Correspondence 0001104659-24-096031 from Baozun Inc. (BZUN)
Baozun Inc.
Date: Sept. 3, 2024 · CIK: 0001625414 · Accession: 0001104659-24-096031
AI Filing Summary & Sentiment
File numbers found in text: 001-37385
Referenced dates: August 6, 2024
Letter
VIA EDGAR Division of Corporation Finance Taylor Beech Re: Baozun Inc. Form 20-F for the Fiscal Year Ended December 31, 2023 File No. 001-37385
Dear Mr. Stringer, Mr. Phippen, Mr. Anderegg and Ms. Beech,
On behalf of our client, Baozun Inc., an exempted company organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated August 6, 2024 on the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023 (“Annual Report”). The Staff’s comments are repeated below in italics and are followed by the Company’s responses. Defined terms used but not defined herein have the meanings assigned to such terms in the Annual Report.
Form 20-F for the Fiscal Year Ended December 31, 2023
Certain Defined Terms, page 1
1. We note that your definition of "China" and "PRC" excludes Hong Kong. Revise to clarify that the “legal and operational” risks associated with operating in China also apply to operations in Hong Kong. This disclosure could appear in the definition itself or in an appropriate discussion of legal and operational risks.
Partners | Constance Choy H.M., Desmond Ang C.K., (Stephanie) Chan C. M., (Christopher) Cheng C.H., Meng Ding, Dominic D. James, (Sherlyn) Lau S.Y., David K. Lee,
Olivia Ngan S.M., (Raymond) Oh C.H., Yuet Ming Tham, (Friven) Yeoh K.H., Claudia Yu K.W., Yan Zhang
Registered Foreign Lawyers | Lei Li (New York)*, (Carrie) Li J. (New York)*, David J. Ryan (Victoria), G. Matthew Sheridan (New York)*,
Effie Vasilopoulos (New South Wales)*, (Renee) Xiong Y. (New York)*, Liming Xu (New York)
Consultants | Hon Au Yeung, Huberta Chow X.L., (Winnie) Mak T.M.,
Douglas Tsang C.L., (Eva) Tsui Y.W, Alan Wong C.K., Felicity Wong K.Y., Holly Yeung S.M., Iris Yuen L.S.
* Partner of Sidley Austin Holding LLP (a Delaware Limited Liability Partnership)
Page 2
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 1
CERTAIN DEFINED TERMS
“China” and the “PRC” are to the People’s Republic of China, excluding, for the purpose of this annual report only, including Taiwan, the Hong Kong Special Administrative Region and the Macau Special Administrative Region; however, only in the context of describing PRC laws, regulations and other legal or tax matters in this annual report, excludes Taiwan, the Hong Kong Special Administrative Region and the Macau Special Administrative Region. The same legal and operational risks associated with operations in China also apply to operations in Hong Kong;
Our Corporate Structure and Contractual Arrangements with our VIE, page 3
2. Clearly disclose how you will refer to the holding company, subsidiaries, and VIEs when providing the disclosure throughout the document so that it is clear to investors which entity the disclosure is referencing and which subsidiaries or entities are conducting the business operations. Refrain from using terms such as “we” or “our” when describing activities or functions of a VIE. For example, disclose, if true, that your subsidiaries and/or the VIE conduct operations in China, that the VIE is consolidated for accounting purposes but is not an entity in which you own equity, and that the holding company does not conduct operations.
In response to the Staff’s comment, the Company acknowledges the Staff’s comments and will refrain from using terms such as “we” or “our” when describing activities or functions of a VIE. The Company also respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 1
CERTAIN DEFINED TERMS
Page 3
“Baozun,” “we,” “us,” “our company,” and “our,” are to Baozun Inc., a Cayman Islands exempted holding company with no substantial business operations, formerly known as Baozun Cayman Inc. and unless the context requires otherwise, includes its consolidated subsidiaries and variable interest entity, and its subsidiaries, unless otherwise indicated;
……
“VIE” are to variable interest entity, and “our VIE” are to Shanghai Zunyi Business Consulting Ltd., or Shanghai Zunyi, our PRC consolidated VIE variable interest entity that conducts operations in China and is consolidated for accounting purposes in which we do not hold any equity interests.
3. We note your disclosure concerning your VIE arrangements. Please augment your disclosure to state that this structure involves unique risks to investors. If true, disclose that these contracts have not been tested in court. Explain whether the VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies, and disclose that investors may never hold equity interests in the Chinese operating company. We note your disclosure that "government actions causes us to lose our right to direct the activities of Shanghai Zunyi." Your disclosure should acknowledge that Chinese regulatory authorities could disallow this structure, which would likely result in a material change in your operations and/or a material change in the value of your securities, including that it could cause the value of such securities to significantly decline or become worthless.
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 3
ITEM 3. KEY INFORMATION
……Revenues from Shanghai Zunyi contributed to 8.6%, 6.8% and 6.2% of our total net revenues in 2021, 2022 and 2023, respectively. Investors in our ADSs are not purchasing, and may never hold, equity interest in ourthe VIE in China or any PRC subsidiaries, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.
……
Page 4
These contractual arrangements This VIE structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in internet information service companies. As our economic benefits in and the control over operations of Shanghai Zunyi are based on contractual agreements only, and are not equivalent to equity ownership in the business of Shanghai Zunyi, the structure involves unique risks to investors. Because we do not hold equity interests in the VIE, the contractual agreements may not be as effective as direct ownership in providing us with control over ourthe VIE. If ourthe VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements..…….
The contractual arrangements have not been tested in a court of law, and we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to limitation on foreign ownership of internet information service companies, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of our contractual arrangements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material adverse change in our operations and the value of our ADSs may significantly decline or become worthless.
4. We note your disclosure at the top of page 4, "Our business and operations are primarily based in the PRC, and are governed by PRC laws, rules and regulations, and the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable." Please augment your disclosure to make clear whether these risks could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Your disclosure should address how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and data security or anti-monopoly concerns, have or may impact the company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange.
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 4
ITEM 3. KEY INFORMATION
Page 5
Our Corporate Structure and Contractual Arrangements with ourthe VIE
……
Our business and operations are primarily based in the PRC, and are governed by PRC laws, rules and regulations, and the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. As an online distributor of goods, we are subject to numerous PRC laws and regulations that regulate retailers generally or govern online retailers specifically. Such legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. These risks could result in a material adverse change in our operations and/or the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of such securities to significantly decline or be worthless. See “Item 3. Key Information — D. Risk Factors— Risks Related to Doing Business in the People’s Republic of China — There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations”, “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People’s Republic of China — We are subject to laws that are applicable to retailers, including advertising and promotion laws and consumer protection laws that could require us to modify our current business practices and incur increased costs” and “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People’s Republic of China — Failure to comply with the relatively new E-Commerce Law may have a material adverse impact on our business, financial conditions and results of operations.”
Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate the business operations, the use of variable interest entities, data security and anti-monopoly activities of China-based companies, including the following: the Measures for Cyber Security Review (2021), the Measures for the Security Assessment of Data Exit and related guidelines, the Standard Contract for the Outbound Cross-border Transfer of Personal Information (the “Standard Contract”) and the Measures for the Standard Contract for the Outbound Cross-Border Transfer of Personal Information (the "Measures for the Standard Contract"), the Anti-Monopoly Law and its supporting laws and regulations and related guidelines, the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Version), the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines (collectively, the “Overseas Listing Filing Rules”), and the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Archives Rules”).
Page 6
In connection with our issuance of securities to foreign investors, under current PRC laws, regulations, and rules, as of the date of this annual report, we, our PRC subsidiaries, and the VIE (i) are not required to obtain permissions from or complete filings with the China Securities Regulatory Commission (the “CSRC”) or any other PRC government authorities under the abovementioned PRC laws and regulations, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China (the “CAC”), and (iii) have not received or were not denied such requisite permissions by any PRC authority. We have not been involved in any investigations or cybersecurity review initiated by the CAC and we have not received any official inquiry, notice, warning, or sanctions regarding cybersecurity and overseas listing from the CAC, the CSRC, or any other PRC government authorities.
The PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas by and/or foreign investment in China-ba
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filename1.htm
SIDLEY
AUSTIN
39/F, TWO INT'L FINANCE CENTRE
CENTRAL, HONG KONG
+852 2509 7888
+852 2509 3110 FAX
AMERICA • ASIA PACIFIC • EUROPE
MENG.DING@SIDLEY.COM
+852 2509 7858
September 3, 2024
VIA EDGAR
Division of Corporation Finance
Disclosure Review Program
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Attn: Scott Stringer
Adam Phippen
Scott Anderegg
Taylor Beech
Re: Baozun
Inc.
Form
20-F for the Fiscal Year Ended December 31, 2023
File
No. 001-37385
Dear Mr. Stringer, Mr. Phippen, Mr. Anderegg and Ms. Beech,
On behalf of our client, Baozun Inc., an exempted company organized
under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities
and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained
in the Staff’s letter dated August 6, 2024 on the Company’s Annual Report on Form 20-F for the fiscal year ended December
31, 2023 (“Annual Report”). The Staff’s comments are repeated below in italics and are followed by the Company’s
responses. Defined terms used but not defined herein have the meanings assigned to such terms in the Annual Report.
Form 20-F for the Fiscal Year Ended December 31, 2023
Certain Defined Terms, page 1
1. We
note that your definition of "China" and "PRC" excludes Hong Kong. Revise
to clarify that the “legal and operational” risks associated with operating in
China also apply to operations in Hong Kong. This disclosure could appear in the definition
itself or in an appropriate discussion of legal and operational risks.
Partners
| Constance Choy H.M., Desmond Ang C.K., (Stephanie) Chan C. M., (Christopher) Cheng C.H., Meng Ding, Dominic D. James, (Sherlyn)
Lau S.Y., David K. Lee,
Olivia Ngan S.M., (Raymond) Oh C.H., Yuet Ming Tham, (Friven) Yeoh K.H., Claudia Yu K.W., Yan Zhang
Registered Foreign Lawyers | Lei Li (New York)*, (Carrie) Li J. (New York)*, David J. Ryan (Victoria), G. Matthew Sheridan (New
York)*,
Effie Vasilopoulos (New South Wales)*, (Renee) Xiong Y. (New York)*, Liming Xu (New York)
Consultants | Hon Au Yeung, Huberta Chow X.L., (Winnie) Mak T.M.,
Douglas Tsang C.L., (Eva) Tsui Y.W, Alan Wong C.K., Felicity Wong K.Y., Holly Yeung S.M., Iris Yuen L.S.
*
Partner of Sidley Austin Holding LLP (a Delaware Limited Liability Partnership)
Page 2
In response to the Staff’s comment, the Company respectfully
proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location
of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates
and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 1
CERTAIN DEFINED TERMS
“China” and the “PRC” are to the People’s
Republic of China, excluding, for the purpose of this annual report only, including Taiwan, the Hong Kong Special
Administrative Region and the Macau Special Administrative Region; however, only in the context of describing PRC laws, regulations
and other legal or tax matters in this annual report, excludes Taiwan, the Hong Kong Special Administrative Region and the Macau Special
Administrative Region. The same legal and operational risks associated with operations in China also apply to operations in Hong Kong;
Our Corporate Structure and Contractual Arrangements
with our VIE, page 3
2. Clearly
disclose how you will refer to the holding company, subsidiaries, and VIEs when providing
the disclosure throughout the document so that it is clear to investors which entity the
disclosure is referencing and which subsidiaries or entities are conducting the business
operations. Refrain from using terms such as “we” or “our” when describing
activities or functions of a VIE. For example, disclose, if true, that your subsidiaries
and/or the VIE conduct operations in China, that the VIE is consolidated for accounting purposes
but is not an entity in which you own equity, and that the holding company does not conduct
operations.
In response to the Staff’s comment, the Company acknowledges
the Staff’s comments and will refrain from using terms such as “we” or “our” when describing activities
or functions of a VIE. The Company also respectfully proposes to revise the referenced disclosure as follows (page reference is made
to the 2023 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown
as strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development
of the subject matter being disclosed:
Page 1
CERTAIN DEFINED TERMS
Page 3
“Baozun,” “we,” “us,” “our
company,” and “our,” are to Baozun Inc., a Cayman Islands exempted holding company with no substantial business
operations, formerly known as Baozun Cayman Inc. and unless the context requires otherwise, includes its consolidated subsidiaries
and variable interest entity, and its subsidiaries, unless otherwise indicated;
……
“VIE” are to variable interest entity, and “our
VIE” are to Shanghai Zunyi Business Consulting Ltd., or Shanghai Zunyi, our PRC consolidated VIE variable
interest entity that conducts operations in China and is consolidated for accounting purposes in which we do not hold any equity interests.
3. We
note your disclosure concerning your VIE arrangements. Please augment your disclosure to
state that this structure involves unique risks to investors. If true, disclose that these
contracts have not been tested in court. Explain whether the VIE structure is used to provide
investors with exposure to foreign investment in China-based companies where Chinese law
prohibits direct foreign investment in the operating companies, and disclose that investors
may never hold equity interests in the Chinese operating company. We note your disclosure
that "government actions causes us to lose our right to direct the activities of Shanghai
Zunyi." Your disclosure should acknowledge that Chinese regulatory authorities could
disallow this structure, which would likely result in a material change in your operations
and/or a material change in the value of your securities, including that it could cause the
value of such securities to significantly decline or become worthless.
In response to the Staff’s comment, the Company
respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the
approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined),
subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 3
ITEM 3. KEY INFORMATION
……Revenues from Shanghai Zunyi contributed
to 8.6%, 6.8% and 6.2% of our total net revenues in 2021, 2022 and 2023, respectively. Investors in our ADSs are not purchasing, and
may never hold, equity interest in ourthe VIE in China or any PRC subsidiaries, but instead are purchasing
equity interest in a holding company incorporated in the Cayman Islands.
……
Page 4
These contractual arrangements
This VIE structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment
in internet information service companies. As our economic benefits in and the control over operations of Shanghai Zunyi are based on
contractual agreements only, and are not equivalent to equity ownership in the business of Shanghai Zunyi, the structure involves unique
risks to investors. Because we do not hold equity interests in the VIE, the contractual agreements may
not be as effective as direct ownership in providing us with control over ourthe VIE. If ourthe
VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial
costs and expend additional resources to enforce such arrangements..…….
The contractual arrangements have not been tested
in a court of law, and we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations,
including but not limited to limitation on foreign ownership of internet information service companies, regulatory review of overseas
listing of PRC companies through a special purpose vehicle, and the validity and enforcement of our contractual arrangements. We are
also subject to the risks of uncertainty about any future actions of the PRC government in this regard that could disallow the VIE structure,
which would likely result in a material adverse change in our operations and the value of our ADSs may significantly decline or become
worthless.
4. We
note your disclosure at the top of page 4, "Our business and operations are primarily
based in the PRC, and are governed by PRC laws, rules and regulations, and the interpretation
and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent
and unpredictable." Please augment your disclosure to make clear whether these risks
could significantly limit or completely hinder your ability to offer or continue to offer
securities to investors and cause the value of such securities to significantly decline or
be worthless. Your disclosure should address how recent statements and regulatory actions
by China’s government, such as those related to the use of variable interest entities
and data security or anti-monopoly concerns, have or may impact the company’s ability
to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange.
In response to the Staff’s comment, the Company respectfully
proposes to revise the referenced disclosure as follows (page reference is made to the 2023 Form 20-F to illustrate the approximate location
of the disclosure) in its future Form 20-F filings (with deletions shown as strikethrough and additions underlined), subject to updates
and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 4
ITEM 3. KEY INFORMATION
Page 5
Our Corporate Structure and Contractual Arrangements
with ourthe VIE
……
Our business and operations are primarily based in the
PRC, and are governed by PRC laws, rules and regulations, and the interpretation and enforcement of these laws, rules and regulations
involve uncertainties and can be inconsistent and unpredictable. As an online distributor of goods, we are subject to numerous PRC laws
and regulations that regulate retailers generally or govern online retailers specifically. Such legal requirements are frequently changed
and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on
our operations. These risks could result in a material adverse change in our operations and/or the value of our ADSs, significantly
limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of such securities
to significantly decline or be worthless. See “Item 3. Key Information — D. Risk Factors— Risks Related to Doing
Business in the People’s Republic of China — There are uncertainties regarding the interpretation and enforcement of PRC
laws, rules and regulations”, “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in
the People’s Republic of China — We are subject to laws that are applicable to retailers, including advertising and promotion
laws and consumer protection laws that could require us to modify our current business practices and incur increased costs” and
“Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People’s Republic of China
— Failure to comply with the relatively new E-Commerce Law may have a material adverse impact on our business, financial conditions
and results of operations.”
Recently, the PRC government adopted a series of regulatory
actions and issued statements to regulate the business operations, the use of variable interest entities, data security and anti-monopoly
activities of China-based companies, including the following: the Measures for Cyber Security Review (2021), the Measures for the Security
Assessment of Data Exit and related guidelines, the Standard Contract for the Outbound Cross-border Transfer of Personal Information
(the “Standard Contract”) and the Measures for the Standard Contract for the Outbound Cross-Border Transfer of Personal Information
(the "Measures for the Standard Contract"), the Anti-Monopoly Law and its supporting laws and regulations and related guidelines,
the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Version), the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines (collectively, the “Overseas Listing
Filing Rules”), and the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering
and Listing by Domestic Companies (the “Archives Rules”).
Page 6
In connection with our issuance of securities to foreign
investors, under current PRC laws, regulations, and rules, as of the date of this annual report, we, our PRC subsidiaries, and the VIE
(i) are not required to obtain permissions from or complete filings with the China Securities Regulatory Commission (the “CSRC”)
or any other PRC government authorities under the abovementioned
PRC laws and regulations, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China (the “CAC”),
and (iii) have not received or were not denied such requisite permissions by any PRC authority. We have not been involved in any investigations
or cybersecurity review initiated by the CAC and we have not received any official inquiry, notice, warning, or sanctions regarding cybersecurity
and overseas listing from the CAC, the CSRC, or any other PRC government authorities.
The PRC government has recently indicated an intent
to exert more oversight and control over offerings that are conducted overseas by and/or foreign investment in China-ba