Arm will end up with less than 20% of Arm China with Softbank holding 28%. A majority stake is held by Chinese investors.
After the transfer, Arm China will be treated as a licensee rather than a subsidiary of Arm and as an uncontrolled affiliate for accounting purposes.
The arrangement leaves Softbank with the task of dealing with sacked Arm China CEO Allen Wu who is still running the company in defiance of Arm.
Arm China is thought to contribute a quarter of Arm revenues, the possible loss of which will impact the proceeds from the IPO.