What is an equity structure? The equity structure refers to the organization and arrangement of share distribution and ownership structure within a company. The equity structure determines the rights of shareholders, the proportion of share ownership, and the allocation of decision-making power within the company, among other aspects. Overseas equity structures refer to the structures that individuals or companies from within a country establish offshore companies to control domestic or overseas businesses through these offshore structures.

How important is a reasonable equity structure for a company, and what are the classifications of overseas equity structures in detail?
Designing an equity structure is important for several reasons: to have control over the company, establish funding channels, achieve risk isolation, and facilitate wealth inheritance.
Setting up an overseas equity structure is typically done to achieve overseas listings, facilitate overseas capital operations such as financing and mergers and acquisitions, take advantage of investment incentives policies in certain regions, manage wealth through offshore structures, mitigate tax liabilities, and expand overseas operations.

Factors to consider when designing an equity structure:
1. Shareholder Structure: The shareholder structure refers to the shareholders of the company and their ownership percentages. Shareholders can include individuals, companies, funds, etc., and the distribution of shares determines their voting rights and allocation of benefits within the company.2. Share Allocation: Share allocation refers to the distribution of shares within the company, including the quantity of shares held by each shareholder. Share allocation can be based on factors such as the shareholder's capital contribution, performance contribution to the company, or collaborative relationships.
3. Shareholder Rights: Shareholder rights refer to the power and benefits enjoyed by shareholders within the company, including voting rights, dividend distribution, transfer rights, etc. The extent of shareholder's rights depends on their shareholding percentage.
4. Decision-making Power Allocation: Decision-making power allocation refers to the attribution of decision-making rights within the company. In an equity structure, decision-making power can be allocated based on shareholding percentages, company bylaws, or other agreed-upon criteria.
5. Corporate Governance: The equity structure is closely associated with corporate governance. A reasonable equity structure can enhance effective governance, protect shareholder rights, and ensure the sustainable and steady development of the company.

Classifications of Overseas Equity Structures:
The common classifications of overseas equity structures include:

1. Red-Chip Structure: The red-chip structure refers to the situation where domestic individuals or companies transfer assets or equity interests from within the country to offshore companies registered abroad through equity or asset acquisitions or through variable interest entity (VIE) structures. The offshore companies then hold the domestic assets or equity, and ultimately apply for listing on overseas exchanges in the name of the offshore companies. The red-chip structure can be further divided into equity control structures and VIE structures.

2. "Go Global" Structure: The "go global" structure, also known as direct overseas investment, refers to Chinese enterprises investing overseas in foreign countries or regions using cash, assets, or intellectual property. The core of this structure is to gain control over the operation and management of overseas companies.

3. Return Investment Structure: Return investment refers to the direct or indirect investments made by domestic residents through Special Purpose Vehicles (SPVs) in domestic activities. This includes establishing foreign-invested enterprises or projects through methods such as new establishment or acquisitions domestically and acquiring ownership, control, operational rights, and other interests.

In summary, designing an equity structure requires consideration of factors such as shareholder structure, share allocation, shareholder rights, and decision-making power allocation. A reasonable equity structure facilitates effective governance, protects shareholder rights, and ensures the sustained and steady development of the company.