Moonshot AI, the Chinese AI unicorn behind the popular Kimi chatbot, has informed shareholders that it intends to dismantle its offshore structure to pave the way for an initial public offering, likely in Hong Kong, according to people familiar with the matter.

The Beijing-based start-up, with assets held by a Cayman Islands parent company, has proposed a plan to remove its variable interest entity (VIE) structure. The company sought feedback from investors this week, the two sources said, speaking on condition of anonymity.

The move is the latest example of how Beijing has toughened its stance on the decades-old arrangement that has allowed foreign investors to gain exposure to Chinese companies. While no formal rule change has been enacted, the China Securities Regulatory Commission (CSRC) has increased its scrutiny of offshore entities, often requiring start-ups to justify the necessity of the VIE model.

Some VIE companies have reportedly been advised to restructure and pursue listings through their mainland entities instead.

Under the typical VIE structure, a company sets up an offshore holding entity – often in the Cayman Islands – which controls a Hong Kong subsidiary. That subsidiary, in turn, establishes a wholly foreign-owned enterprise (WFOE) in mainland China. Rather than owning the operating business outright, the WFOE controls it through contractual agreements.

This allows foreign investors to gain exposure to sectors such as telecoms and the internet, which are otherwise subject to restrictions on overseas ownership.

Moonshot initially attempted to seek an exemption to proceed with the VIE structure, but the recent proposal to unwind it signals that the chance of getting a waiver is slim, one of the sources said.