Sunlands Technology Group's Comment on Supply Chain
The Group operates its business in China through Variable Interest Entities (VIEs) due to restrictions under PRC laws on foreign investment in value-added telecommunication services companies. The Group controls and derives economic benefits from the VIEs via contractual arrangements, including operating agreements, equity pledge agreements, exclusive purchase option agreements, shareholder voting right trust agreements, loan agreements, and cooperation agreements. Investors in the Group's American Depositary Shares (ADSs) or ordinary shares do not hold direct equity interests in the VIEs but maintain contractual relationships with the operating entities in China. The VIEs are owned by nominee shareholders, which introduces risks if these shareholders breach contracts or if the VIEs undergo liquidation or bankruptcy. The enforceability of these contractual arrangements is subject to legal uncertainties under PRC law, and if deemed illegal or unenforceable, the Group may face penalties or lose its interests in the VIEs.
Sunlands Technology Group's Comment on Supply Chain
The Group operates its business in China through Variable Interest Entities (VIEs) due to restrictions under PRC laws on foreign investment in value-added telecommunication services companies. The Group controls and derives economic benefits from the VIEs via contractual arrangements, including operating agreements, equity pledge agreements, exclusive purchase option agreements, shareholder voting right trust agreements, loan agreements, and cooperation agreements. Investors in the Group's American Depositary Shares (ADSs) or ordinary shares do not hold direct equity interests in the VIEs but maintain contractual relationships with the operating entities in China. The VIEs are owned by nominee shareholders, which introduces risks if these shareholders breach contracts or if the VIEs undergo liquidation or bankruptcy. The enforceability of these contractual arrangements is subject to legal uncertainties under PRC law, and if deemed illegal or unenforceable, the Group may face penalties or lose its interests in the VIEs.
Sources:
Sunlands Technology Group's official press releases and regulatory filings; CSIMarket.com's supply-chain research; and the financial filings and press releases of other companies cited in this report.
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