This excerpt taken from the SOHU 10-K filed Feb 26, 2009.
Risks Related to Chinas Regulation EnvironmentSTYLE="margin-top:6px;margin-bottom:0px">If our current ownership structure is found to be in violation of current or future PRC laws, rules or regulations regarding the legality of foreign investment in
the PRC Internet sector, we could be subject to severe penalties.
We conduct our Internet and value-added telecommunication operations solely in
The PRC began several years ago to regulate its Internet sector by making pronouncements or
STYLE="margin-top:12px;margin-bottom:0px">In addition, under the agreement reached in November 1999 between the PRC and the United States concerning the United States support of Chinas entry into the
World Trade Organization (or WTO), regulation of foreign investment in PRC Internet services is to be liberalized to allow for 30% foreign ownership in key telecommunication services, including PRC Internet ventures, for the first year after
Chinas entry into the WTO, 49% in the second year and 50% thereafter. China officially entered the WTO on December 11, 2001. However, the implementation of Chinas WTO accession agreements is still subject to various conditions.
Accordingly, it is possible that the relevant PRC authorities could, at any time, assert that any portion or all of the Sohu PRC subsidiaries and
If we or any of our PRC subsidiaries and VIEs were found to be in violation of any existing
Sogou Information and Gamease.
As of December 31, 2008, Sohu had outstanding long-term loans of $11.9 million to Dr. Zhang, Sohus
The loan agreements contain provisions that, subject to PRC laws, (i) the loans can only be repaid to us by transferring the shares of
the amounts advanced under these loans will depend on the profitability of High Century, Sohu Entertainment, GoodFeel, Sogou Information and Gamease is uncertain.
Furthermore, because of uncertainties associated with the PRC law, ultimate enforcement of the loan agreements is
FACE="Times New Roman" SIZE="2">We depend upon contractual arrangements with High Century, Sohu Entertainment, Sohu Internet, GoodFeel, Tu Xing Tian Xia, Feng Yang Tian Lang, Sogou Information and Gamease for the success of our business and
SIZE="2">Because we conduct our Internet operations only in the PRC, and are restricted or prohibited by the PRC government from owning Internet content or telecommunication operations in the PRC, we are dependent on High Century, Sohu