HISTORY, REORGANIZATION AND CORPORATE STRUCTURE › app › sehk › 2020 › 101385 › a103425 › s… · As part of the Reorganization, our Company became the holding company

OVERVIEW

Our Company was incorporated in the Cayman Islands under the Companies Law as an

exempted company with limited liability on October 31, 2019. As part of the Reorganization,

our Company became the holding company of our Group for the purpose of the [REDACTED]

with our businesses conducted through our subsidiaries and Combined Affiliated Entities.

Please see “– Reorganization” below for more details.

Our Group’s history can be traced back to 2009 when Wuhan Fulu was incorporated in

the PRC as a limited liability company by Mr. Fu Xi and an independent third party. Upon

incorporation, Wuhan Fulu primarily engaged in virtual goods-related services. Subsequently,

Mr. Zhang Yuguo, Mr. Shui Yingyu and Mr. Zhao Bihao joined the Group during 2009 to 2013

and each contributed to the development of the Group by performing key management duties.

Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Shui Yingyu and Mr. Zhao Bihao became acquainted as they

had been working in the same industry. Over the years, our Group gradually developed into a

leading third-party virtual goods and services provider in China. Our primary businesses

currently comprise virtual goods-related services and value-added services. For details of the

background of Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Shui Yingyu and Mr. Zhao Bihao and their

key responsibilities, see “Directors and Senior Management – Board of Directors – Executive

Directors”. For details of the shareholding changes of Wuhan Fulu and other companies of the

Group, please see “– Our Major Subsidiaries and Combined Affiliated Entities” below.

KEY MILESTONES

The following is a summary of our key milestones and achievements in the business

development of our Group:

Year Event

2009 Wuhan Fulu was founded.

We started to develop our own top-up system.

2010 We launched our platform Kamen website (卡門網) to begin providing

virtual goods and services.

2012 We began to provide mobile top-up services.

We began to provide TSC services for applications.

2014 We began to provide top-up services for video platforms and mobile

games.

We began to provide MALL services and started operation of online

stores.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

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THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THISDOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

Year Event

2015 We began to provide virtual goods related services for music and sports

platforms.

2017 We began to provide virtual goods related services for live streaming

platforms, including sale of membership cards and traffic acquisition

services.

We began to provide user acquisition and management services, such as

mini-games.

We launched our Shuyu platform which provided POP and H5-based

services.

2018 We began to provide virtual goods related services for lifestyle service

providers such as restaurants, bakeries and online grocery stores.

2019 We expanded our virtual goods related services for the leisure and

entertainment industry by beginning to provide services to online

education content providers.

We began to help virtual goods vendors develop mini-programs and ISV

applet.

We began to provide text messaging services, including verification code

authentication, text message marketing, multimedia messaging and order

tracking.

We launched the Fulu Open Platform.


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OUR MAJOR SUBSIDIARIES AND COMBINED AFFILIATED ENTITIES

The principal business activities, dates of establishment and commencement of business

and other material information of each of our subsidiaries and Combined Affiliated Entities

that primarily responsible for the results, assets, liabilities or businesses of the Group during

the Track Record Period and up to the Latest Practicable Date are shown below:

Name of entityPlace ofincorporation

Registeredshare capital

Principal businessactivities

Business License(s)Owned

Date ofestablishment andcommencement ofbusiness

Relationship withour Company

Wuhan Fulu PRC RMB19,688,935 Provision of services

to facilitate virtual

goods transactions

ICP License

EDI License

ICB License

March 24, 2009 controlled by our Company

through the Contractual

Arrangements

Wuhan Yiqiyou PRC RMB10,000,000 Provision of services


goods transactions

ICP License

ICB License

June 4, 2012 a wholly-owned subsidiary of

Wuhan Fulu and controlled

by our Company through the

Contractual Arrangements

Tibet Fulu PRC RMB10,000,000 Provision of services


goods transactions

ICP License

EDI License

ICB License

December 8, 2016 a wholly-owned subsidiary of




Xinjiang Fulu PRC RMB5,000,000 Provision of services


goods transactions

ICP License

EDI License

December 27, 2016 a wholly-owned subsidiary of




Kashgar Yiqiwan PRC RMB10,000,000 Provision of services


goods transactions

ICP License March 14, 2014 controlled by our Company

through the Contractual

Arrangements

Fulu Technology PRC RMB10,000,000 Investment holding – December 25, 2019 a wholly-owned subsidiary of

our Company


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Wuhan Fulu

Wuhan Fulu was incorporated as a limited liability company in the PRC on March 24,

2009 with an initial registered capital of RMB30,000 and owned as to 50% by Mr. Fu Xi and

50% by Mr. Zhou Xuanzheng, an independent third party as of the Latest Practicable Date. Mr.

Zhou Xuanzheng did not actively participate in the management of Wuhan Fulu.

On August 25, 2011, the registered capital of Wuhan Fulu was increased to RMB500,000.

Mr. Fu Xi contributed RMB470,000 for the purpose of increasing the registered capital of

Wuhan Fulu. Immediately after the increase of the registered capital, Wuhan Fulu was owned

as to 97% by Mr. Fu Xi and 3% by Mr. Zhou Xuanzheng.

On April 22, 2013, the registered capital of Wuhan Fulu was further increased to RMB1

million. Mr. Fu Xi contributed RMB500,000 for the purpose of increasing the registered capital

of Wuhan Fulu. Immediately after the increase of the registered capital, Wuhan Fulu was

owned as to 98.5% by Mr. Fu Xi and 1.5% by Mr. Zhou Xuanzheng.

On July 23, 2015, due to personal reasons, Mr. Zhou Xuanzheng transferred 1.5% of the

equity interest in Wuhan Fulu to Mr. Shui Yingyu, one of our Controlling Shareholders and an

executive Director, for a consideration of RMB16,000.

On December 25, 2015, the registered capital of Wuhan Fulu was further increased to

RMB10 million. Mr. Fu Xi and Mr. Shui Yingyu contributed RMB8,865,000 and RMB135,000

for the purpose of increasing the share capital of Wuhan Fulu, respectively. Immediately after

the increase of the registered capital, Wuhan Fulu was owned as to 98.5% by Mr. Fu Xi and

1.5% by Mr. Shui Yingyu.

On December 15, 2017, Mr. Zhang Yuguo, Tibet Fuxu, Tibet Fulong, Mr. Shui Yingyu and

Mr. Zhao Bihao subscribed to additional registered share capital of RMB2,968,324,

RMB2,504,019, RMB2,255,072, RMB1,234,998 and RMB726,522 of Wuhan Fulu,

respectively. As a consequence, the registered capital of Wuhan Fulu was further increased to

RMB19,688,935. Upon completion of such capital increase and up to the Latest Practicable

Date, Wuhan Fulu was held as to 50.03% by Mr. Fu Xi, 15.08% by Mr. Zhang Yuguo, 12.72%

by Tibet Fuxu, 11.45% by Tibet Fulong, 7.03% by Mr. Shui Yingyu and 3.69% by Mr. Zhao

Bihao. For details of Tibet Fuxu and Tibet Fulong, please see “– Our Major Subsidiaries and

Combined Affiliated Entities – Employee Shareholding Vehicles” below.

Wuhan Yiqiyou

Wuhan Yiqiyou was incorporated as a limited liability company in the PRC on June 4,

2012 with an initial registered capital of RMB100,000 and owned as to 50% by Mr. Tian Xuan

and 50% by Mr. Liu Lufeng. Upon incorporation of Wuhan Yiqiyou, Mr. Tian Xuan and Mr.

Liu Lufeng were both employees of the Group and they each entered into a nominee

shareholder agreement with Wuhan Fulu to record and confirm that they held their respective

equity interest in Wuhan Yiqiyou for the benefit and on behalf of Wuhan Fulu.


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On October 30, 2014, the registered capital of Wuhan Yiqiyou was increased from

RMB100,000 to RMB0.5 million. At the direction of Wuhan Fulu, Mr. Tian Xuan and Mr. Liu

Lufeng each subscribed to additional share capital of RMB200,000 of Wuhan Yiqiyou. Upon

completion of such capital increase, Wuhan Yiqiyou was held as to 50% and 50% by Mr. Tian

Xuan and Mr. Liu Lufeng for the benefit and on behalf of Wuhan Fulu.

On November 11, 2015, the registered capital of Wuhan Yiqiyou was increased from

RMB0.5 million to RMB10 million. At the direction of and on behalf of Wuhan Fulu, Mr. Liu

Lufeng subscribed to additional registered share capital of RMB9.5 million of Wuhan Yiqiyou.

Upon completion of such capital increase, Wuhan Yiqiyou was held as to 2.5% by Mr. Tian

Xuan and 97.5% by Mr. Liu Lufeng. On the same day, Mr. Tian Xuan and Mr. Liu Lufeng each

entered into a nominee shareholder agreement with Wuhan Fulu to re-confirm that they held

their respective equity interest in Wuhan Yiqiyou for the benefit and on behalf of Wuhan Fulu.

On April 28, 2017, Mr. Tian Xuan and Mr. Liu Lufeng each entered into an equity transfer

agreement with Wuhan Fulu to transfer the entire equity interest in Wuhan Yiqiyou to Wuhan

Fulu for a consideration of RMB500,000. Wuhan Yiqiyou became a wholly-owned subsidiary

of Wuhan Fulu.

Kashgar Yiqiwan

Kashgar Yiqiwan was incorporated as a limited liability company in the PRC on March

14, 2014 with an initial registered capital of RMB10 million and owned as to 50% by Mr.

Zhang Yuguo, one of our Controlling Shareholders and an executive Director, and 50% by Mr.

Fu Lulu, an independent third party. Upon incorporation, the corporate name of Kashgar

Yiqiwan was Wuhan Yiqiwan Network Technology Co., Ltd. (武漢一起玩網絡科技有限公司),

which has been changed to Kashgar Yiqiwan Network Technology Co., Ltd. (喀什一起玩網絡科技有限公司) since April 1, 2017.

On December 14, 2016, Mr. Fu Lulu transferred 50% of the equity interest in Kashgar

Yiqiwan to Mr. Wu Xuliang, an employee of the Group at the time. Prior to the change of the

company’s name in 2017, Mr. Zhang Yuguo and Mr. Wu Xuliang had entered into nominee

shareholder agreements with Wuhan Fulu to record and confirm that they held their respective

equity interest in Wuhan Yiqiwan for the benefit and on behalf of Wuhan Fulu. Shortly after

the change of the company’s name to Kashgar Yiqiwan, Mr. Wu Xuliang and Mr. Zhang Yuguo

re-entered into such nominee shareholder agreements (the “Nominee ShareholderAgreements”) to re-confirm that they hold their respective equity interest in Kashgar Yiqiwan

for the benefit and on behalf of Wuhan Fulu.

According to the Nominee Shareholder Agreements: (a) the share capital of Kashgar

Yiqiwan subscribed by Mr. Zhang Yuguo and Mr. Wu Xuliang (each a “NomineeShareholder”) are contributed by Wuhan Fulu; (b) the Nominee Shareholders are not entitled

to any economic benefits derived from their shares in Kashgar Yiqiwan; (c) the Nominee


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Shareholders are not entitled to dispose of (including by way of pledge, charge or share

transfer) his shares in Kashgar Yiqiwan; and (d) the Nominee Shareholders shall exercise the

voting rights in respect of his shares in Kashgar Yiqiwan in accordance with the instructions

of Wuhan Fulu.

As the then registered shareholders of Kashgar Yiqiwan, Mr. Zhang Yuguo and Mr. WuXuliang, at the direction of Wuhan Fulu (as the ultimate beneficial owner of the whole equityinterest of Kashgar Yiqiwan) entered into a set of contractual arrangements agreements withWFOE on December 25, 2019, including the exclusive business cooperation agreement,exclusive option agreements, equity pledge agreements etc. (the “Previous Kashgar YiqiwanVIE Agreements”) pursuant to which WFOE would have the right to exercise control over theoperation and enjoy all the economic benefits of Kashgar Yiqiwan and its subsidiary, WuhanYilu.

As Mr. Wu Xuliang has decided to exit from the Group prior to the [REDACTED] topursue his other business endeavors, WFOE designated Mr. Zhang Yuguo and Ms. Shen Yaling(an employee of Wuhan Fulu and an indirect Shareholder of the Company) to hold 99% and1% of the equity interest in Kashgar Yiqiwan as the registered shareholders respectively. Forfurther details of Mr. Wu Xuliang’s exit from the Group, please see “– Reorganization – 4. Mr.Wu Xuliang’s Exit from the Group” below. The legal title to the entire shares of KashgarYiqiwan was not reverted to Wuhan Fulu, the ultimate beneficial owner of these shares, butwere held by Mr. Zhang Yuguo and Ms. Shen Yaling as designated by WFOE. Such anarrangement is due to the following considerations:

(1) In accordance with applicable PRC tax laws and regulations, if Wuhan Fulu becomesthe registered shareholder of Kashgar Yiqiwan, although Wuhan Fulu is the ultimatebeneficial owner of the entire equity interest of Kashgar Yiqiwan, the transfer ofshares of Kashgar Yiqiwan from the existing registered shareholders to Wuhan Fuluwould still be deemed as a “share transfer” for taxation purpose. Such a sharetransfer may result in an unnecessary tax burden to the Group, because the sharetransfer price per share under such circumstance payable to the individual nomineeshareholders (as the transferors of these shares) shall generally not be lower than thenet assets of Kashgar Yiqiwan per share, which would result in a high income taxpayable by the individual nominee shareholders.

However, if the shares previously registered under Mr. Wu Xuliang’s name are heldby Mr. Zhang Yuguo and Ms. Shen Yaling as currently structured, although such achange is still deemed as a “share transfer” for taxation purpose, the income taxpayable for such share transfers will be lower because (a) the share transfer priceunder such circumstance could be set as low as the original cost when such shareswere obtained because the shares are transferred to individual employees of theGroup (namely, Mr. Zhang Yuguo and Ms. Shen Yaling); and (b) the number ofshares for the purpose of assessing the income tax payable would be 50% of the totalshares of Kashgar Yiqiwan (i.e., the shares previously registered under Mr. WuXuliang’s name) as opposed to the 100% of the shares of Kashgar Yiqiwan if all theshares of Kashgar Yiqiwan are reverted to Wuhan Fulu.


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(2) Kashgar Yiqiwan currently holds an ICP License. As advised by our PRC Legal

Advisor, if the legal title to the shares in Kashgar Yiqiwan were to be reverted to

Wuhan Fulu, which is a corporate entity, as opposed to individuals, it might take

longer time for the competent authorities regulating ICP License to review the

transfer documents and qualification of the ultimate shareholders of Wuhan Fulu,

which would potentially cause disruption and uncertainty to the business of Kashgar

Yiqiwan.

(3) When the Company was planning the Reorganization, Kashgar Yiqiwan was in the

process of negotiating the renewal of a business contract with a long-established and

renowned business partner. If Wuhan Fulu, as a corporate entity, becomes the

registered shareholder of Kashgar Yiqiwan, as opposed to individuals, it was

envisaged that the internal approval procedures required by this business partner

would be complicated. In contrast, if the registered shareholders of Kashgar Yiqiwan

remain to be individuals, among whom is an existing shareholder of Kashgar

Yiqiwan and owns the majority of equity interest in Kashgar Yiqiwan (i.e., Mr.

Zhang Yuguo), it was envisaged that the internal approval procedures would be

relatively simpler, which may just be similar to annual renewal of such existing

business contract.

Xinjiang Fulu

Xinjiang Fulu was incorporated as a limited liability company in the PRC on December

27, 2016 with an initial registered capital of RMB5 million and owned as to 57%, 20%, 12%

and 11% by Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Zhao Bihao and Mr. Shui Yingyu, respectively.

On July 25, 2017, Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Zhao Bihao and Mr. Shui Yingyu each

entered into an equity transfer agreement with Wuhan Fulu to transfer the entire equity interest

in Xinjiang Fulu to Wuhan Fulu for nil consideration. Subsequently, Xinjiang Fulu became a

wholly-owned subsidiary of Wuhan Fulu.

Tibet Fulu

Tibet Fulu was incorporated as a limited liability company in the PRC on December 8,

2016 with an initial registered capital of RMB5 million and owned as to 57%, 11%, 12% and

20% by Mr. Fu Xi, Mr. Shui Yingyu, Mr. Wu Xuliang and Mr. Zhang Yuguo, respectively.

On July 10, 2017, Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Wu Xuliang and Mr. Shui Yingyu

each entered into an equity transfer agreement with Wuhan Fulu to transfer the entire equity

interest in Tibet Fulu to Wuhan Fulu for nil consideration, as part of the preparation for a

potential initial public offering of Wuhan Fulu in the PRC. Subsequently, Tibet Fulu became

a wholly-owned subsidiary of Wuhan Fulu.


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Fulu Technology

Fulu Technology (i.e., WFOE) was incorporated as a wholly foreign-owned enterprise in

the PRC on December 25, 2019 by Fulu HK, a wholly-owned subsidiary of the Company. Fulu

Technology is an indirectly wholly-owned subsidiary of the Company and there has been no

change in Fulu Technology’s shareholding structure since its incorporation.

As confirmed by our PRC Legal Advisor, all the above mentioned equity transfers are

legal, valid and duly settled. They are binding on the relevant parties and duly completed in

accordance with applicable laws and regulations in the PRC. All necessary approvals for the

above mentioned equity transfers as required by relevant authorities, if any, have been

obtained.

Employee Shareholding Vehicles

To align the interest of key employees with the overall interests of Wuhan Fulu and to

enable those employees to share the fruition of the development of Wuhan Fulu, Mr. Fu Xi,

together with certain key employees of the Group established Tibet Fuxu and Tibet Fulong on

January 19, 2017 and January 12, 2017, respectively, as employee shareholding vehicles. On

December 15, 2017, Tibet Fuxu and Tibet Fulong subscribed for 12.72% and 11.45% of the

equity interest of Wuhan Fulu, respectively. Since then and as of the Latest Practicable Date,

Tibet Fuxu and Tibet Fulong held in aggregate 24.17% of the equity interest in Wuhan Fulu.

As at the Latest Practicable Date, Tibet Fuxu had a total of 14 partners (including a sole

general partner, being Mr. Fu Xi) with a total capital contribution of approximately RMB3.82

million. As at the Latest Practicable Date, Tibet Fulong had a total of 7 partners (including a

sole general partner, being Mr. Fu Xi) with a total capital contribution of approximately

RMB3.44 million.

Under the partnership agreements of Tibet Fuxu and Tibet Fulong, Tibet Fuxu and Tibet

Fulong will distribute the profit they receive from Wuhan Fulu to their partners in proportion

to the paid-up contribution of each partner.

To continue to fulfill the purpose of our employee shareholding vehicles after the

[REDACTED] and as part of the Reorganization, the partners of Tibet Fuxu and Tibet Fulong

incorporated Luzhi Holdings in the BVI on September 20, 2019 to substantially reflect the

aggregate interest of Tibet Fuxu and Tibet Fulong in Wuhan Fulu. For details of Luzhi Holdings

and its interests in the Company, see “ – Reorganization”.


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PREVIOUS LISTING PLAN

Our Group initiated the preparation for proposed listing of its Shares on a domestic stockexchange in 2017, and we had engaged a PRC financial institution as our financial advisor tofacilitate the relevant restructuring work. However, due to the uncertain and relativelyprolonged listing timetable for A-share listing, and considering that the Hong Kong StockExchange would provide us with an international platform to gain access to foreign capital andoverseas investors, the Group suspended the preparatory work in the second half of 2018.

As of the Latest Practicable Date, the Group had not (i) entered into the stage of listingtutoring (上市輔導), (ii) submitted any A-share listing application to the CSRC for review or(iii) received any comments or issues raised by the CSRC (including its local offices). We donot plan to pursue the A-share Listing Preparation in the near future.

To the best of their knowledge, our Directors are not aware of (i) any other mattersrelating to the A-share Listing Preparation that are relevant to the [REDACTED] which shouldbe reasonably highlighted in this document for investors to form an informed assessment of ourCompany; (ii) any other matters relating to the A-share Listing Preparation that may haveimplications on our Company’s suitability for [REDACTED] on the Hong Kong StockExchange or on the truthfulness, accuracy and completeness of information disclosed in thisdocument; and (iii) any other matters that need to be brought to the attention of the Hong KongStock Exchange and investors in relation to the A-share Listing Preparation. Based on theabove, our Directors are of the view that there are no matters in the A-share Listing Preparationthat would potentially affect the suitability of our Company to [REDACTED] on the HongKong Stock Exchange.

REORGANIZATION

In anticipation of our [REDACTED], we underwent the Reorganization pursuant towhich our Company became the holding company and [REDACTED] vehicle of our Group.

The following chart sets out the shareholding and corporate structure of Wuhan Fuluimmediately before the Reorganization:

Mr. Wu Xuliang Tibet Fulong(1) Mr. Fu Xi Mr. Zhang Yuguo Mr. Shui Yingyu Mr. Zhao Bihao Tibet Fuxu(2)

Wuhan Fulu Kashgar

Yiqiwan(4) Mr. Ma Jian(3)

Wuhan Yilu

Wuhan

Yiqiyou Wuhan Lishuo Tibet Fulu Wuhan Souka

Wuhan

Tianshi Hubei Kejin Xinjiang Fulu

Wuhan

Zhongteng Tibet Huluwa

Xinjiang

Huluwa

11.45% 50.03% 15.08% 7.03% 3.69% 12.72%

50.0% 50.0%

70.0% 30.0%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%


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Notes:

(1) Tibet Fulong is a limited partnership and one of the employee shareholding vehicles. Tibet Fulong was ownedby Mr. Ren Wei as to 0.94%, Mr. Fu Xi as to 37.53%, Mr. Wu Xuliang as to 42.44%, Mr. Ding Chao as to6.29%, Mr. Xu Jian as to 5.5%, Mr. Chen Tianjun as to 4.37%, Mr. Mei Qiaojun as to 1.18% and Mr. Li Junas to 1.75%. Mr. Fu Xi is our Controlling Shareholder and an executive Director of our Company. Mr. Ren Wei,Mr. Xu Jian and Mr. Chen Tianjun are members of our senior management. Mr. Ding Chao, Mr. Mei Qiaojunand Mr. Li Jun are our current employees. Mr. Wu Xuliang is a former employee of the Group.

(2) Tibet Fuxu is a limited partnership and one of the employee shareholding vehicles. Tibet Fuxu was owned byMr. Wu Xuliang as to 44.41%, Mr. Fu Xi as to 37.74%, Mr. Yang Yuquan as to 7.78%, Mr. Liu Lufeng as to7.08%, Ms. Shen Yaling as to 1.42%, Mr. Wang Qiang as to 0.79%, and Mr. Guo Chenxi as to 0.79%. Mr. FuXi is our Controlling Shareholder and an executive Director of our Company. Mr. Yang Yuquan, Mr. LiuLufeng, Ms. Shen Yaling, Mr. Wang Qiang and Mr. Guo Chenxi are our current employees. Mr. Wu Xuliangis a former employee of the Group.

Of the 7.08% interest in Tibet Fuxu held by Mr. Liu Lufeng, 3.54% (being 50% of 7.08%) was held as nomineefor Mr. Tian Xuan, who is a former employee of the Group.

(3) Mr. Ma Jian is an independent third party.

(4) Kashgar Yiqiwan was held as to 50% and 50% by Mr. Wu Xuliang and Mr. Zhang Yuguo, respectively, undera nominee arrangement with Wuhan Fulu, the ultimate beneficial owner of all the equity interest of KashgarYiqiwan. For details of the nominee arrangement, please see “– Our Major Subsidiaries and CombinedAffiliated Entities – Kashgar Yiqiwan”.

The Reorganization involved the following steps:

1. Adjustment of Shareholding in Tibet Fuxu

Tibet Fuxu is a limited partnership and one of the employee shareholding vehicles. Prior

to the Reorganization, Tibet Fuxu was owned as to 7.08% by Mr. Liu Lufeng, an employee of

the Group 3.54% (being 50% of 7.08%) of the interest in Tibet Fuxu held by Mr. Liu Lufeng

was held as nominee for Mr. Tian Xuan, a former employee of our Group.

As part of the Reorganization, Mr. Liu Lufeng transferred 3.54% (being 50% of 7.08%)

of interest in Tibet Fuxu to Mr. Tian Xuan, the beneficial owner of these shares, in September

2019.

2. Incorporation of our Company and the Offshore Structure

Our Company was incorporated in the Cayman Islands as an exempted company with

limited liability on October 31, 2019 and has an authorized share capital of US$50,000, divided

into 500,000,000 Shares with a par value of US$0.0001 each. Upon incorporation, our

Company issued one Share with a par value of US$0.0001 to Harneys Fiduciary (Cayman)

Limited in exchange for US$0.0001, and Harneys Fiduciary (Cayman) Limited subsequently

transferred such Share to FuXi Limited on the same date at the same price.


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To reflect the onshore shareholding structure of our PRC Holdcos, our Company further

allotted an aggregate of 499,999,999 Shares to the following shareholders at par value

US$0.0001, the consideration of which has been settled in full as of October 31, 2019:

Name

Number ofShares

allotted

Considerationfor the

allotments

Approximatepercentage of

shareholding inour Company

after theallotment

FuXi Limited(1) 46,428,100(2) US$4,642.81 46.43%Zhangyuguo Holdings(3) 15,076,100 US$1,507.61 15.08%Luzhi Holdings(4) 15,071,400 US$1,507.14 15.07%Shuiyingyu Holdings(5) 7,034,400 US$703.44 7.03%Fuxu Holdings(1) 6,700,000 US$670.00 6.70%Fuzhi Holdings(1) 6,000,000 US$600.00 6.00%Zhaobihao Holdings(6) 3,690,000 US$369.00 3.69%

Total 100,000,000 US$10,000.00 100.00%

Notes:

Upon incorporation of the Company,

(1) FuXi Limited, a limited liability company incorporated in the BVI on June 27, 2019, is wholly ownedby Mr. Fu Xi, a Controlling Shareholder and an executive Director. Fuxu Holdings and Fuzhi Holdingsare wholly-owned subsidiaries of FuXi Limited.

(2) Including the one Share already held by FuXi Limited prior to such allotment.

(3) Zhangyuguo Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is whollyowned by Mr. Zhang Yuguo, a Controlling Shareholder and an executive Director.

(4) Luzhi Holdings, a limited liability company incorporated in the BVI on September 20, 2019, was ownedas to (i) 69.72% by Wuxuliang Holdings, which was wholly owned by Mr. Wu Xuliang, then anemployee of the Group, and (ii) 6.57%, 2.99%, 1.19%, 0.66%, 0.66%, 4.18%, 0.72%, 0.90%, 1.33%,4.78% and 3.32% by Mr. Yang Yuquan, Mr. Liu Lufeng, Ms. Shen Yaling, Mr. Wang Qiang, Mr. GuoChenxi, Mr. Xu Jian, Mr. Ren Wei, Mr. Mei Qiaojun, Mr. Li Jun, Mr. Ding Chao and Mr. Chen Tianjun,respectively, each of whom a current employee of the Group, and 2.99% by Mr. Tian Xuan, who is aformer employee of the Group.

(5) Shuiyingyu Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is whollyowned by Mr. Shui Yingyu, a Controlling Shareholder and an executive Director.

(6) Zhaobihao Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is whollyowned by Mr. Zhao Bihao, a Controlling Shareholder and an executive Director.


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3. Incorporation of Certain Subsidiaries and Entering into Contractual Arrangements

Fulu HK was incorporated under the laws of Hong Kong as our Company’s wholly-owned

subsidiary on November 21, 2019.

Fulu Technology (i.e., WFOE) was incorporated under the laws of the PRC as a directly

wholly-owned subsidiary of Fulu HK and an indirectly wholly-owned subsidiary of the

Company in the PRC on December 25, 2019.

To allow the Company to exercise control over the business operations of our PRC

Holdcos and enjoy all the economic interests derived therefrom, WFOE has entered into a

series of contractual arrangements with our PRC Holdcos and their registered shareholders. For

details of these contractual arrangements, please see “Contractual Arrangements – Our

Contractual Arrangements – Summary of the Material Terms under the Contractual

Arrangements”.

4. Mr. Wu Xuliang’s Exit from the Group

Mr. Wu Xuliang was an employee of the Group and held the following interests in the

Group prior to his exit from the Group: (1) approximately 10.51% of the equity interest in

Wuhan Fulu by virtue of his holding of approximately 44.41% of the partnership interest in

Tibet Fuxu and approximately 42.44% of the partnership interest in Tibet Fulong, (2)

approximately 10.51% of the equity interest in the Company by virtue of his shareholding in

Luzhi Holdings, and (3) 50% of the equity interest in Kashgar Yiqiwan in his capacity as a

nominee shareholder for Wuhan Fulu.

However, Mr. Wu Xuliang has decided to exit from the Group prior to the [REDACTED]

to pursue his other business endeavors. On December 1, 2019, Mr. Wu Xuliang entered into an

equity transfer agreement with, among others, Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Zhao Bihao,

the partners of Tibet Fuxu and Tibet Fulong and the individual shareholders of Luzhi Holdings

(collectively, the “Transferees”), pursuant to which Mr. Wu Xuliang agreed to transfer his

entire interests in the Group to the Transferees or the appointee(s) of the Transferees at the

consideration of approximately RMB24.2 million in aggregate. The consideration of the

transfer was determined based on the book value of the net assets of the Group and was paid

in full by the Transferees to Mr. Wu Xuliang on December 17, 2019.

5. Restructuring of Our Non-restricted and/or Non-prohibited Business

Wuhan Zhongteng was established in the PRC as a limited liability company on October

25, 2018 with a registered capital of RMB1 million. Immediately prior to the Reorganization,

Wuhan Zhongteng was a wholly-owned subsidiary of Wuhan Fulu. Wuhan Zhongteng held

minority equity interest in Hangzhou Jiwei Logic Technology Co., Ltd. (杭州幾維邏輯科技有限公司) (“Jiwei Logic”) and minority equity interest in Weifen (Shanghai) Sports and Culture


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Co., Ltd. (微分(上海)體育文化有限公司) (“Weifen Shanghai”). Wuhan Zhongteng does not

hold an ICP License or an ICB License, nor did it engage or plan to engage in any business

that is subject to any foreign investment prohibition or restriction under the relevant

regulations in the PRC.

As part of the Reorganization to transfer the businesses which are not subject to any

foreign investment restrictions or prohibition to ensure that the Contractual Arrangements are

narrowly tailored in accordance with the requirements of the Stock Exchange, Wuhan

Zhongteng transferred its minority equity interests in Jiwei Logic and Weifen Shanghai to

independent third parties. As of the Latest Practicable Date, Wuhan Fulu, as the sole

shareholder of Wuhan Zhongteng, is in the process of preparing for the application to dissolve

Wuhan Zhongteng prior to the [REDACTED] so as to streamline the corporate structure of the

Group. In the event that it becomes infeasible for Wuhan Zhongteng to be dissolved prior to

the [REDACTED], Wuhan Fulu intends to transfer its entire equity interest in Wuhan

Zhongteng to independent third parties prior to the [REDACTED].

6. Restructuring of Wuhan Yilu

Wuhan Yilu was established in the PRC as a limited liability company on November 19,

2015 with a registered capital of RMB1 million. Prior to the Reorganization, 70% of the shares

of Wuhan Yilu were owned by Kashgar Yiqiwan and 30% of the shares were owned by Mr. Ma

Jian, an independent third party.

To streamline the corporate structure of the Group and as part of the Reorganization, on

August 23, 2019, Kashgar Yiqiwan acquired 30% of equity interest in Wuhan Yilu held by Mr.

Ma Jian for nil consideration as Wuhan Yilu had negative shareholder equity at the time of the

acquisition. Wuhan Yilu became a wholly-owned subsidiary of Kashgar Yiqiwan, and the

Company has the power to indirectly exercise control over the operation and enjoy economic

benefits of Wuhan Yilu through contractual arrangements with Kashgar Yiqiwan. For further

details, please see “– Our Major Subsidiaries and Combined Affiliated Entities – Kashgar

Yiqiwan” and “Contractual Arrangements”.

COMPLIANCE WITH PRC LAWS AND REGULATION

Our PRC Legal Advisor confirmed that (i) the establishment of our subsidiaries in the

PRC and their subsequent shareholding changes have complied with the relevant laws and

regulations in all material respects; and (ii) the Reorganization has complied with all applicable

PRC laws and regulations in all material respects.

[REDACTED]

Subject to the share premium account of our Company being credited by an amount of

US$[REDACTED] as a result of the [REDACTED] of the [REDACTED] pursuant to the

[REDACTED], our Company will, on the [REDACTED], allot and issue a total of

[REDACTED] credited as fully paid at par to the holders of Shares whose names appear on


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the register of members of our Company on the day preceding the [REDACTED] in proportion

to their then existing shareholdings in our Company by capitalizing the sum of

US$[REDACTED] from the share premium account of our Company. The Shares allotted and

issued pursuant to the above [REDACTED] will rank pari passu in all respects with the

existing issued Shares.

PUBLIC FLOAT AND VOLUNTARY LOCK-UP

Upon the [REDACTED], the Shares beneficially owned by Mr. Fu Xi, Mr. Zhang Yuguo,

Mr. Shui Yingyu and Mr. Zhao Bihao will not be counted towards the public float of the

Company. Taking into account the Shares held by the existing Shareholders of the Company

and the Shares to be issued to other public shareholders pursuant to the [REDACTED], the

Directors are of the view that our Company will be able to satisfy the public float requirement

under Rule 8.08 of the Listing Rules.

[Notwithstanding that it is not required by Listing Rules, each of Mr. Fu Xi, Mr. Zhang

Yuguo, Mr. Shui Yingyu, Mr. Zhao Bihao and Luzhi Holdings, would voluntarily enter into a

contractual lock-up undertaking in favor of the Company prior to the [REDACTED] for a

period of 48 months from the [REDACTED]. Each of Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Shui

Yingyu, Mr. Zhao Bihao and Luzhi Holdings would undertake to the Company that subject to

any applicable laws, regulations or the Listing Rules and any lock-up arrangements with the

[REDACTED], they will not (and procure the companies controlled by them, trustee, or

nominees not to) sell, transfer or dispose the Shares beneficially owned by them for the first

12 months since the [REDACTED]. On the first [REDACTED] after each of the first, second,

third and fourth anniversary of the [REDACTED], a 25% of the Shares owned by each of them

will be unlocked. During the lock-up period and subject to the applicable lock-up percentage,

if any one of Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Shui Yingyu and Mr. Zhao Bihao plans to

transfer or dispose his Shares, he shall offer the other three non-selling parties the right of first

refusal to purchase such Shares. Commencing from the first [REDACTED] after the fourth

anniversary of the [REDACTED], Mr. Fu Xi, Mr. Zhang Yuguo, Mr. Shui Yingyu, Mr. Zhao

Bihao and Luzhi Holdings can freely sell, transfer or dispose their Shares. For the avoidance

of doubt, such restrictions will not apply to any new Shares acquired by Mr. Fu Xi, Mr. Zhang

Yuguo, Mr. Shui Yingyu, Mr. Zhao Bihao and Luzhi Holdings after the [REDACTED].]

CORPORATE AND SHAREHOLDING STRUCTURE

The following charts illustrate our corporate and shareholding structure (1) immediately

after completion of Reorganization but prior to completion of the [REDACTED] and the

[REDACTED] and (2) immediately after the completion of the [REDACTED] and the

[REDACTED] (assuming that the [REDACTED] has not been exercised).


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(1) After completion of the Reorganization but prior to the completion of the[REDACTED] and the [REDACTED]

Direct Ownership


Zhangyuguo

Holdings(2)

FuXi

Limited(1)

Fuzhi

Holdings

Fuxu

Holdings

the Company

Fulu HK

Shuiyingyu

Holdings(3)

Zhaobihao

Holdings(4)

Luzhi

Holdings(5)

Kashgar

Yiqiwan(6)

Wuhan Yilu

Wuhan

Fulu(7)

Offshore

Onshore

Wuhan

Yiqiyou

Wuhan

LishuoTibet Fulu

Wuhan

Souka

Wuhan

Tianshi

Hubei

Kejin

Xinjiang

Fulu

Tibet

Huluwa

Xinjiang

Huluwa

100%

100%

100%

100%

100%

100%

100% 100% 100% 100% 100% 100% 100% 100%

6.45% 6.00% 46.43% 15.33% 7.03% 5.61% 13.15%

Fulu Technology

(WFOE)

Notes:

(1) FuXi Limited, a limited liability company incorporated in the BVI on June 27, 2019, is wholly owned by Mr.Fu Xi, a Controlling Shareholder and an executive Director. Fuxu Holdings and Fuzhi Holdings arewholly-owned subsidiaries of FuXi Limited.

(2) Zhangyuguo Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is wholly ownedby Mr. Zhang Yuguo, a Controlling Shareholder and an executive Director.

(3) Shuiyingyu Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is wholly ownedby Mr. Shui Yingyu, a Controlling Shareholder and an executive Director.

(4) Zhaobihao Holdings, a limited liability company incorporated in the BVI on June 25, 2019, is wholly ownedby Mr. Zhao Bihao, a Controlling Shareholder and an executive Director.

(5) Luzhi Holdings, a limited liability company incorporated in the BVI on September 20, 2019, is owned as to14.52%, 3.65%, 2.99%, 2.72%, 2.72%, 34.36%, 10.24%, 3.39%, 3.21%, 7.14% and 11.00% by Mr. YangYuquan, Mr. Liu Lufeng, Ms. Shen Yaling, Mr. Wang Qiang, Mr. Guo Chenxi, Mr. Xu Jian, Mr. Ren Wei, Mr.Mei Qiaojun, Mr. Li Jun, Mr. Ding Chao and Mr. Chen Tianjun, respectively, each of whom a current employeeof the Group, and 4.06% by Mr. Tian Xuan, who is a former employee of the Group.

(6) Kashgar Yiqiwan is owned by Mr. Zhang Yuguo as to 99% and Ms. Shen Yaling as to 1% as designated by theWFOE. Please see “– Our Major Subsidiaries and Combined Affiliated Entities – Kashgar Yiqiwan” and“Contractual Arrangements” for more details.

(7) Wuhan Fulu is owned as to (i) 50.03% by Mr. Fu Xi, (ii) 15.08% by Mr. Zhang Yuguo, (iii) 7.03% by Mr. ShuiYingyu, (iv) 3.69% by Mr. Zhao Bihao; (v) 12.72% by Tibet Fuxu and (vi) 11.45% by Tibet Fulong. Pleasesee “Contractual Arrangements” for more details.

Tibet Fuxu is a limited partnership and one of the employee shareholding vehicles. Tibet Fuxu is owned byMr. Fu Xi as to 37.74%, Mr. Yang Yuquan as to 15.01%, Mr. Liu Lufeng as to 3.78%, Ms. Shen Yaling as to3.09%, Mr. Wang Qiang as to 2.81%, Mr. Guo Chenxi as to 2.81%, Mr. Zhang Yuguo as to 2.02%, Mr. ZhaoBihao as to 15.09%, Mr. Tian Xuan as to 4.19%, Mr. Xu Jian as to 0.11%, Mr. Ding Chao as to 1.72%, Mr.Mei Qiaojun as to 2.44%, Mr. Chen Tianjun as to 7.43% and Mr. Li Jun as to 1.75%. Mr. Fu Xi, Mr. ZhangYuguo and Mr. Zhao Bihao are our Controlling Shareholders and executive Directors. Mr. Chen Tianjun andMr. Xu Jian are members of our senior management. Mr. Yang Yuquan, Mr. Liu Lufeng, Ms. Shen Yaling, Mr.Wang Qiang, Mr. Guo Chenxi, Mr. Ding Chao, Mr. Mei Qiaojun and Mr. Li Jun are our current employees.Mr. Tian Xuan is a former employee of the Group.

Tibet Fulong is a limited partnership and one of the employee shareholding vehicles. Tibet Fulong is ownedby Mr. Ren Wei as to 11.75%, Mr. Fu Xi as to 35.36%, Mr. Ding Chao as to 6.29%, Mr. Xu Jian as to 39.31%,Mr. Chen Tianjun as to 4.37%, Mr. Mei Qiaojun as to 1.18% and Mr. Li Jun as to 1.75%. Mr. Fu Xi is ourControlling Shareholder and an executive Director. Mr. Ren Wei, Mr. Xujian and Mr. Chen Tianjun aremembers of our senior management. Mr. Ding Chao, Mr. Mei Qiaojun and Mr. Li Jun are our currentemployees.


– 124 –


(2) Immediately after the completion of the [REDACTED] and the [REDACTED]

(before exercise of the [REDACTED])

Direct Ownership


Shuiyingyu

Holdings(3)

Fuzhi

Holdings

FuXi

Limited(1)

Zhangyuguo

Holdings(2)

the Company

Fulu HK

Offshore

Onshore

Wuhan

Yiqiyou

Wuhan

LishuoTibet Fulu

Wuhan

Souka

Wuhan

TianshiHubei Kejin

Xinjiang

Fulu

Tibet

Huluwa

Xinjiang

Huluwa

Wuhan

Fulu(7)

Kashgar

Yiqiwan(6)

Wuhan Yilu

100%

100% 100%

100%

100%

[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

100%

100% 100% 100% 100% 100% 100% 100%

Zhaobihao

Holdings(4)

Luzhi

Holdings(5)

Other Public

Shareholders

Fuxu

Holdings

[REDACTED]

Fulu Technology

(WFOE)

Notes (1) to (7):

Please refer to the details contained in the preceding page.

PRC REGULATORY REQUIREMENTS

M&A Rules

According to the Regulations on Merger with and Acquisition of Domestic Enterprises by

Foreign Investors (《關於外國投資者併購境內企業的規定》) (the “M&A Rules”) jointly

issued by the MOFCOM, the State-owned Assets Supervision and Administration Commission

of the State Council, the SAT, the CSRC, the SAIC and the SAFE on August 8, 2006, effective

as of September 8, 2006 and amended on June 22, 2009, a foreign investor is required to obtain

necessary approvals when it (1) acquires the equity of a domestic enterprise so as to convert

the domestic enterprise into a foreign-invested enterprise; (2) subscribes the increased capital

of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested

enterprise; (3) establishes a foreign-invested enterprise through which it purchases the assets

of a domestic enterprise and operates these assets; or (4) purchases the assets of a domestic

enterprise, and then invests such assets to establish a foreign-invested enterprise. The M&A

Rules, among other things, further purport to require that an offshore special vehicle, or a

special purpose vehicle, formed for listing purposes and controlled directly or indirectly by

PRC companies or individuals, shall obtain the approval of the CSRC prior to the listing and

trading of such special purpose vehicle’s securities on an overseas stock exchange, especially

in the event that the special purpose vehicle acquires shares or equity interest in the PRC

companies in exchange for the shares of offshore companies.


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Our PRC Legal Advisor is of the opinion that prior CSRC approval for this offering is not

required because (i) our wholly foreign-owned PRC subsidiary was not established through a

merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC

companies or individuals as defined under the M&A Rules that are the beneficial owners of our

Company, and (ii) no provision in the M&A Rules clearly classifies contractual arrangements

as a type of transaction subject to the M&A Rules. However, our PRC Legal Advisor further

advises that there is uncertainty as to how the M&A Rules will be interpreted or implemented.

SAFE Registration

Pursuant to the Circular of the SAFE on Concerning Relevant Issues on the Foreign

Exchange Administration of Offshore Investing and Financing and Round-Trip Investing by

Domestic Residents through Special Purpose Vehicles (《國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (the “SAFE Circular No.37”), promulgated by SAFE and which became effective on July 4, 2014, and which replaced

the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’

Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles

(《關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》), (a) a

PRC resident must register with the local SAFE branch before he or she contributes assets or

equity interests to an overseas special purpose vehicle (the “Overseas SPV”) that is directly

established or indirectly controlled by the PRC resident for the purpose of conducting

investment or financing, and (b) following the initial registration, the PRC resident is also

required to register with the local SAFE branch for any major change, in respect of the

Overseas SPV, including, among other things, a change of Overseas SPV’s PRC resident

shareholder(s), the name of the Overseas SPV, terms of operation, or any increase or reduction

of the Overseas SPV’s capital, share transfer or swap, and merger or division. 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 that special purpose vehicle may be restricted from

making profit distributions to the offshore parent and from carrying out subsequent

cross-border foreign exchange activities, and the 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 could result in

liability under PRC law for evasion of foreign exchange controls.

Pursuant to the Notice of the SAFE on Simplifying and Improving the Foreign Currency

Management Policy on Direct Investment (《國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知》) (the “SAFE Circular No. 13”), promulgated by SAFE and which

became effective on June 1, 2015, the power to accept SAFE registration was delegated from

local SAFE to local banks where the assets or interests in the domestic entity are located.

As advised by our PRC Legal Advisor, our individual beneficial owners, who are known

to us as PRC citizens, have duly completed their registration in compliance with the SAFE

Circular No. 37 and the SAFE Circular No. 13 as of December 6, 2019. We expect to complete

the necessary changes to the SAFE registration as a result of the Reorganization prior to the

[REDACTED].


– 126 –


Documents

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE › app › sehk › 2020 › 101385 › a103425 › s… · As part of the Reorganization, our Company became the holding company