordance with its original
terms, if necessary to comply with Section 409A of the Code.
9.3
Outstanding
Awards – Other Changes
. In the event of any other change in the capitalization of the Company or corporate change other
than those specifically referred to in this Article 9, the Administrator may, in its absolute discretion, make such adjustments
in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share grant
or exercise price of each Award as the Administrator may consider appropriate to prevent dilution or enlargement of rights.
9.4
No
Other Rights
. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or
consolidation of Shares of any class, the payment of any dividend, any increase or decrease in the number of shares of any class
or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided
in the Plan or pursuant to action of the Administrator under the Plan, and no issuance by the Company of shares of any class, or
securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to,
the number of Shares subject to an Award or the grant or exercise price of any Award.
Article
10
ADMINISTRATION
10.1
Administrator
.
The Plan shall be administered by the Board or the chairman of the Board.
10.2
Authority
of the Administrator
. Subject to any specific designation in the Plan, the Administrator has the exclusive power, authority
and discretion to:
(a) designate
Participants to receive Awards;
(b) determine
the type or types of Awards to be granted to each Participant;
(c) determine
the number of Awards to be granted and the number of Shares to which an Award will relate;
(d) determine
the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price,
or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions
on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture
of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e) determine
whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be
paid in, cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) prescribe
the form of each Award Agreement, which need not be identical for each Participant;
(g) decide
all other matters that must be determined in connection with an Award;
(h) establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) interpret
the terms of, and any matter arising pursuant to, the Plan or any Award Agreement;
(j) amend
terms and conditions of Award Agreements; and
(k) make
all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable
to administer the Plan, including design and adopt from time to time new types of Awards that are in compliance with Applicable
Laws.
10.3
Decisions
Binding
. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement
and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
Article
11
EFFECTIVE AND EXPIRATION DATE
11.1
Effective
Date
. The Plan shall become effective as of the date on which the Board adopts the Plan (the “
Effective Date
”).
The Plan shall be ratified by the shareholders of the Company by written resolutions or at a meeting duly held in accordance with
the applicable provisions of the Company’s Memorandum of Association and Articles of Association within 12 months of the
Effective Date.
11.2
Expiration
Date
. The Plan will expire on, and no Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective
Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms
of the Plan and the applicable Award Agreement.
Article
12
AMENDMENT, MODIFICATION, AND TERMINATION
12.1
Amendment,
Modification, and Termination
. At any time and from time to time, the Board may terminate, amend or modify the Plan;
provided,
however
, that to the extent necessary and desirable to comply with Applicable Laws or stock exchange rules, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, unless the Company decides
to follow home country practice.
12.2
Awards
Previously Granted
. Except with respect to amendments made pursuant to Section 12.1, no termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written
consent of the Participant.
Article
13
GENERAL PROVISIONS
13.1
No
Rights to Awards
. No Participant, employee, or other person shall have any claim to be granted any Award pursuant to the Plan,
and neither the Company nor the Administrator is obligated to treat Participants, employees, and other persons uniformly.
13.2
No
Shareholders Rights
. No Award gives the Participant any of the rights of a shareholder of the Company unless and until Shares
are in fact issued to such person in connection with such Award.
13.3
Taxes
.
No Shares shall be delivered under the Plan to any Participant until such Participant has made arrangements acceptable to the Administrator
for the satisfaction of any income and employment tax withholding obligations under Applicable Laws. The Company or any Subsidiary
shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy all applicable taxes (including the Participant’s payroll tax obligations) required or permitted by Applicable
Laws to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Administrator
may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold
Shares otherwise issuable under an Award (or allow the return of Shares) having a Fair Market Value equal to the sums required
to be withheld. Notwithstanding any other provision of the Plan, the number of Shares which may be withheld with respect to the
issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award after such
Shares were acquired by the Participant from the Company) in order to satisfy any income and payroll tax liabilities applicable
to the Participant with respect to the issuance, vesting, exercise or payment of the Award shall, unless specifically approved
by the Administrator, be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase
equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for the applicable income and
payroll tax purposes that are applicable to such supplemental taxable income.
13.4
No
Right to Employment or Services
. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right
of the Service Recipient to terminate any Participant’s employment or services at any time, nor confer upon any Participant
any right to continue in the employment or services of any Service Recipient.
13.5
Unfunded
Status of Awards
. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the
Participant any rights that are greater than those of a general creditor of the relevant Group Entity.
13.6
Indemnification
.
To the extent allowable pursuant to the memorandum and articles of association of the Company and all Applicable Laws, the Administrator
and each member of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the
Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding
against him or her;
provided
he or she gives the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Memorandum
of Association and Articles of Association, as a matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
13.7
Relationship
to Other Benefits
. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any
pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the any Group Entity except to
the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
13.8
Expenses
.
The expenses of administering the Plan shall be borne by the Group Entities.
13.9
Titles
and Headings
. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall control.
13.10
Fractional
Shares
. No fractional Shares shall be issued and the Administrator shall determine, in its discretion, whether cash shall be
given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down as appropriate.
13.11
Limitations
Applicable to Section 16 Persons
. Notwithstanding anything herein to the contrary, the Plan, and any Award granted or awarded
to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act)
that are requirements for the application of such exemptive rule. To the extent permitted by the Applicable Laws, the Plan and
Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
13.12
Government
and Other Regulations
. The obligation of the Company to make payment of awards in Shares or otherwise shall be subject to all
Applicable Laws, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register
any of the Shares paid pursuant to the Plan under the Securities Act or any other similar law in any applicable jurisdiction. If
the Shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act or
other Applicable Laws, the Company may restrict the transfer of such Shares in such manner as it deems advisable to ensure the
availability of any such exemption.
13.13
Governing
Law
. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the Cayman Islands.
13.14
Section
409A
. To the extent that the Administrator determines that any Award granted under the Plan is or may become subject to Section
409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A
of the Code. To the extent applicable, the Plan and the Award Agreements shall be interpreted in accordance with Section 409A of
the Code and the U.S. Department of Treasury regulations and other interpretative guidance issued thereunder, including without
limitation any such regulation or other guidance that may be issued after the Effective Date. Notwithstanding any provision of
the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject
to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may
be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable Award agreement
or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other
actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or
preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of
Section 409A of the Code and related U.S. Department of Treasury guidance.
13.15
Appendices
.
Subject to Section 12.1, the Administrator may approve such supplements, amendments or appendices to the Plan as it may consider
necessary or appropriate for purposes of compliance with Applicable Laws or otherwise and such supplements, amendments or appendices
shall be considered a part of the Plan; provided, however, that no such supplements shall increase the share limitation contained
in Section 3.1 of the Plan without the approval of the Board.
Exhibit 10.10
Equity Transfer Agreement
June 6, 2018
Table of Contents
Article 1 Definition
|
4
|
|
|
Article 2 Overall Transaction Arrangement
|
5
|
|
|
Article 3 Allocation of Profit and Loss during Transition Period
|
6
|
|
|
Article 4 Closing Arrangement
|
6
|
|
|
Article 5 Representations and Warranties
|
7
|
|
|
Article 6 Confidentiality Obligation
|
10
|
|
|
Article 7 Liabilities for Breach
|
10
|
|
|
Article 8 Force Majeure
|
11
|
|
|
Article 9 Effectiveness of Agreement
|
12
|
|
|
Article 10 Governing Law and Dispute Resolution
|
12
|
|
|
Article 11 Severability of Provisions
|
12
|
|
|
Article 12 Miscellaneous
|
12
|
Equity Transfer Agreement
This Agreement is signed by and among the following parties
on June 6, 2018 in Hangzhou:
Party A
: Weidai Hong Kong Limited
Legal Representative: Hong YAO
Party B1
: Pengfei WANG
Party B2
: Desheng DING
Party B3
: Li DENG
(Party B1, Party B2 and Party B3 are collectively referred to
as “Party B”)
Party C
: Rymo Technology Industry Limited [Seal of Rymo
Technology Industry Limited]
Legal Representative: Desheng DING
WHEREAS:
|
1.
|
As of the date hereof, Party B is each a shareholder of Party C and collectively owns 100% of the latter’s equity, among
which:
|
Party B1 made a capital contribution of HKD 3.999
million, which accounts for 9.99% of the registered capital of the Target Company;
Party B2 made a capital contribution of HKD 35.991
million, which accounts for 89.98% of the registered capital of the Target Company;
Party B3 made a capital contribution of HKD 10,000,
which accounts for 0.03% of the registered capital of the Target Company.
|
2.
|
Party A intends to purchase 100% of the equity of Party C in cash.
|
Upon negotiation and in the principle of equality
and mutual benefit, the Parties have agreed as follows for them to jointly comply with in connection with Party A’s purchase
of 100% of the equity of Party C from Party B in cash:
Article 1 Definition
Unless otherwise agreed in the context, the following
terms used herein shall have the meaning ascribed to them below:
Party A, Company, Purchaser
|
refers to
|
Weidai Hong Kong Limited.
|
Transferor, Transaction Counterparty, Party B
|
refers to
|
Pengfei WANG, Desheng DING and/or Li DENG, based on specific terms of this Agreement and the context.
|
Target Company
|
refers to
|
Rymo Technology Industry Limited.
|
Target Asset
|
refers to
|
100% equity of the Target Company.
|
This Transaction, This Purchase
|
refers to
|
Party A’s purchase of 100% equity of the Target Company from the Transaction Counterparty in cash.
|
Execution Date of this Agreement
|
refers to
|
signature on the originals of this Agreement and affixation of company seal by the legal representatives or authorized representatives of Party A and Party C, and signature on the originals of this Agreement by Party B.
|
Effective Date of this Agreement
|
refers to
|
the date of satisfaction of all conditions for effectiveness of this Agreement as agreed.
|
Closing Date
|
refers to
|
the date of registration with the administration for industry and commerce for transfer of the Target Asset to Party A.
|
Transition Period
|
refers to
|
the period between the base date of evaluation and the Closing Date.
|
Tax
|
refers to
|
any and all taxes payable, including but not limited to any value added tax, income tax, business tax, stamp duty tax, deed tax or other applicable types of taxes collected, charged or apportioned, or fees charged by relevant government authorities.
|
Laws
|
refers to
|
laws, regulations and administrative rules or other regulatory documents with general legal binding effect which are currently existing and effective in China, including amendments, revisions, supplements, interpretations or re-enactments made thereto from time to time.
|
Day
|
refers to
|
a calendar day.
|
Business Day
|
refers to
|
any day when banks in China are open for business, except for statutory holidays.
|
Article 2 Overall Transaction Arrangement
2.1 Manner of this Transaction
Party A shall purchase 100% of the equity of the
Target Company held by Party B by way of cash.
|
2.2
|
Purchase Price of Target Asset
|
Upon negotiation, the Parties unanimously agree that
the purchase price for the 100% of the Target Company’s equity is HKD 1.
2.3 Method and Time of Payment
The Parties agree that Party A shall pay the total
purchase price of HKD 1 for the Target Asset hereunder in cash, and Party A shall pay [100%] of such equity transfer price in a
total of HKD [1] to Party B within [60] days upon completion of the registration with the administration for industry and commerce
for the equity transfer.
2.3.1 Distribution of Cash among Party B
The Parties agree that Party B shall obtain the following
cash consideration for this Transaction:
No.
|
Name of Party B
|
Shareholding
Percentage in the
Target Company (%)
|
Cash Consideration Obtained
|
1
|
Pengfei WANG
|
9.99
|
HKD 1
|
2
|
Desheng DING
|
89.98
|
3
|
Li DENG
|
0.03
|
In total
|
100
|
HKD 1
|
2.3.2 Party B1, Party B2 and Party B3 shall transfer
in aggregate 100% of the Target Company’s equity for a cash consideration of HKD 1, which is to be allocated among Party
B1, Party B2 and Party B3 through internal negotiation.
2.4 Employee Placement Program
The Target Asset for this Transaction is the equity
of the Target Company, which does not involve employee placement. The existing employees of the Target Company will maintain the
labor relationship with it and such relationship will not be changed, dismissed or terminated due to this Transaction.
Article 3 Allocation of Profit
and Loss during Transition Period
3.1 The Parties agree and acknowledge that the proceeds
accrued by the Target Asset during the Transition Period will be owned by Party A, and the losses incurred by the Target Asset
during the Transition Period will be borne by Party B in proportion to their shareholding percentages in the Target Company, and
Party B shall reimburse Party A against such losses in cash upon completion of this Purchase, and be jointly liable for such losses
among themselves. The profits and losses incurred by the Target Asset during the Transition Period will be subject to the amounts
shown on the special audit report issued by an audit firm with relevant securities and futures business qualifications.
Article 4 Closing Arrangement
4.1 Closing of Target Asset
Both Party A and Party B unanimously agree that Party
B shall complete the procedures for transfer of asset and change registration with the administration for industry and commerce
of the place where the Target Company is located within [10] Business Days of the Effective Date of this Agreement, and Party A
shall provide necessary assistance.
The independent legal person status of the Target
Company will not be changed due to this Transaction, and therefore, this Transaction does not involve credit and debt disposition
and employee placement of the Target Company and its subsidiary.
4.2 Rights Transfer and Risk Sharing of Target Asset
The Parties agree and acknowledge that the rights
to and risks of the Target Asset shall be transferred as of the Closing Date, and Party A shall become shareholder of the Target
Company as of the Closing Date, and enjoy full ownership to such equity and be liable for all risks and expenses of such asset
as of the Closing Date.
If the Target Company has any illegal business or
non-business conduct prior to the Closing Date, which causes the Target Company to be fined or penalized or otherwise punished
by the administration for industry and commerce, Tax, labor and social security, housing provident fund, environmental protection,
quality supervision, safety production and other competent authorities and departments, or requires the Target Company to make
up payment of certain amounts, Party B shall jointly compensate all such economic losses in cash to Party A or the Target Company.
In the event that Party B fails to disclose to Party
A any contingency matters it has become aware of prior to the Closing Date, or makes any untrue, inaccurate or untimely representations
and warranties to Party A, which causes property losses to the Target Company, Party B shall jointly compensate all such economic
losses in cash to the Purchaser or the Target Company.
4.3 Post-Closing Shareholding Structure and Organizational
Structure of Target Company
4.3.1 Upon completion of the Transaction, the actual
shareholding structure of the Target Company will be as follows:
Serial No.
|
Shareholder Name
|
Shareholding Percentage (%)
|
1
|
MicroCredit Hong Kong Limited
|
100%
|
4.3.2 Upon completion of the Transaction, the organizational
structure of the Target Company may be adjusted subject to actual needs, including appointment of a general manager by Party A,
and the senior management personnel may also be adjusted based on actual needs.
Article 5 Representations
and Warranties
The Parties have made the following representations
and warranties as of the Execution Date of this Agreement:
5.1 Validly Existing
Party A is a limited liability company duly incorporated
and validly existing and has the status as an independent legal person enterprise under the PRC Laws.
5.2 Approval and Authorization
Party A has duly obtained all approvals, consents,
authorizations and permits required for the execution and full performance of this Agreement which can be obtained as of the date
hereof, and warrants to have legal power and rights to execute and fully perform this Agreement.
5.3 All members of Party B are natural person or
legal person with full civil capacity and have rights to execute this Agreement according to the Laws.
5.4 The Target Company has been operating legally
in recent three years, and has no material violation of any Laws or regulations and has not been subject to any material administrative
penalties in terms of industry and commerce, Tax, labor protection, provident fund, safety production, environmental protection,
quality supervision and so on. As of the date hereof, the Target Company is not involved in any material litigation, arbitration
or any dispute or controversy that might lead to a material litigation or arbitration.
Upon and after the Closing Date of the Target Asset,
if the Target Company is required by the social insurance or housing provident fund department or other administrative agencies
to make up payment of any social insurance fees and housing provident funds incurred prior to the Closing Date; or the Target Company
is required to pay late payment penalties and imposed administrative punishment for insufficient payment of any social insurance
fees and housing provident funds incurred prior to the Closing Date; or the Target Company suffers any losses due to recovery against
it of any unpaid social insurance fees and housing provident funds by the employees in any way, Party B shall assume such social
insurance fees and housing provident funds to be made up and relevant late payment penalties, fines and other losses on behalf
of the Target Company without recovery against it to prevent the Target Company from such losses.
5.5 The core technology of the Target Company has
a legal source, and has not infringed upon patents and proprietary technologies of others. The key technical personnel of the Target
Company have not violated the non-competition covenants with their former employers while joining the Target Company. As of the
date hereof, the Target Company has no dispute, controversy or potential dispute with others due to the ownership or related issues
of its production technology or research and development results. Upon completion of this Transaction, the core technology which
the Target Company relies upon to maintain business will continue to be owned by the Target Company without any dispute or obstacle.
Upon and after the Closing Date of the Target Assets, if the Target Company has dispute or controversy with others due to ownership
of its existing production technology which causes the Target Company to assume relevant liabilities and thus suffers losses, Party
B shall assume such economic liabilities on behalf of the Target Company without recovery against it to prevent the Target Company
from such losses.
5.6 The current personnel structure and core technology
of the Target Company are sufficient to maintain its qualifications during the valid terms of such qualifications.
5.7 Except for the loans and securities already disclosed,
the Target Company has no any other forms of loans or securities.
5.8 Non-Conflict
The execution and performance of this Agreement neither
violate the provisions of articles of association or other organizational rules of each Party, nor contradict with such provisions
or rules or any other agreements or arrangements entered into by any Party or any representations, statements, commitments or warranties
made by any Party, and does not violate the provisions of any Laws, regulations or regulatory documents.
5.9 Authenticity of Representations and Warranties
Party A warrants that all representations and warranties
it made hereunder are true, accurate and complete.
Party B warrants that as of the Closing Date, all
documents it has delivered to Party A pursuant to this Agreement and all of its representations, statements and warranties hereunder
and thereunder are true, accurate and complete.
Party B warrants that from the base date of evaluation
to the Closing Date, the Target Company does not have any new abnormal funds transfer by any shareholder and its affiliates such
as funds embezzlement, and will make clear and feasible settlement and repayment plans for relevant circumstances arising prior
to the base date of evaluation, and such plans shall be approved by competent agency of Party A in writing.
5.10 No Defects in Rights
Party B respectively warrants that it has full ownership
and disposal rights to the shares of the Target Company to be transferred, and such shares are not attached with any trust, entrusted
holding arrangement or any other similar arrangements, are not pledged or subject to other security arrangements, are not under
the circumstances of being frozen, being sealed up or any other compulsory preservation, are not prohibited from transfer, restricted
from transfer or under any other contracts, commitments or arrangements with rights restrictions, and are not subject to any known
pending or potential litigations, arbitrations or other administrative or judicial proceedings which might cause such shares to
be sealed, frozen, expropriated or restricted from transfer by the judicial or administrative organs, and may be legally transferred
to Party A in accordance with the PRC Laws.
5.11 Continuous Operation
From the date hereof to the Closing Date, unless
otherwise stipulated herein or agreed by Party A in writing, Party B warrants that:
5.11.1 it will not use the Target Asset to provide
security for others or otherwise encumber it;
5.11.2 unless otherwise agreed by Party A and Party
B, it will not approve any resolution to distribute profits from the Target Asset or any resolution on disposal of material assets;
5.11.3 without consent of Party A, it will not transfer
shares it holds in the Target Company to any third party other than Party A;
5.11.4 without consent of Party A, it will not bring
in an investor other than Party A through capital increase or other means;
5.11.5 it will operate the Target Company in the
ordinary way, maintain the Target Company in good working conditions, keep the existing structure and senior management personnel
of the Target Company, and continue to maintain relationship with customers, to ensure that operation of the Target Company will
not be subject to adverse material impact after the Closing;
5.11.6 it will not conduct any abnormal transaction
outside of the scope of ordinary business activities or incur any abnormal debt;
5.11.7 it will timely perform the contracts, agreements
or other documents related to the Target Company (unless otherwise stipulated herein);
5.11.8 it will keep its books and records based on
customary practices;
5.11.9 it will comply with the Laws and regulations
applicable to its properties, assets or business;
5.11.10 it will timely notify Party A in writing
of any event, fact, condition, change or other circumstances that cause or may cause material adverse change to the Target Asset
or that is adverse to completion of the Closing; and
5.11.11 it will exercise its shareholder’s
rights according to the Laws and procure the Target Company to comply with all requirements related to the above warranties.
5.12 The Target Company will keep its basic management
team and business mode unchanged upon completion of this Transaction.
Article 6 Confidentiality
Obligation
6.1 All Parties hereto shall keep the information
related to this Transaction confidential (including but not limited to information about the progress of this Transaction and any
and all documents, information and materials provided, disclosed, made by each Party hereto to other Parties hereto in written
or oral form to procure the completion of this Transaction), and each Party shall procure its employees and intermediary agencies
it has hired for this Transaction and its project members to keep such information confidential, and shall not make insider trading
by using information related to this Transaction.
6.2 Party A will not be deemed to have violated the
confidentiality obligation hereunder if it discloses certain information as required by the Laws, regulations and the regulatory
agencies.
6.3 Each Party shall continue to have the confidentiality
obligation hereunder notwithstanding the effectiveness, termination or rescission of this Agreement until the confidential information
enters the public domain pursuant to requirements of Laws and regulations or provisions of this Agreement.
Article 7 Liabilities for
Breach
7.1 Upon execution of this Agreement, any Party failing
to perform in whole or in part obligations hereunder or making warranties inconsistent with the facts hereunder shall constitute
a breach of this Agreement unless such failure or inconsistency is caused by a force majeure event.
7.2 The breaching Party shall continue to perform
its obligations, take remedy measures based on the requirements of the non-breaching Party or make full and sufficient compensation
to the non-breaching Party, provided that the compensation shall not be more than the amount of losses that the breaching Party
anticipates or should have anticipated for breach of Agreement at the time of execution of this Agreement. In the event that the
relevant breach constitutes a material breach and causes the purpose of this Agreement unable to be fulfilled, the non-breaching
Party has the right to terminate this Agreement through written notice to the breaching Party and make compensation claims pursuant
to this Agreement. The amount of compensation made by the breaching Party shall be limited to the amount of losses suffered by
the non-breaching Party, including direct losses suffered by the non-breaching Party and its attorney’s fees, investigation
fees and other relevant expenses incurred in connection with the claims.
7.3 If any material adverse change which will affect
the continuous, legal and ordinary operation of the Target Company, or any adverse condition which might result in major adjustments
to the evaluation value of the Target Asset, occurs to the Target Company prior to the Closing Date, Party A may terminate this
Transaction unilaterally. The termination of Agreement will not lead to extinguishment of breach liabilities to be borne by the
beaching Party in accordance with Article 8.2.
7.4 If either Party violates the provisions of this
Agreement, the non-breaching Party shall notify the breaching Party in writing to correct its act or take remedy measures, and
give the breaching Party a grace period of 15 Business Days. If the breaching Party still fails to properly perform this Agreement
or fails to make remedies in a way satisfactory to the non-breaching Party upon expiry of the grace period, the non-breaching Party
may terminate this Agreement unilaterally, and this Agreement shall terminate as of the date of notice by the non-breaching Party
to the breaching Party. The termination of this Agreement will not lead to extinguishment of breach liabilities to be borne by
the beaching Party in accordance with Article 8.2
Article 8 Force Majeure
8.1 A force majeure event mentioned herein refers
to any event that is out of the reasonable control, cannot be predicted, or cannot be avoided or overcome even if it is predictable
by the Party affected, and that occurs after the date hereof, causing the performance of this Agreement in whole or in party by
such Party affected impossible or impractical from objective circumstances, including but limited to flood, fire, drought, typhoon,
earthquake, other natural disaster, traffic accident, epidemic diseases, strike, turmoil, riot, war and acts and omissions of government
departments.
8.2 If any Party is unable to perform this Agreement
in whole or in part due to a force majeure event, it shall immediately notify other Parties hereto in writing of such circumstance,
and provide details on such force majeure event and effective certificates for reasons for failure or delay of performance of this
Agreement in whole or in part within 7 Business Days as of its occurrence.
8.3 If any Party is unable to perform this Agreement
in whole or in part due to a force majeure event, it shall not be deemed as breaching this Agreement, and the performance of such
obligations will be suspended during the period of obstruction of performance by the force majeure. Upon termination or elimination
of the force majeure event and its impact, such Party shall immediately resume performance of its obligations hereunder. If the
force majeure event and its impact lasts for thirty days or longer and causes any Party hereto to lose its capacity to continue
performance of this Agreement, either Party has right to terminate this Agreement.
8.4 Where national policies or Laws, regulations
and regulatory documents have changed in material aspects after the execution of this Agreement which directly affect the performance
of this Agreement or cause this Agreement unable to be performed as agreed, and neither Party has fault, each Party will not be
liable for such non-performance after occurrence of such changes, and the Parties shall negotiate whether to terminate this Agreement
or extend performance of this Agreement based on their extent of impact on the performance of this Agreement.
Article 9 Effectiveness of
Agreement
This Agreement shall be formed as of the date of
signature and affixation of seal by each Party, and take effect as of the date of approval by the shareholders’ meeting of
Party A.
Article 10 Governing Law and
Dispute Resolution
This Agreement shall be governed by and interpreted
according to the PRC Laws.
All disputes arising out of this Agreement shall
first be solved through negotiation, failing which either Party may submit the dispute to the people’s court with jurisdiction
of the place where this Agreement is signed for settlement.
During the period of dispute settlement, the remaining
provisions of this Agreement other than the provisions related to the dispute shall continue to be valid or performed.
Article 11 Severability of
Provisions
Where any one or more provisions of this Agreement
become null, void, terminated, illegal or unenforceable in any aspect under any applicable Law, the validity, legality and enforceability
of other provisions hereof will not be affected.
Article 12 Miscellaneous
The legal documents, other than this Agreement, signed
by the Parties for the purpose of registration of change with the administration for industry and commerce shall be solely used
for such change registration, and the actual rights and obligations of each Party shall be subject to those set forth herein.
Expenses incurred in connection with this Transaction,
including but not limited to the intermediary service fees and various taxes, shall be borne by each Party respectively according
to the Laws. Unless otherwise agreed, the statutory Taxes incurred due to the execution and performance of this Agreement shall
be borne by each Party respectively according to relevant Laws, and there shall not be any obligation of payment, deduction or
withholding on behalf of another Party among the Parties.
Any amendment, change or supplement to this Agreement
shall be made by a written agreement signed by all Parties, which shall form part of this Agreement and have the same legal force
and effect with this Agreement.
This Agreement shall supersede any oral or written
statement, warranty, understanding, letter of intent, memo of understanding and framework agreement made by any Party hereto separately
with the other Party hereto or made by the Parties jointly before the execution of this Agreement with respect to the subject matter
hereof.
This Agreement is made in six originals, with each
Party holding one original, and the remaining original(s) will be used for filing or registration or information disclosure or
other legal procedures, and each original has the same legal force and effect.
(End of Text)
Signature Page
Party A (Seal): Weidai Hong Kong Limited
Legal Representative (Signature):
/s/ Hong Yao
Party B1 (Signature):
/s/ Pengfei Wang
Party B2 (Signature):
/s/ Desheng Ding
Party B3 (Signature):
/s/ Li Deng
Party C (Seal): Rymo Technology Industry Limited
Legal Representative (Signature):
/s/ Desheng Ding
Date: June 6, 2018
Exhibit 21.1
List of Subsidiaries of the Registrant
Name
|
|
Subsidiaries
|
|
Place of Incorporation
|
|
|
|
|
|
Weidai HK Limited
|
|
100%
|
|
Hong Kong
|
|
|
|
|
|
Weidai Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Weidai (Hangzhou) Financial Information Service Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Qianwei (Hangzhou) Technology Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Ruituo (Hangzhou) Internet Financial Information Services Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Yiwu Weirui Internet Technology Co., Ltd. Hangzhou Yiqitou Investment advisory Co.,Ltd
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Liangche (Hangzhou) Internet Technology Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Hangzhou Jingwei Assets Management Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Fuzhou Weidai Online Microcredit Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Khorgos Micro-car Auction Information Technology Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Khorgos Micron Internet Technology Co., Ltd.
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Khorgos Weiyi Internet Technology Co.,
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Rymo Technology Industry Limited
|
|
100%
|
|
People’s Republic of China
|
|
|
|
|
|
Hangzhou Jiujiu Financial Information Services Limited
|
|
70%
|
|
People’s Republic of China
|
Exhibit 23.1
Consent of Independent Registered Public
Accounting Firm
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated May 25, 2018, except for Note 22, as to which the date is August 10, 2018, in the Registration
Statement (Form F-1) and related Prospectus of Weidai Ltd. dated August 10, 2018.
/s/ Ernst & Young Hua Ming LLP
Guangzhou, People’s Republic of China
August 10, 2018
Exhibit 99.1
Code
of Business Conduct and Ethics
OF
WEIDAI LTD.
(Adopted by the Board of Directors of Weidai Ltd. on ___________, 2018, effective upon the effectiveness of its registration
statement on Form F-1 relating to its initial public offering)
Weidai Ltd. and its subsidiaries and affiliates
(collectively, the “
Company
”) is committed to conduct its business in accordance with applicable laws, rules
and regulations and the highest standards of business ethics. This Code of Business Conduct and Ethics (the “
Code
”)
contains general guidelines for conducting the business of the Company. To the extent this Code requires a higher standard than
required by commercial practice or applicable laws, rules or regulations, the Company adheres to these higher standards.
This Code is designed to deter wrongdoing
and to promote:
(i)
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal
and professional relationships;
(ii)
full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits
to, the U.S. Securities and Exchange Commission (the “
SEC
”) and in other public communications made by the Company;
(iii)
compliance with applicable governmental laws, rules and regulations;
(iv)
prompt internal reporting of violations of the Code; and
(v)
accountability for adherence to the Code.
This Code applies to all directors, officers,
employees and advisors of the Company, whether they work for the Company on a full-time, part-time, consultative, or temporary
basis (each an “
employee
” and collectively, the “
employees
”).
The Board of Directors of the Company (the
“
Board
”) has appointed the Legal Department as the compliance officer (the “
Compliance Officer
”)
for the Company. If you have any questions regarding the Code or would like to report any violation of the Code, please call Li
Zhao at 0571-56927450 or send e-mail to zhaoli1@wdai.com. Any questions or violations of the Code involving an executive officer,
which include the Chief Executive Officer, Chief Financial Officer and Vice Presidents and any other persons who perform similar
functions for the Company (each an “
executive officer
”), shall be directed or reported to any of our independent
directors on the Board or the members of the appropriate committee of the Board, and any such questions or violations will be reviewed
directly by the Board or the appropriate committee of the Board.
|
III.
|
Conflicts of Interest
|
A.
Identifying Conflicts of Interest
A conflict of interest occurs when an employee’s
private interest interferes, or appears to interfere, in any way with the interests of the Company as a whole. An employee should
actively avoid any private interest that may impact such employee’s ability to act in the interests of the Company or that
may make it difficult to perform the employee’s work objectively and effectively. In general, the following are considered
conflicts of interest:
1.
Competing Business
. No employee may be employed by a business that competes with the Company or deprives it of any
business.
2.
Corporate Opportunity
. No employee may use corporate property, information or his or her position with the Company
to secure a business opportunity that would otherwise be available to the Company. If an employee discovers a business opportunity
that is in the Company’s line of business, through the use of the Company’s property, information or position, the
employee must first present the business opportunity to the Company before pursuing the opportunity in his/her individual capacity.
3.
Financial Interests
.
(i)
No employee may have any financial interest (ownership or otherwise), either directly or indirectly through a spouse or
other family member, in any other business entity if such financial interest adversely affects the employee’s performance
of duties or responsibilities to the Company, or requires the employee to devote certain time during such employee’s working
hours at the Company;
(ii)
no employee may hold any ownership interest in a privately-held company that is in competition with the Company;
(iii)
an employee may hold up to but no more than 1.0 ownership interest in a publicly traded company that is in competition with
the Company; and
(iv)
no employee may hold any ownership interest in a company that has a material business relationship with the Company.
If an employee’s ownership interest
in a business entity described in clause (iii) above increases to more than 1.0%, the employee must immediately report such ownership
to
Compliance Officer
.
4.
Loans or Other Financial Transactions
. No employee may obtain loans or guarantees of personal obligations from, or
enter into any other personal financial transaction with, any company that is a material customer, supplier or competitor of the
Company. This guideline does not prohibit arms-length transactions with recognized banks or other financial institutions.
5.
Service on Boards and Committees
. No employee may serve on a board of directors or trustees or on a committee of
any entity (whether profit or not-for-profit) whose interests could reasonably be expected to conflict with those of the Company.
Employees must obtain prior approval from the Board before accepting any such board or committee position. The Company may revisit
its approval of any such position at any time to determine whether an employee’s service in such position is still appropriate.
It is difficult to list all of the ways
in which a conflict of interest may arise, and we have provided only a few, limited examples. If you are faced with a difficult
business decision that is not addressed above, ask yourself the following questions:
|
·
|
Is the action to be taken legal?
|
|
·
|
Is it in the best interests of the Company?
|
B.
Disclosure of Conflicts of Interest
The Company requires that employees fully
disclose any situations that could reasonably be expected to give rise to a conflict of interest. If an employee suspect that he/she
has a conflict of interest, or a situation that others could reasonably perceive as a conflict of interest, the employee must report
it immediately to
Compliance Officer
. Conflicts of interest may only be waived by the Board, or the appropriate committee
of the Board, and will be promptly disclosed to the public to the extent required by law.
C.
Family Members and Work
The actions of family members outside the
workplace may also give rise to conflicts of interest because they may influence an employee’s objectivity in making decisions
on behalf of the Company. If a member of an employee’s family is interested in doing business with the Company, the criteria
as to whether to enter into or continue the business relationship, and the terms and conditions of the relationship, must be no
less favorable to the Company compared with those that would apply to a non-relative seeking to do business with the Company under
similar circumstances.
Employees are required to report any situation
involving family members that could reasonably be expected to give rise to a conflict of interest to their supervisor or the Compliance
Officer. For purposes of this Code, “family members” or “members of employee’s family” include an
employee’s spouse, parents, children and siblings, whether by blood, marriage or adoption or anyone residing in such employee’s
home.
|
IV.
|
Gifts and Entertainment
|
A.
Generally
The giving and receiving of gifts is common
business practice. Appropriate business gifts and entertainment are welcome courtesies designed to build relationships and understanding
among business partners. However, gifts and entertainment should never compromise, or appear to compromise, an employee’s
ability to make objective and fair business decisions.
It is the responsibility of employees to
use good judgment in this area. As a general rule, employees may give or receive gifts or entertainment to or from customers or
suppliers only if the gift or entertainment could not be viewed as an inducement to any particular business decision. All gifts
and entertainment expenses made on behalf of the Company must be properly accounted for on expense reports, and all gift and entertainment
expenses exceeding RMB200 made on behalf of the Company must be approved by the head of the relevant department of the Company.
Employees may only accept appropriate gifts.
We encourage employees to submit gifts received to the Company. While it is not mandatory to submit small gifts, gifts of over
RMB200 must be submitted immediately to the administration department of the Company.
The Company’s business conduct is
founded on the principle of “fair transaction.” Therefore, no employee may give or receive kickbacks, bribe others,
or secretly give or receive commissions or any other personal benefits.
B.
United States Foreign Corrupt Practices Act Compliance
The United States Foreign Corrupt Practices
Act (“
FCPA
”) prohibits giving anything of value, directly or indirectly, to officials of foreign governments
or foreign political candidates in order to obtain or retain business. A violation of FCPA not only violates the Company’s
policy but is also a civil or criminal offense under FCPA which the Company is subject to after the Code becomes effective. No
employee shall give or authorize directly or indirectly any illegal payments to government officials of any country. While the
FCPA does, in certain limited circumstances, allow nominal “facilitating payments” to be made, any such payment must
be discussed with and approved by your supervisor in advance before it can be made.
C.
Political Contributions
Except as approved in advance by the Chief
Executive Officer or Chief Financial Officer of the Company, the Company prohibits political contributions (directly or through
trade associations) by any employee on behalf of the Company. Prohibited political contribution activities include:
(i)
any contributions of Company funds or other assets for political purposes;
(ii)
encouraging individual employees to make any such contribution; and
(iii)
reimbursing an employee for any political contribution.
The Company strives to compete and to succeed
through superior performance and products and without the use of unethical or illegal practices. Accordingly, the Company’s
employees should respect the rights of, and should deal fairly with, the Company’s customers, suppliers, competitors and
employees and should not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information or
any material misrepresentation. For example, an individual should not:
(i)
give or receive kickbacks, bribe others, or secretly give or receive commissions or any other personal benefits;
(ii)
spread rumors about competitors, customers or suppliers that the individual knows to be false;
(iii)
intentionally misrepresent the nature of quality of the Company’s products; or
(iv)
otherwise seek to advance the Company’s interests by taking unfair advantage of anyone through unfair dealing practices,
including engaging in unfair practices through a third party.
|
VI.
|
Protection and Use of Company Assets
|
Employees should protect the Company’s
assets and ensure their efficient use for legitimate business purposes only. Theft, carelessness and waste have a direct impact
on the Company’s profitability. The use of the funds or assets of the Company, whether for personal gain or not, for any
unlawful or improper purpose is strictly prohibited.
To ensure the protection and proper use
of the Company’s assets, each employee should:
(i)
exercise reasonable care to prevent theft, damage or misuse of Company property;
(ii)
promptly report the actual or suspected theft, damage or misuse of Company property;
(iii)
safeguard all electronic programs, data, communications and written materials from inadvertent access by others; and
(iv)
use Company property only for legitimate business purposes.
|
VII.
|
Intellectual Property and Confidentiality
|
Employees shall abide by the Company’s
rules and policies in protecting the intellectual property and confidential information, including the following:
1.
All inventions, creative works, computer software, and technical or trade secrets developed by an employee in the course
of performing the employee’s duties or primarily through the use of the Company’s materials and technical resources
while working at the Company, shall be the property of the Company.
2.
Employees shall maintain the confidentiality of information entrusted to them by the Company or entities with which the
Company has business relations, except when disclosure is authorized or legally mandated. Confidential information includes all
non-public information that might be of use to competitors, or harmful to the company or its business associates, if disclosed.
3.
The Company maintains a strict confidentiality policy. During an employee’s term of employment with the Company, the
employee shall comply with any and all written or unwritten rules and policies concerning confidentiality and shall fulfill the
duties and responsibilities concerning confidentiality applicable to the employee.
4.
In addition to fulfilling the responsibilities associated with his/her position in the Company, an employee shall not, without
obtaining prior approval from the Company, disclose, announce or publish trade secrets or other confidential business information
of the Company, nor shall an employee use such confidential information outside the course of his/her duties to the Company.
5.
Even outside the work environment, an employee must maintain vigilance and refrain from disclosing important information
regarding the Company or its business, customers or employees.
6.
An employee’s duty of confidentiality with respect to the confidential information of the Company survives the termination
of such employee’s employment with the Company for any reason until such time as the Company discloses such information publicly
or the information otherwise becomes available in the public sphere through no fault of the employee.
7.
Upon termination of employment, or at such time as the Company requests, an employee must return to the Company all of its
property without exception, including all forms of medium containing confidential information, and may not retain duplicate materials.
|
VIII.
|
Accuracy of Financial Reports and Other Public Communications
|
Upon the completion of the IPO, the Company
will become a public company which is required to report its financial results and other material information about its business
to the public and the SEC. It is the Company’s policy to promptly disclose accurate and complete information regarding its
business, financial condition and results of operations. Employees must strictly comply with all applicable standards, laws, regulations
and policies for accounting and financial reporting of transactions, estimates and forecasts. Inaccurate, incomplete or untimely
reporting will not be tolerated and can severely damage the Company and result in legal liability.
Employees should be on guard for, and promptly
report, any possibility of inaccurate or incomplete financial reporting. Particular attention should be paid to:
(i)
financial results that seem inconsistent with the performance of the underlying business;
(ii)
transactions that do not seem to have an obvious business purpose; and
(iii)
requests to circumvent ordinary review and approval procedures.
The Company’s senior financial officers
and other employees working in the finance and accounting department have a special responsibility to ensure that all of the Company’s
financial disclosures are full, fair, accurate, timely and understandable. These individuals are required to report any practice
or situation that might undermine this objective to Compliance Officer.
Employees are prohibited from directly or
indirectly taking any action to coerce, manipulate, mislead or fraudulently influence the Company’s independent auditors
for the purpose of rendering the financial statements of the Company materially misleading. Prohibited actions include but are
not limited to those actions taken to coerce, manipulate, mislead or fraudulently influence an auditor:
(i)
to issue or reissue a report on the Company’s financial statements that is not warranted in the circumstances (due
to material violations of U.S. GAAP, generally accepted auditing standards or other professional or regulatory standards);
(ii)
not to perform audit, review or other procedures required by generally accepted auditing standards or other professional
standards;
(iii)
not to withdraw an issued report; or
(iv)
not to communicate matters to the Company’s audit committee of the Board.
Employees with information relating to questionable
accounting or auditing matters may also confidentially, and anonymously if they desire, submit the information in writing to the
Company’s audit committee of the Board.
Accurate and reliable records are crucial
to the Company’s business and form the basis of its earnings statements, financial reports and other disclosures to the public.
The Company’s records are the source of essential data that guides business decision-making and strategic planning. Company
records include, but are not limited to, booking information, payroll, timecards, travel and expense reports, e-mails, accounting
and financial data, measurement and performance records, electronic data files and all other records maintained in the ordinary
course of our business.
All Company records must be complete, accurate
and reliable in all material respects. There is never an acceptable reason to make false or misleading entries. Undisclosed or
unrecorded funds, payments or receipts are strictly prohibited. An employee is are responsible for understanding and complying
with the Company’s record keeping policy. An employee should contact Compliance Officer if you have any questions regarding
the record keeping policy.
|
X.
|
Compliance with Laws and Regulations
|
Each employee has an obligation to comply
with the laws of the cities, provinces, regions and countries in which the Company operates. This includes, without limitation,
laws covering commercial bribery and kickbacks, copyrights, trademarks and trade secrets, information privacy, insider trading,
offering or receiving gratuities, employment harassment, environmental protection, occupational health and safety, false or misleading
financial information, misuse of corporate assets or foreign currency exchange activities. Employees are expected to understand
and comply with all laws, rules and regulations that apply to your position at the Company. If any doubt exists about whether a
course of action is lawful, you should seek advice immediately from Compliance Officer.
Employees are prohibited from trading securities
while in possession of material nonpublic information, whether of the Company or other companies, and must comply with insider
trading and any applicable securities law and the Company’s Statement of Policies Governing Material, Non-Public Information
and the Prevention of Insider Trading regarding securities transactions and handling of confidential information. Insider trading
is both unethical and illegal and will be firmly dealt with by the Company. Prohibition on insider trading applies to members of
the employees’ family and anyone else sharing the home of the employees. Therefore, employees must use discretion when discussing
work with friends or family members, as well as with other employees.
|
XI.
|
Workplace Environment
|
A.
Discrimination and Harassment
The Company is firmly committed to providing
equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment based on race, ethnicity,
religion, gender, age, national origin or any other protected class. For further information, you should consult Compliance Officer.
B.
Health and Safety
The Company strives to provide employees
with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for other
employees by following environmental, safety and health rules and practices and reporting accidents, injuries and unsafe equipment,
practices or conditions. Violence and threatening behavior are not permitted.
Each employee is expected to perform his
or her duty to the Company in a safe manner, free of the influences of alcohol, illegal drugs or other controlled substances. The
use of illegal drugs or other controlled substances in the workplace is prohibited.
|
XII.
|
Violations of the Code; Protection Against Retaliation
|
All employees have a duty to report any
known or suspected violation of this Code, including any violation of laws, rules, regulations or policies that apply to the Company.
Reporting a known or suspected violation of this Code by others will not be considered an act of disloyalty, but an action to safeguard
the reputation and integrity of the Company and its employees.
If an employee knows of or suspect a violation
of this Code, it is such employee’s responsibility to immediately report the violation to Compliance Officer, who will work
with the employee to investigate his/her concern. Any suspected violation of this Code involving an executive officer shall be
directed or reported to any of our independent directors on the Board or to the appropriate committee of the Board. All questions
and reports of known or suspected violations of this Code will be treated with sensitivity and discretion. Compliance Officer,
the Board or the appropriate committee of the Board and the Company will protect the employee’s confidentiality to the extent
possible, consistent with the law and the Company’s need to investigate such employee’s concern.
It is the Company’s policy that any
employee who violates this Code will be subject to appropriate discipline, including termination of employment, based upon the
facts and circumstances of each particular situation. An employee’s, if it does not comply with the law or with this Code,
can result in serious consequences for both the employee and the Company.
The Company strictly prohibits retaliation
against an employee who, in good faith, seeks help or reports known or suspected violations. An employee inflicting reprisal or
retaliation against another employee for reporting a known or suspected violation will be subject to disciplinary action up to
and including termination of employment.
|
XIII.
|
Waivers of the Code
|
Waivers of this Code will be granted on
a case-by-case basis and only in extraordinary circumstances. Waivers of this Code may be made only by the Board, or the appropriate
committee of the Board, and will be promptly disclosed to the public.
This Code contains general guidelines for
conducting the business of the Company consistent with the highest standards of business ethics. If employees have any questions
about these guidelines, they should contact Compliance Officer. The Company expects all employees to adhere to these standards.
Each employee is separately responsible for his/her actions. Conduct that violates the law or this Code cannot be justified by
claiming that it was ordered by a supervisor or someone in higher management positions. If an employee engages in conduct prohibited
by the law or this Code, such employee will be deemed to have acted outside the scope of his/her employment. Such conduct will
subject the employee to disciplinary action, including termination of employment.
* * * * * * * * * * * * *
Exhibit 99.2
北京
|
上海
|
深圳
|
杭州
|
广州
|
昆明
|
天津
|
成都
|
宁波
|
福州
|
西安
|
南京
|
南宁
|
济南
|
香港
|
巴黎
|
马德里
|
硅谷
|
BEIJING
|
SHANGHAI
|
SHENZHEN
|
HANGZHOU
|
GUANGZHOU
|
KUNMING
|
TIANJIN
|
CHENGDU
|
NINGBO
|
FUZHOU
|
XI’AN
|
NANJING
|
NANNING
|
JINAN
|
HONG KONG
|
PARIS
|
MADRID
|
SILICON
VALLEY
|
中国上海市北京西路
968
号嘉地中心
23-25
层
邮编:
200041
23-25/F, Garden
Square, 968 West Beijing Road, Shanghai 200041, China
电话
/Tel:
+86 21 52341668
传真
/Fax: +86 21 52341670
网址
/Website:http://www.grandall.com.cn
August 10, 2018
Weidai Ltd.
50/F, West Building, Fortune Finance Center
No. 33 Jiefang East Road
Jianggan District, Hangzhou
Zhejiang Province
People’s Republic of China
Dear Sir or Madam,
We are qualified lawyers of the People’s
Republic of China (the “
PRC
” or “
China
”, for the purpose of this opinion only, the PRC shall
not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan) and as such are qualified
to issue this opinion on the laws and regulations of the PRC effective as of the date hereof.
We act as the PRC counsel to Weidai Ltd.
(the “
Company
”), a company incorporated under the laws of the Cayman Islands, in connection with (i) the proposed
initial public offering (the “
Offering
”) of certain number of American depositary shares (“
Offered
ADSs
”), each Offered ADS representing certain number of ordinary shares of the Company (the “
Ordinary Shares
”),
by the Company as set forth in the Company’s registration statement on Form F-1, including all amendments or supplements
thereto (the “
Registration Statement
”), filed by the Company with the Securities and Exchange Commission under
the U.S. Securities Act of 1933 (as amended) in relation to the Offering, and (ii) the Company’s proposed listing of the
Offered ADSs on the New York Stock Exchange.
|
A.
|
Documents and Assumptions
|
In rendering this opinion, we have examined
originals or copies of the due diligence documents provided to us by the Company and the PRC Companies and such other documents,
corporate records and certificates issued by the governmental authorities in the PRC (collectively the “
Documents
”).
In rendering this opinion, we have assumed
without independent investigation that (the “
Assumptions
”):
|
(i)
|
All signatures, seals and chops are genuine, each signature on behalf of a party thereto is that
of a person duly authorized by such party to execute the same, all Documents submitted to us as originals are authentic, and all
Documents submitted to us as certified or photostatic copies conform to the originals;
|
|
(ii)
|
Each of the parties to the Documents, other than the PRC Companies, (i) if a legal person or other entity, is duly organized
and is validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation; or (ii) if an
individual, has full capacity for civil conduct; each of them, other than the PRC Companies, has full power and authority to execute,
deliver and perform its obligations under the Documents to which it is a party in accordance with the laws of its jurisdiction
of organization or incorporation or the laws that it/she/he is subject to;
|
|
(iii)
|
The Documents that were presented to us remain in full force and effect on the date of this opinion and have not been revoked,
amended or supplemented, and no amendments, revisions, supplements, modifications or other changes have been made, and no revocation
or termination has occurred, with respect to any of the Documents after they were submitted to us for the purposes of this legal
opinion;
|
|
(iv)
|
The laws of jurisdictions other than the PRC which may be applicable to the execution, delivery, performance or enforcement
of the Documents are complied with; and
|
|
(v)
|
All requested Documents have been provided to us and all factual statements made to us by the Company
and the PRC Companies in connection with this legal opinion are true, correct and complete.
|
In addition to the terms defined in the
context of this opinion, the following capitalized terms used in this opinion shall have the meanings ascribed to them as follows.
M&A Rules
|
means
|
The
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
promulgated by six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, which became effective on September 8, 2006 and was amended on June 22, 2009 by the Ministry of Commerce.
|
PRC Companies
|
means
|
collectively, the entities listed in Schedule I hereto, and each, a “PRC Company”.
|
|
|
|
PRC Laws
|
means
|
all applicable national, provincial and local laws, regulations, rules, notices, orders, decrees and supreme court’s judicial interpretations of the PRC currently in effect and publicly available on the date of this opinion.
|
|
|
|
PRC Subsidiary
|
means
|
Weidai Co., Ltd. (
微贷有限公司
)
|
|
|
|
VIE
|
means
|
Weidai (Hangzhou) Financial Information Service Ltd. (
微贷(杭州)金融信息服务有限公司
)
|
|
|
|
VIE Agreements
|
means
|
various agreements listed in Schedule II attached hereto.
|
Based on our review of the Documents and
subject to the Assumptions and the Qualifications, we are of the opinion that:
(i)
Corporate
Structure
.
The descriptions of the corporate structure and contractual arrangements of the PRC Companies as set
forth in the Registration Statement under the captions “Prospectus Summary” and “Corporate History and Structure”
are true and accurate in all material respects and nothing has been omitted from such description which would make it misleading
in any material respect. The corporate structure of the Company (including the ownership structure of the Company and each of the
PRC Companies, individually or in the aggregate), is in compliance with the PRC Laws.
Based
on our understanding of PRC Laws,
each of the VIE Agreements is legal, valid and binding, and enforceable in accordance
with its terms and applicable PRC Laws. However, there are substantial uncertainties regarding the interpretation and application
of current PRC Laws, and there can be no assurance that the PRC government will ultimately take a view that is consistent with
our opinion stated above.
(ii)
M&A
Rule.
B
ased on our understanding of the explicit provisions
of the PRC Laws as of the date hereof, given that (a) PRC Subsidiary was established by means of direct investment rather than
by a merger with or an acquisition of any PRC domestic companies as defined under the M&A Rule; (b) no explicit provision in
the M&A Rules classifies the respective contractual arrangements among PRC Subsidiary, the VIEs and their shareholders as a
type of acquisition transaction falling under the M&A Rule, (c) the China Securities Regulatory Commission currently has not
issued any definitive rule or interpretation concerning whether the Offerings are subject to the M&A Rules; and we are of the
opinion that M&A Rule and related regulations do not require that the Company obtain prior China Securities Regulatory Commission
approval for the listing and trading of the ADSs on the New York Stock Exchange. However, there are substantial uncertainties as
to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and our opinions stated
above are subject to any new PRC Laws or detailed implementations and interpretations in any form relating to the M&A Rules,
and there can be no assurance that the PRC government will ultimately take a view that is consistent with our opinion stated above.
(iii)
Enforceability
of Civil Procedures.
The recognition and enforcement of foreis
not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal
recognition and enforcemgn judgments are provided for under the PRC Civil Procedures
Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based
either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China doeent of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will
not enforce a foreign judgment against a company or its directors and officers if they decide that the judgment violates the basic
principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis
a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands.
(iv)
Taxation
.
The statements set forth in the Registration Statement under the caption “Taxation
—
People’s
Republic of China Taxation” with respect to the PRC tax laws and regulations, constitute true and accurate descriptions of
the matters described therein in all material aspects, and constitute our legal opinion.
(v)
PRC
Laws.
All statements set forth in the Registration Statement under the captions “Prospectus Summary”, “Risk
Factors,” “Dividend Policy”, “Related Party Transactions”, “Business”, “Corporate
History and Structure”, “Regulations”, “Enforceability of Civil Liabilities”, “Taxation”,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in each case insofar
as such statements describe or summarize PRC legal or regulatory matters, are true and accurate in all material aspects, and correctly
set forth therein, and nothing has been omitted from such statements which would make the same misleading in all material aspects.
Our opinion expressed above is subject to
the following qualifications (the “Qualifications”):
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(i)
|
Our opinion is limited to the PRC Laws of general application on the date hereof. We have made no investigation of, and do
not express or imply any views on, the laws of any jurisdiction other than the PRC;
|
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(ii)
|
The PRC Laws referred to herein are laws and regulations publicly available and currently in force on the date hereof and there
is no guarantee that any of such laws and regulations, or the interpretation or enforcement thereof, will not be changed, amended
or revoked in the future with or without retrospective effect;
|
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(iii)
|
Our opinion is subject to the effects of (i) certain legal or statutory principles affecting the enforceability of contractual
rights generally under the concepts of public interest, social ethics, national security, good faith, fair dealing, and applicable
statutes of limitation; (ii) any circumstance in connection with formulation, execution or performance of any legal documents that
would be deemed materially mistaken, clearly unconscionable, fraudulent, coercionary or concealing illegal intentions with a lawful
form; (iii) judicial discretion with respect to the availability of specific performance, injunctive relief, remedies or defenses,
or calculation of damages; and (iv) the discretion of any competent PRC legislative, administrative or judicial bodies in exercising
their authority in the PRC;
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(iv)
|
This opinion is issued based on our understanding of the current PRC Laws. For matters not explicitly provided under the current
PRC Laws, the interpretation, implementation and application of the specific requirements under the PRC Laws are subject to the
final discretion of competent PRC legislative, administrative and judicial authorities, and there can be no assurance that the
Government Agencies will ultimately take a view that is not contrary to our opinion stated above;
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(v)
|
We may rely, as to matters of fact (but not as to legal conclusions), to the extent we deem proper, on certificates and confirmations
of responsible officers of the PRC Operating Companies and PRC government officials;
|
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(vi)
|
This opinion is intended to be used in the context which is specifically referred to herein;
|
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(vii)
|
As used in this opinion, the expression “to our best knowledge” or similar language with reference to matters of
fact refers to the current actual knowledge of the attorneys of this firm who have worked on matters for the Company in connection
with the Offering and the transactions contemplated thereunder. We have not undertaken any independent investigation to determine
the existence or absence of any fact, and no inference as to our knowledge of the existence or absence of any fact should be drawn
from our representation of the Company or the rendering of this opinion;
|
We hereby consent to the use of this opinion
in, and the filing hereof as an exhibit to, the Registration Statement, and to the reference to our name in such Registration Statement.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section
7 of the U.S. Securities Act of 1933, as amended, or the regulations promulgated thereunder.
Sincerely yours,
/s/ Grandall Law Firm (Shanghai)
Grandall Law Firm (Shanghai)
Schedule I
PRC Companies
|
1.
|
Weidai Co., Ltd. (
微贷有限公司
)
|
|
2.
|
Weidai (Hangzhou) Financial Information Service Ltd. (
微贷(杭州)金融信息服务有限公司
)
|
|
3.
|
Ruituo (Hangzhou) Internet Financial Information Services Co., Ltd. (
锐拓(杭州)互联网金融信息服务有限公司
)
|
|
4.
|
Foshan Hongliang Investment Advisory Co., Ltd. (
佛山宏良投资咨询有限公司
)
|
|
5.
|
Hangzhou Qiantangli Catering Management Co. , Ltd (
杭州乾塘里餐饮管理有限公司
)
|
|
6.
|
Hangzhou Yaohong Internet Technology Co., Ltd. (
杭州尧泓网络科技有限公司
)
|
|
7.
|
Yiwu Weirui Internet Technology Co., Ltd. (
义乌微锐网络科技有限公司
)
|
|
8.
|
Qianwei (Hangzhou) Technology Co., Ltd. (
千微
(
杭州
)
科技有限公司
)
|
|
9.
|
Hangzhou Jingwei Assets Management Co., Ltd. (
杭州京微资产管理有限公司
)
|
|
10.
|
Hangzhou Yiqitou Investment Advisory Co., Ltd. (
杭州易起投资咨询有限公司
)
|
|
11.
|
Liangche (Hangzhou) Internet Technology Co., Ltd. (
靓车(杭州)网络科技有限公司
)
|
|
12.
|
Horgos Weichepai Information Technology Co., Ltd. (
霍尔果斯微车拍信息技术有限公司
)
|
|
13.
|
Fuzhou Weidai Online Microcredit Co., Ltd. (
抚州微贷网络小额贷款有限公司
)
|
|
14.
|
Khorgos Micron Internet Technology Co., Ltd. (
霍尔果斯微米互联网科技有限公司
)
|
|
15.
|
Khorgos Weiyi Internet Technology Co., Ltd. (
霍尔果斯微一网络科技有限公司
)
|
|
16.
|
Hangzhou Yaowei Technology Co., Ltd. (
杭州尧微科技有限公司
)
|
|
17.
|
Hangzhou Jiniuniu Technology Co., Ltd. (
北京机牛牛科技有限公司
)
|
|
18.
|
Hangzhou Weiche Auction Co., Ltd. (
杭州微车拍卖有限公司
)
|
|
19.
|
Zhengzhou Warehousing Services Co., Ltd. (
郑州网链通仓储服务有限公司
)
|
|
20.
|
Hangzhou Weian Automobile Rental Co., Ltd. (
杭州微安汽车租赁有限公司
)
|
Schedule II
VIE Agreements
Exclusive Business Cooperation Agreement between Weidai Co.,
Ltd. and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Exclusive Call Option Contract among Weidai Co., Ltd., Mr. Hong
Yao, Suzhou Weixin Zhonghua Venture Investment Partnership (Limited Partnership), Deqing Jinxiu Management Consulting Partnership
(Limited Partnership), Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership), Zhejiang Hakim Unique Finance
Service Co., Ltd., Zhejiang Zheshang Lihai Venture Investment Partnership (Limited Partnership), Shenzhen Guosheng Qianhai Investment
Co., Ltd., Qingdao Oriental Capital Investment Co., Ltd., Beijing Dongyitianzheng Investment Co., Ltd., Hangzhou Shanan Investment
Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Beijing Dongyitianzheng
Investment Co., Ltd. and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Deqing Jinxiu
Management Consulting Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10,
2018;
Share Pledge Agreement among Weidai Co., Ltd., Hangzhou Lihai
Internet Venture Investment Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April
10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Hangzhou Shanan
Investment Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Qingdao Oriental
Capital Investment Co., Ltd. and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Shenzhen Guosheng
Qianhai Investment Co., Ltd. and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Suzhou Weixin
Zhonghua Venture Investment Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April
10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Mr. Hong Yao
and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Zhejiang Hakim
Unique Finance Service Co., Ltd. and Weidai (Hangzhou) Financial Information Service Ltd., dated April 10, 2018;
Share Pledge Agreement among Weidai Co., Ltd., Zhejiang Zheshang
Lihai Venture Investment Partnership (Limited Partnership) and Weidai (Hangzhou) Financial Information Service Ltd., dated April
10, 2018;
Spouse Consent Letter of Mr. Hong Yao, dated April 10, 2018;
Power of Attorney among Weidai Co., Ltd., Mr. Hong Yao, Suzhou
Weixin Zhonghua Venture Investment Partnership (Limited Partnership), Deqing Jinxiu Management Consulting Partnership (Limited
Partnership), Hangzhou Lihai Internet Venture Investment Partnership (Limited Partnership), Zhejiang Hakim Unique Finance Service
Co., Ltd., Zhejiang Zheshang Lihai Venture Investment Partnership (Limited Partnership), Shenzhen Guosheng Qianhai Investment Co.,
Ltd., Qingdao Oriental Capital Investment Co., Ltd., Beijing Dongyitianzheng Investment Co., Ltd. and Hangzhou Shanan Investment
Partnership (Limited Partnership), dated April 10, 2018.
Exhibit 99.3
CONSENT OF OLIVER WYMAN CONSULTING (SHANGHAI)
LIMITED
Weidai Ltd.
50/F, West Building, Fortune Finance Center
No. 33 Jiefang East Road
Jianggan District, Hangzhou
Zhejiang Province
The People’s Republic of China
August 10, 2018
Ladies and Gentlemen:
Oliver Wyman Consulting
(Shanghai) Limited hereby consents to (i) references to our name, (ii) inclusion of information, data and statements from, and
references to our preparation of, the report entitled “CHINA AUTO-BACKED LOAN MARKETPLACE – MARKET OVERVIEW AND PERSPECTIVES”
(together with any subsequent amendments made by us thereto, the “Report”) and (iii) citation of the Report, in each
case, in this registration statement on Form F-1 (together with any amendments thereto, the “Registration Statement”)
in connection with the proposed initial public offering of Weidai Ltd. (the “Company”), to be filed with the U.S. Securities
and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, and in any other future filings or
correspondence with the SEC, including filings on Form 20-F or Form 6-K or other SEC filings (collectively, the “SEC Filings”).
We further hereby consent to the filing of this letter as an exhibit to the Registration Statement with the SEC.
/s/ Hainuo Sheng
|
|
Name: Hainuo Sheng
|
|
Title: Head of China Financial Services
|
|
Oliver Wyman Consulting (Shanghai) Limited
|
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Room 3708-10
|
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The Center
|
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989 Changle Road
|
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Xuhui District
|
|
Shanghai
|
|
Exhibit 99.4
Weidai Ltd.
50/F, West Building, Fortune Finance Center
No. 33 Jiefang East Road, Jianggan District
Hangzhou, Zhejiang Province
The People’s Republic of China
July 25, 2018
Ladies and Gentlemen:
Pursuant to Rule 438 promulgated under the
Securities Act of 1933, as amended, I hereby consent to be named in the Registration Statement on Form F-1 (the “
Registration
Statement
”) of Weidai Ltd. (the “
Company
”), and any amendments thereto, as a person about to become
a director of the Company and agree that following the effectiveness of the Registration Statement and commencing at the time the
Securities and Exchange Commission declares the registration statement on Form 8-A under Section 12(b) of the Securities Exchange
Act of 1934, as amended, effective, I will serve as a member of the board of directors of the Company.
[
Signature page to follow
]
|
Sincerely yours,
|
|
|
|
/s/ Tony Cai
|
|
Name:
|
Tony Cai
|