Ten minutes after Li Mingyang had left, Yao Yun, Tiansheng Capital's chief lawyer, entered Lu Ming's office with a stack of comprehensive materials. She came well-prepared, ready to discuss the intricacies of Tiansheng Capital's backdoor listing and restructuring during the holiday break.
Lu Ming acknowledged the dedicated effort Yao Yun had put into her work and expressed his gratitude for her overtime commitment during the holiday period.
The heart of Yao Yun's proposal was a strategy known as the "two-layer structure." It was designed to ensure Lu Ming's control over the company even after it went public. Yao Yun had meticulously outlined the details to safeguard Lu Ming's authority.
One critical aspect was the composition of the board of directors. Currently, there were seven members on the board, with the founder (Lu Ming) having the right to nominate more than half of them. This strategic move guaranteed Lu Ming's strong influence over board decisions, even as the company's equity was dispersed post-listing.
To fortify this control, Yao Yun introduced a special agreement that required over 90% of all shareholders' votes to modify the clause allowing the founder to nominate the majority of directors. Given Lu Ming's ownership of over 90% of Tiansheng Capital's equity, this safeguarded his position as the majority nominator on the board of directors.
The second layer of protection centered on subsidiary entities. Each of Tiansheng Capital's four core businesses—VC, PV, private equity, and public funds—had its own subsidiary. These entities adopted a similar corporate structure, with their articles of association and shareholder agreements referencing templates. Moreover, 100% of their equity was consolidated into a shell company, referred to as Tiansheng Holdings, which would ultimately undergo a backdoor listing.
This structure offered risk isolation; in case of an issue within one subsidiary, the potential risks would not systematically affect the others. Tiansheng Holdings served as a pure shareholding platform, insulating the risk from other entity subsidiaries.
The introduction of independent directors and the inclusion of a "golden parachute clause" in the director and senior supervisor contracts further bolstered the corporate governance structure. These elements encouraged diverse opinions within the company, preventing unilateral decisions by the majority shareholder.
The "golden parachute clause" protected senior management by imposing substantial costs on their dismissal. Independent directors, being third-party representatives, contributed to a healthier decision-making process. Their impartiality was vital for sound corporate governance.
Lu Ming was determined to ensure that independent directors had a voice, even if their objections couldn't prevent the passage of resolutions due to his majority control. Their opinions and objections could serve as a corrective mechanism, leading to adjustments and corrections when necessary.
Finally, Lu Ming outlined the composition of the board of directors. Four seats would be nominated by the internal directors. Lu Ming, as the chairman, would nominate Yao Yun, Su Xiaoman, and Ge Feng, the head of the primary market. This decision was strategic, fostering a united front within the board while also considering potential future expansion of the board.
Yao Yun absorbed Lu Ming's directives and insights. She had skillfully crafted a well-rounded and legally sound strategy for Tiansheng Capital's backdoor listing and restructuring. The meticulous planning aimed to ensure Lu Ming's continued control and the company's robust corporate governance even as it entered the complex realm of public trading.