Correspondence 0001104659-23-123391 from 51Talk Online Education Group (COE)
51Talk Online Education Group
Date: Dec. 5, 2023 · CIK: 0001659494 · Accession: 0001104659-23-123391
AI Filing Summary & Sentiment
File numbers found in text: 001-37790
Referenced dates: November 6, 2023
Letter
VIA EDGAR Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission Washington, D.C. 20549 RE: 51Talk Online Education Group (the “Company”) Form 20-F for Fiscal Year Ended December 31, 2022 Filed April 6, 2023 Correspondence filed September 5, 2023 File No. 001-37790
Dear Ms. Beech and Ms. Beysolow:
This letter sets forth the Company’s response to the comments contained in the letter dated November 6, 2023 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 6, 2023 (the “2022 Form 20-F”) and the Company’s response letter submitted on September 5, 2023. The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2022 Form 20-F.
Correspondence filed September 5, 2023
Item 3. Key Information, page 4
1. We note your response to prior comment 1 and reissue in part. Please revise to acknowledge that Chinese regulatory authorities could disallow this holding company 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.
The Company respectfully submits to the Staff that in 2022, all of the former mainland China consolidated VIEs were divested along with the China Mainland Business or subsequently dissolved. As a result, the Company does not have a variable interest entity structure and conducts its operations through its offshore subsidiaries and mainland China subsidiaries.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
December 5, 2023
Page 2
The Foreign Investment Law of the PRC, or the PRC Foreign Investment Law, effective January 1, 2020, together with its implementation rules and ancillary regulations, has set the regulatory landscape for foreign investments in mainland China and investment activities in mainland China by foreign investors. Pursuant to the PRC Foreign Investment Law, foreign investment in industries outside the scope of the negative list is generally regulated in the same way as enterprises invested by Chinese domestic investors, subject to certain PRC regulations of loans to and direct investment in entities in mainland China by offshore holding companies and foreign exchange. The currently effective negative list for foreign investment, i.e. the Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version), or the 2021 Negative List, prohibits foreign investors from, among others, investing in internet news information services or holding more than 50% of the equity interest in an enterprise that provides value-added telecommunications services. Foreign investments in fields that are not prescribed as “restricted” or “prohibited” in the 2021 Negative List shall be treated in accordance with the principle of equality as if they are PRC domestic enterprises. The Company primarily conducts its operations outside mainland China, and only conducts a limited portion of its operations in mainland China, which is related to research and development, administration, and sales and marketing, through its mainland China subsidiaries. It is the opinion of the Company’s PRC legal counsel, Shihui Partners, that the Company’s operations in mainland China do not fall within any restricted or prohibited fields under the 2021 Negative List. Accordingly, subject to certain PRC regulations of loans to and direct investment in entities in mainland China by offshore holding companies and foreign exchange, the Company’s mainland China subsidiaries are generally regulated in the same way as enterprises invested by Chinese domestic investors.
Based on the Company’s current corporate structure and the analysis set out above, it is the opinion of the Company’s PRC legal counsel, Shihui Partners, that there is no material risk as to that the PRC government could disallow the Company’s current holding company structure.
2. We note your response to prior comment 2 and reissue in part. Your disclosure should address how recent statements and regulatory actions by China’s government, such as those related to 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 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions or double underlines for additions), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 4
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
December 5, 2023
Page 3
ITEM 3. KEY INFORMATION
Our Holding Company Structure
. . .
The PRC government has recently implemented industry-wide regulations, including data security and anti-monopoly related regulations. After the divestiture of the China Mainland Business, we have ceased selling our service offerings in mainland China and only conduct part of our operations in mainland China, thereby regulations in this nature or regulatory actions related to the PRC Enterprise Income Tax Law do not have not had a material impact to our ability to conduct our business, accept foreign investments, or list on a U.S. or other foreign exchange. For example, the PRC government has recently promulgated a series of cybersecurity and data privacy laws and regulations in China, including the PRC Cybersecurity Law and the Cybersecurity Review Measures. In light of our current business focus on countries and regions outside mainland China after the divestiture of the China Mainland Business and the service providers hosting our servers and routers being located in Singapore, as of the date of this annual report, we have not experienced any material impact of the recently promulgated cybersecurity and data privacy laws and regulations on our ability to conduct our business, accept foreign investments, or list on a U.S. or other foreign exchange. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.” Furthermore, regulators in mainland China have recently focused on enforcement of anti-monopoly and unfair competition rules, which have not materially affected our operations because we have shifted our business focus to countries and regions outside mainland China. However, new regulatory actions relating to data security or anti-monopoly concerns in mainland China may be taken, and there is no assurance that such new regulatory actions will not materially impact our ability to conduct our business, accept foreign investments, or list on a U.S. or other foreign exchange.
Our Holding Company Structure, page 4
3. We note your response to prior comment 3 and reissue in part. Please revise to discuss the “variety of laws and regulations in Hong Kong” to which you are subject that you reference, aside from the laws and regulations related to data privacy and cybersecurity, anti-monopoly and education, and address to what extent the company believes that it is compliant with the relevant regulations or policies.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
December 5, 2023
Page 4
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions or double underlines for additions), 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
Our Holding Company Structure
. . .
In addition, as we conduct operations in Hong Kong, we face legal and operational risks under a variety of laws and regulations in Hong Kong, such as laws and regulations related to regarding data privacy and cybersecurity, copyright, anti-money laundering, anti-monopoly, and education, employment and labor, consumer protection and anti-discrimination. As of the date of this annual report, we believe we have complied with the relevant laws and regulations in Hong Kong in all material respects. As of the date of this annual report, regulatory actions related to data security or anti-monopoly concerns in Hong Kong have not had a material impact on our ability to conduct business, accept foreign investment in the future or continue to list on a United States or other foreign stock exchange. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Global Operations—We provide our course offerings to our students in Hong Kong and are subject to laws, rules and regulations governing the accessibility and content of our course offerings, such as the Education Ordinance and anti-discrimination laws. Non-compliance with the relevant laws and regulations regarding our operations in Hong Kong may materially and adversely affect our reputation, business operations and prospects.”
Cash Flows through Our Organization, page 5
4. We note your response to prior comment 6 and reissue in part. Provide a description of how cash is transferred between you and your PRC subsidiaries, and provide more detail explaining the restrictions on foreign exchange and cross-border cash transfers from the PRC.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
December 5, 2023
Page 5
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions or double underlines for additions), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed:
Page 5
ITEM 3. KEY INFORMATION
Cash Flows through Our Organization
. . .
51Talk Online Education Group is a holding company with no operations of its own. Under laws of mainland China, 51Talk Online Education Group may, and its offshore subsidiaries can through capital contributions or loans, provide funding to its wholly owned subsidiaries in Hong Kong or subject to the satisfaction of applicable government registration and approval requirements, to through capital contributions or loans. Its HK subsidiary, HelloWorld Online Education Group (HK) Limited, in turn, may transfer cash to its wholly owned mainland China subsidiaries through capital contributions or loans, subject to satisfaction of applicable government registration and approval requirements. In particular, 51Talk Online Education Group may, through capital contributions, to provide funding to its wholly owned subsidiaries in Hong Kong, which in turn may provide funding to mainland China subsidiaries wholly owned by such Hong Kong subsidiaries through capital contributions, subject to the satisfaction of applicable government registration and approval requirements in mainland China. Additionally, 51Talk Online Education Group or its offshore subsidiaries may directly provide funding to its wholly owned subsidiaries in mainland China through loans, subject to the satisfaction of applicable government registration and approval requirements in mainland China. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Global Operations—PRC regulation on loans to, and direct investment in, mainland China entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of our equity offerings to make loans to our mainland China subsidiaries or make additional capital contributions to our mainland China subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” In addition, offshore subsidiaries of 51Talk Online Education Group pay service fees to certain mainland China subsidiary of 51Talk Online Education Group pursuant to operating management service agreements, marketing service agreements and research and development service agreements. Mainland China subsidiaries of 51Talk Online Education Group may distribute dividends or make other distributions on equity to 51Talk Online Education Group, subject to satisfaction of applicable government filing and approval requirements. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Global Operations—Our mainland China subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.”
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
December 5, 2023
Page 6
. . .
In addition, under laws and regulations of mainland China, our mainland China subsidiaries are subject to restrictions on foreign exchange and cross-border cash transfers, including to our holding company 51Talk Online Education Group and to U.S. investors. For example, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as
Show Raw Text
CORRESP
1
filename1.htm
51TALK ONLINE
EDUCATION GROUP
24 Raffles Place
#17-04 Clifford Centre,
Singapore 048621
December 5, 2023
VIA EDGAR
Ms. Taylor Beech
Ms. Jennie Beysolow
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE:
51Talk Online Education Group
(the “Company”)
Form 20-F for Fiscal Year Ended December 31, 2022
Filed April 6, 2023
Correspondence filed September 5, 2023
File No. 001-37790
Dear Ms. Beech
and Ms. Beysolow:
This
letter sets forth the Company’s response to the comments contained in the letter dated November 6, 2023 from the staff (the
“Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s
annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 6, 2023 (the
“2022 Form 20-F”) and the Company’s response letter submitted on September 5,
2023. The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms
used but not defined in this letter shall have the meaning ascribed to such terms in the 2022 Form 20-F.
Correspondence
filed September 5, 2023
Item 3. Key
Information, page 4
1. We
note your response to prior comment 1 and reissue in part. Please revise to acknowledge that
Chinese regulatory authorities could disallow this holding company 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.
The Company respectfully submits
to the Staff that in 2022, all of the former mainland China consolidated VIEs were divested along with the China Mainland Business or
subsequently dissolved. As a result, the Company does not have a variable interest entity structure and conducts its operations through
its offshore subsidiaries and mainland China subsidiaries.
Division of Corporation Finance
Office of Trade & Services
Securities
and Exchange Commission
December 5, 2023
Page 2
The Foreign Investment Law
of the PRC, or the PRC Foreign Investment Law, effective January 1, 2020, together with its implementation rules and ancillary
regulations, has set the regulatory landscape for foreign investments in mainland China and investment activities in mainland China by
foreign investors. Pursuant to the PRC Foreign Investment Law, foreign investment in industries outside the scope of the negative list
is generally regulated in the same way as enterprises invested by Chinese domestic investors, subject to certain PRC regulations of loans
to and direct investment in entities in mainland China by offshore holding companies and foreign exchange. The currently effective negative
list for foreign investment, i.e. the Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version),
or the 2021 Negative List, prohibits foreign investors from, among others, investing in internet news information services or holding
more than 50% of the equity interest in an enterprise that provides value-added telecommunications services. Foreign investments in fields
that are not prescribed as “restricted” or “prohibited” in the 2021 Negative List shall be treated in accordance
with the principle of equality as if they are PRC domestic enterprises. The Company primarily conducts its operations outside mainland
China, and only conducts a limited portion of its operations in mainland China, which is related to research and development, administration,
and sales and marketing, through its mainland China subsidiaries. It is the opinion of the Company’s PRC legal counsel, Shihui
Partners, that the Company’s operations in mainland China do not fall within any restricted or prohibited fields under the 2021
Negative List. Accordingly, subject to certain PRC regulations of loans to and direct investment in entities in mainland China by offshore
holding companies and foreign exchange, the Company’s mainland China subsidiaries are generally regulated in the same way as enterprises
invested by Chinese domestic investors.
Based on the Company’s
current corporate structure and the analysis set out above, it is the opinion of the Company’s PRC legal counsel, Shihui Partners,
that there is no material risk as to that the PRC government could disallow the Company’s current holding company structure.
2. We
note your response to prior comment 2 and reissue in part. Your disclosure should address
how recent statements and regulatory actions by China’s government, such as those related
to 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 2022 Form 20-F
to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through
and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions
or double underlines for additions), subject to updates and adjustments to be made in connection with any material development of the
subject matter being disclosed:
Page 4
Division of Corporation Finance
Office of Trade & Services
Securities
and Exchange Commission
December 5, 2023
Page 3
ITEM 3. KEY INFORMATION
Our Holding Company
Structure
. . .
The
PRC government has recently implemented industry-wide regulations, including data security and anti-monopoly related regulations. After
the divestiture of the China Mainland Business, we have ceased selling our service offerings in mainland China and only conduct part
of our operations in mainland China, thereby regulations in this nature or regulatory actions related to the PRC Enterprise Income Tax
Law do not have not
had a material impact to our ability to conduct our business, accept foreign investments,
or list on a U.S. or other foreign exchange. For
example, the PRC government has recently promulgated a series of cybersecurity and data privacy laws and regulations in China, including
the PRC Cybersecurity Law and the Cybersecurity Review Measures. In light of our current business focus on countries and regions outside
mainland China after the divestiture of the China Mainland Business and the service providers hosting our servers and routers being located
in Singapore, as of the date of this annual report, we have not experienced any material impact of the recently promulgated cybersecurity
and data privacy laws and regulations on our ability to conduct our business, accept foreign investments, or list on a U.S. or other
foreign exchange. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and
Industry—Our business generates and processes a large amount of data, and we are required to comply with applicable laws relating
to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.”
Furthermore, regulators in mainland China have recently focused on enforcement of anti-monopoly and unfair competition rules, which have
not materially affected our operations because we have shifted our business focus to countries and regions outside mainland China. However,
new regulatory actions relating to data security or anti-monopoly concerns in mainland China may be taken, and there is no assurance
that such new regulatory actions will not materially impact our ability to conduct our business, accept foreign investments, or list
on a U.S. or other foreign exchange.
Our Holding
Company Structure, page 4
3. We
note your response to prior comment 3 and reissue in part. Please revise to discuss the “variety
of laws and regulations in Hong Kong” to which you are subject that you reference,
aside from the laws and regulations related to data privacy and cybersecurity, anti-monopoly
and education, and address to what extent the company believes that it is compliant with
the relevant regulations or policies.
Division of Corporation Finance
Office of Trade & Services
Securities
and Exchange Commission
December 5, 2023
Page 4
In response to the Staff’s
comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2022 Form 20-F
to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through
and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions
or double underlines for additions), 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
Our Holding Company
Structure
. . .
In
addition, as we conduct operations in Hong Kong, we face legal and operational risks under a variety of laws and regulations in Hong
Kong, such as laws and regulations related to regarding
data privacy and cybersecurity, copyright, anti-money laundering, anti-monopoly,
and education,
employment and labor, consumer protection and anti-discrimination. As
of the date of this annual report, we believe we have complied with the relevant laws and regulations in Hong Kong in all material respects.
As of the date of this annual report, regulatory actions related to data security
or anti-monopoly concerns in Hong Kong have not had a material impact on our ability to conduct business, accept foreign investment in
the future or continue to list on a United States or other foreign stock exchange. For more details, see “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and
we are required to comply with applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have
a material and adverse effect on our business and prospects” and “Item 3. Key Information—D. Risk Factors—Risks
Related to Our Global Operations—We provide our course offerings to our students in Hong Kong and are subject to laws, rules and
regulations governing the accessibility and content of our course offerings, such as the Education Ordinance and anti-discrimination
laws. Non-compliance with the relevant laws and regulations regarding our operations in Hong Kong may materially and adversely affect
our reputation, business operations and prospects.”
Cash Flows
through Our Organization, page 5
4. We
note your response to prior comment 6 and reissue in part. Provide a description of how cash
is transferred between you and your PRC subsidiaries, and provide more detail explaining
the restrictions on foreign exchange and cross-border cash transfers from the PRC.
Division of Corporation Finance
Office of Trade & Services
Securities
and Exchange Commission
December 5, 2023
Page 5
In response to the Staff’s
comment, the Company respectfully proposes to revise the referenced disclosure as follows (page reference is made to the 2022 Form 20-F
to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown as strike-through
and additions underlined, and incremental changes in response to the Staff’s follow-up comment shown in strike-through for deletions
or double underlines for additions), subject to updates and adjustments to be made in connection with any material development of the
subject matter being disclosed:
Page 5
ITEM 3. KEY INFORMATION
Cash Flows through Our
Organization
. . .
51Talk
Online Education Group is a holding company with no operations of its own. Under laws of mainland China, 51Talk Online
Education Group may, and its offshore subsidiaries can through capital contributions or loans, provide
funding to its wholly owned subsidiaries in Hong Kong or subject to the satisfaction of applicable government registration and approval
requirements, to through capital contributions or loans. Its HK subsidiary, HelloWorld Online Education Group (HK) Limited,
in turn, may transfer cash to its wholly owned mainland China subsidiaries through capital contributions or loans, subject
to satisfaction of applicable government registration and approval requirements. In
particular, 51Talk Online Education Group may, through capital contributions, to provide funding to its wholly owned subsidiaries in
Hong Kong, which in turn may provide funding to mainland China subsidiaries wholly owned by such Hong Kong subsidiaries through capital
contributions, subject to the satisfaction of applicable government registration and approval requirements in mainland China. Additionally,
51Talk Online Education Group or its offshore subsidiaries may directly provide funding to its wholly owned subsidiaries in mainland
China through loans, subject to the satisfaction of applicable government registration and approval requirements in mainland China.
For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Global Operations—PRC regulation on loans to, and direct investment in, mainland China entities by offshore holding companies and
governmental control in currency conversion may delay or prevent us from using the proceeds of our equity offerings to make loans to
our mainland China subsidiaries or make additional capital contributions to our mainland China subsidiaries, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.” In
addition, offshore subsidiaries of 51Talk Online Education Group pay service fees to certain mainland China subsidiary of 51Talk Online
Education Group pursuant to operating management service agreements, marketing service agreements and research and development service
agreements. Mainland China subsidiaries of 51Talk Online Education Group may distribute dividends or make other distributions on equity
to 51Talk Online Education Group, subject to satisfaction of applicable government filing and approval requirements. For more details,
see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Global Operations—Our mainland China subsidiaries
are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity
requirements.”
Division of Corporation Finance
Office of Trade & Services
Securities
and Exchange Commission
December 5, 2023
Page 6
. . .
In
addition, under laws and regulations of mainland China, our mainland China subsidiaries are subject to restrictions on foreign exchange
and cross-border cash transfers, including to our holding company 51Talk Online Education Group and to U.S. investors.
For example, approval
from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted
out of mainland China to pay capital expenses such as