Company: SSEA
Filing Date: 2025-06-12
Form Type: S-1
Source: 0001829126-25-004429
Chunk: 42

Company: STARRY SEA ACQUISITION CORP
Filing Date: 2025-06-12
Form: S-1
Chunk 42
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 determined in accordance with Chinese accounting standards and regulations. 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 approval of the State Administration for Foreign Exchange (“SAFE”) by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of a PRC target company’s subsidiaries may be used to pay dividends to the post-combination holding company. In addition, each of the PRC target company’s subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of the Renminbi (“RMB”), the legal currency of the PRC, into foreign currencies and the remittance of currencies out of the PRC. Therefore, the combined company may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from its profits, if any. Furthermore, if the PRC target company’s subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If the combined company or the PRC target company and its subsidiaries are unable to receive all of the revenues from their operations through the VIE agreements, the combined company may be unable to pay dividends on its ordinary shares.

If the combined company will be considered a PRC tax resident enterprise for tax purposes, any dividends it pays to its overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. In addition, in order for to pay dividends to its shareholders, the combined company may rely on payments made from the VIE to WFOE, pursuant to VIE agreements between them, and the distribution