Company: NCL
Filing Date: 2025-02-07
Form Type: 424B3
Source: 0001575872-25-000134
Chunk: 31

Company: Northann Corp.
Filing Date: 2025-02-07
Form: 424B3
Chunk 31
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DC equal at least
the amount of the proposed distribution. The California General Corporation Law also provides that, in the event that sufficient
retained earnings are not available for the proposed distribution, a corporation may nevertheless make a distribution to its stockholders
if it meets two conditions, which generally stated are as follows: (i) the corporation’s assets equal at least 1 and 1/4 times its
liabilities, and (ii) the corporation’s current assets equal at least its current liabilities or, if the average of the corporation’s
earnings before taxes on income and before interest expenses for the two preceding fiscal years were less than the average of the corporation’s
interest expenses for such fiscal years, then the corporation’s current assets must equal at least 1 and 1/4 times its current liabilities.

Benchwick, Cedar Modern Limited, and Raleigh Industries
Limited, our Hong Kong subsidiaries, are permitted, under the laws of Hong Kong, to provide funding to the Company through dividend distribution
out of its profits. Under the current practices of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect
of dividends paid to the Company as a Nevada corporation.

According to the PRC Company Law and the Foreign Investment
Law, each of Crazy Industry, Marco, Ringold and NCP, as a foreign invested enterprise, or FIE, is required to draw 10% of its after-tax
profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common
reserve has already accounted for over 50% of its registered capital. These reserves are not distributable as cash dividends. Furthermore,
under the EIT Law, which became effective in January 2008, the maximum tax rate for the withholding tax imposed on dividend payments from
PRC foreign invested companies to their overseas investors that are not regarded as a “resident” for tax purposes is 20%.
The rate was reduced to 10% under the Implementing Regulations for the EIT Law issued by the State Council. However, a lower withholding
tax rate might be applied if there is a tax treaty between China and the jurisdiction of a foreign holding company. Mainland China and
the Hong Kong Special Administrative Region entered into a tax arrangement to avoid double taxation and prevent fiscal evasion with respect
to income tax. The tax arrangement applies where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise,
directly holds at