Company: SSEA
Filing Date: 2025-04-11
Form Type: DRS/A
Source: 0001829126-25-002569
Chunk: 37

Company: STARRY SEA ACQUISITION CORP
Filing Date: 2025-04-11
Form: DRS/A
Chunk 37
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 its shareholders to operate the business. The combined company will not have equity interests in such PRC operating companies but whose financial results would be consolidated into its consolidated financial statements in accordance with U.S. GAAP, due to it or its direct owned subsidiaries in PRC, i.e., the wholly foreign-owned enterprise (“WFOE”) and the combine company’s being the primary beneficiary of, such entity, for accounting purposes. You will not directly hold equity interests in PRC operating companies. Additionally, the agreements associated with the VIE structure have not been tested in court of law in any jurisdiction. As a result, although other means are available for the combined company to obtain financing at the holding company level, its ability to pay dividends to its shareholders and to service any debt it may incur may depend upon dividends paid by the PRC target company’s subsidiaries.

To the extent that a VIE structure is utilized due to restrictions of foreign investment in the target’s industry, the PRC subsidiaries may subsequently provide funds to the VIE through extending loans subject to statutory limits and restrictions. After the business combination, the combined company may rely on dividends and other distributions from the operating companies to provide it with cash flow and to meet its other obligations. The combined company’s ability to pay dividends, if any, to the shareholders and to service any debt it may incur will depend upon dividends paid by its PRC subsidiaries which are entitled to substantially all of the economic benefits of the VIEs. Under PRC laws and regulations, PRC companies are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to offshore entities. In particular, under the current PRC laws and regulations, dividends may be paid only out of distributable profits. Distributable profits are the net profit as determined under Chinese accounting standards and regulations, less any recovery of accumulated losses and appropriations to statutory and other reserves required to be made.

To the extent that a VIE structure is utilized, cash is transferred through the post-combination organization in the manner as follows: (1) the holding company may transfer funds to its subsidiaries, or intermediate holding companies, via additional capital contributions or shareholder loans, as the case may be; (2) the intermediate holding companies may provide loans to the VIE, subject to statutory limits and restrictions; (3) funds from the VIE to the intermediate holding companies are remitted as services fees; and (4) the intermediate holding companies may make dividends or other distributions to the holding company.

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