Correspondence 0001193125-23-245408 from HUYA Inc. (HUYA)
HUYA Inc.
Date: Sept. 28, 2023 · CIK: 0001728190 · Accession: 0001193125-23-245408
AI Filing Summary & Sentiment
File numbers found in text: 001-38482
Referenced dates: August 10, 2023
Letter
VIA EDGAR Division of Corporation Finance Office of Technology Securities and Exchange Commission RE: HUYA Inc. (the “Company”) Form 20-F for the Fiscal Year Ended December 31, 2022 Filed April 26, 2023 File No. 001-38482
Dear Mr. Krikorian, Mr. Youngwood, Ms. Gowetski and Mr. Howes:
This letter sets forth the Company’s responses to the comments contained in the letter dated August 10, 2023 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission” or “SEC”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 26, 2023 (the “2022 Form 20-F”). 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.
Form 20-F for the Fiscal Year Ended December 31, 2022
Item 3. Key Information
Our Holding Company Structure and Contractual Arrangements with the VIE, page 3
1. You disclose as a result of the contractual arrangements, you are the primary beneficiary of the VIE and its subsidiaries, and HUYA Inc. has consolidated the financial results of operations, assets, and liabilities of these companies in its consolidated financial statements under U.S. GAAP. Please clarify your disclosure to indicate that you are the primary beneficiary of the VIE for accounting purposes.
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure.
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
September 28, 2023
Page
Page 3:
A series of contractual agreements, including an equity interest pledge agreement, an exclusive business cooperation agreement, a shareholder voting rights proxy agreement and an exclusive option agreement, have been entered into by and among Huya Technology, the VIE and its shareholders. As a result of the contractual arrangements, we are the primary beneficiary of the VIE and its subsidiaries for accounting purposes, and HUYA Inc. has consolidated the financial results of operations, assets, and liabilities of these companies in its consolidated financial statements under U.S. GAAP. Neither HUYA Inc. nor its investors has an equity ownership (including foreign direct investment) in, or control through such equity ownership of, the VIE, and the contractual arrangements are not equivalent to an equity ownership in the business of the VIE. For more details of these contractual arrangements, see “Item 4. Information on the Company—D. Organizational Structure—Contractual Arrangements with Guangzhou Huya.”
Page 98:
As a result of these contractual arrangements, we have become the primary beneficiary of Guangzhou Huya for accounting purposes. Accordingly, and we treat Guangzhou Huya as the variable interest entity under U.S. GAAP. We have consolidated the financial results of Guangzhou Huya this variable interest entity and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
Other Risks Related to Our Mainland China Operations, page 5
2. Please clarify your disclosure to address how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and 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 shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure.
Page 5:
Other Risks Related to Our Mainland China Operations
We face various legal and operational risks and uncertainties associated with being based in or having the majority of our operations in mainland China and the complex and evolving laws and regulations of mainland China. For example, we face risks associated with recent statements and regulatory actions by mainland China’s government, such as those related to regulatory approvals on offerings conducted overseas by and foreign investment in mainland China-based issuers, the use of variable interest entities, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign exchange. Specifically, these statements and regulatory actions require us to complete filing procedures for any future offshore offering or listing with the China Securities Regulatory Commission, to fulfill certain obligations as required under the cybersecurity laws and regulations of mainland China if we are deemed to be a critical information infrastructure operator defined thereunder, and to comply with the new anti-monopoly and competitions laws. For details of these regulatory requirements, see “Item 3. Key Information—Permissions Required from the PRC Authorities for our Operations” and “Item 4. Information on the Company—C. Business Overview—Government Regulations.” We face risks and uncertainties as to whether we could address these regulatory requirements in a proper and timely manner, or at all. These risks and uncertainties could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in mainland China, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China.”
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
September 28, 2023
Page
Cash Flows through Our Organization, page 6
3. Please clarify your disclosures to explain whether you have written cash management policies and procedures that dictate how funds are transferred, and if so, describe these policies and procedures (e.g., a policy that addresses how a company handles any limitations on cash transfers due to PRC law). Provide cross-references to the condensed consolidating schedule and the consolidated financial statements.
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure.
Page 7:
Our company has established a centralized cash management policy to direct how funds are transferred between HUYA Inc., its subsidiaries and the VIE to improve the efficiency and ensure the security of cash management. Our centralized cash management policy consists of a series of manuals and procedures on fund management, bank accounts management, financing activities and safe handling of cash and assets, which apply to all of our subsidiaries and VIE and its subsidiaries. The cash of our company is centrally managed by our finance department, and is deployed and applied to each operating entity based on the budget and operating conditions of the specific operating entity. Based on the specific amount of each transfer of funds and the use of funds, requisite internal approval from our finance department must be obtained prior to each funds transfer. The finance department will only allocate the cash to the operating entity after the application for cash requirement is approved by the responsible person in the finance department. Furthermore, the funds will be transferred in accordance with the applicable PRC laws and regulations, either through our cash pooling structure, intercompany loans, and deposits or entrusted loans, depending on the circumstances and taking the regulatory and taxation requirements into consideration. For more information relating to fund flows through our organization, see “Item 3. Key Information—Financial Information Related to the VIE (and VIE’s Subsidiaries)” and Note 1(d) to our audited consolidated financial statements included elsewhere in this annual report.
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
September 28, 2023
Page
Financial Information Related to the VIE (and VIEs Subsidiaries), page 8
4. We note your schedules labeled as “Selected Condensed Consolidated Statements of Operation Data”, “Selected Condensed Consolidated Balance Sheets Data” and “Selected Condensed Consolidated Cash Flows Data.” Please note that these schedules should be labeled as “Selected Condensed Consolidating Statements of Operation Data,” “Selected Condensed Consolidating Balance Sheets Data” and “Selected Condensed Consolidating Cash Flows Data.”
In response to the Staff’s comment, the Company undertakes to label the condensed consolidating schedules to be disclosed under “Item 3. Key Information—Financial Information Related to the VIE (and VIE’s Subsidiaries)” in its future Form 20-F filings as “Selected Condensed Consolidating Statements of Operation Data,” “Selected Condensed Consolidating Balance Sheets Data” and “Selected Condensed Consolidating Cash Flows Data.”
Summary Risk Factors, page 12
5. In your summary of risk factors, disclose the risks that your corporate structure and being based in or having the majority of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in the prospectus. For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in your operations and/or the value of the securities you are registering for sale. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure.
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
September 28, 2023
Page
Page 13:
Risks Related to Doing Business in Mainland China
…
•
Our mainland China operations are governed by PRC laws and regulations. The PRC government may have significant oversight and discretion over the conduct of our business, and may intervene or influence our operations as it deems appropriate to advance regulatory and societal goals and policy positions, which The significant oversight and discretion of the government of mainland China over our business operation could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The significant oversight and discretion of the PRC government over our business operation could result in a material adverse change in our operations and the value of our ADSs;”
•
Changes in the economic, political or social conditions or government policies in mainland China could have a material adverse effect on our business and operations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Changes in the economic, political or social conditions or government policies in mainland China could have a material adverse effect on our business and operations;”
•
Uncertainties with respect to the legal system of mainland China may adversely affect us. Since the PRC legal system may still be evolving, certain laws and regulations may evolve quickly with little advance notice, and the interpretation and enforcement of these laws and regulations may involve uncertainties and of mainland China could limit the legal protections available to you and us. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Uncertainties with respect to the PRC legal system and the interpretation and enforcement of many laws and regulations may involve uncertainties and limit the legal protections available to you and us;” and
•
The PRC government may exert more control over offerings conducted overseas by and/or foreign investment in our company, which could result in a material change in our operations and/or the value of our securities. Any actions by the PRC government to exert more oversight and control over offshore offerings could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. The approval of and filing with the CSRC or other government authorities of mainland China may be required in connection with our future offshore offerings and capital raising activities under law of mainland China, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The approval of and filing with the CSRC or other government authorities of mainland China may be required in connection with our future offshore offerings and capital raising activities under law of mainland China, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing;” and
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
September 28, 2023
Page
•
The funds in our subsidiaries in mainland Ch
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CORRESP 1 filename1.htm CORRESP HUYA INC. Building A3, E-Park 280 Hanxi Road Panyu District, Guangzhou 511446 People’s Republic of China September 28, 2023 VIA EDGAR Mr. Stephen Krikorian Mr. Morgan Youngwood Ms. Jennifer Gowetski Mr. Tyler Howes Division of Corporation Finance Office of Technology Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 RE: HUYA Inc. (the “Company”) Form 20-F for the Fiscal Year Ended December 31, 2022 Filed April 26, 2023 File No. 001-38482 Dear Mr. Krikorian, Mr. Youngwood, Ms. Gowetski and Mr. Howes: This letter sets forth the Company’s responses to the comments contained in the letter dated August 10, 2023 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission” or “SEC”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 26, 2023 (the “2022 Form 20-F”). 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. Form 20-F for the Fiscal Year Ended December 31, 2022 Item 3. Key Information Our Holding Company Structure and Contractual Arrangements with the VIE, page 3 1. You disclose as a result of the contractual arrangements, you are the primary beneficiary of the VIE and its subsidiaries, and HUYA Inc. has consolidated the financial results of operations, assets, and liabilities of these companies in its consolidated financial statements under U.S. GAAP. Please clarify your disclosure to indicate that you are the primary beneficiary of the VIE for accounting purposes. In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure. Division of Corporation Finance Office of Technology Securities and Exchange Commission September 28, 2023 Page 2 Page 3: A series of contractual agreements, including an equity interest pledge agreement, an exclusive business cooperation agreement, a shareholder voting rights proxy agreement and an exclusive option agreement, have been entered into by and among Huya Technology, the VIE and its shareholders. As a result of the contractual arrangements, we are the primary beneficiary of the VIE and its subsidiaries for accounting purposes, and HUYA Inc. has consolidated the financial results of operations, assets, and liabilities of these companies in its consolidated financial statements under U.S. GAAP. Neither HUYA Inc. nor its investors has an equity ownership (including foreign direct investment) in, or control through such equity ownership of, the VIE, and the contractual arrangements are not equivalent to an equity ownership in the business of the VIE. For more details of these contractual arrangements, see “Item 4. Information on the Company—D. Organizational Structure—Contractual Arrangements with Guangzhou Huya.” Page 98: As a result of these contractual arrangements, we have become the primary beneficiary of Guangzhou Huya for accounting purposes. Accordingly, and we treat Guangzhou Huya as the variable interest entity under U.S. GAAP. We have consolidated the financial results of Guangzhou Huya this variable interest entity and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. Other Risks Related to Our Mainland China Operations, page 5 2. Please clarify your disclosure to address how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and 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 shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure. Page 5: Other Risks Related to Our Mainland China Operations We face various legal and operational risks and uncertainties associated with being based in or having the majority of our operations in mainland China and the complex and evolving laws and regulations of mainland China. For example, we face risks associated with recent statements and regulatory actions by mainland China’s government, such as those related to regulatory approvals on offerings conducted overseas by and foreign investment in mainland China-based issuers, the use of variable interest entities, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign exchange. Specifically, these statements and regulatory actions require us to complete filing procedures for any future offshore offering or listing with the China Securities Regulatory Commission, to fulfill certain obligations as required under the cybersecurity laws and regulations of mainland China if we are deemed to be a critical information infrastructure operator defined thereunder, and to comply with the new anti-monopoly and competitions laws. For details of these regulatory requirements, see “Item 3. Key Information—Permissions Required from the PRC Authorities for our Operations” and “Item 4. Information on the Company—C. Business Overview—Government Regulations.” We face risks and uncertainties as to whether we could address these regulatory requirements in a proper and timely manner, or at all. These risks and uncertainties could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in mainland China, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China.” Division of Corporation Finance Office of Technology Securities and Exchange Commission September 28, 2023 Page 3 Cash Flows through Our Organization, page 6 3. Please clarify your disclosures to explain whether you have written cash management policies and procedures that dictate how funds are transferred, and if so, describe these policies and procedures (e.g., a policy that addresses how a company handles any limitations on cash transfers due to PRC law). Provide cross-references to the condensed consolidating schedule and the consolidated financial statements. In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure. Page 7: Our company has established a centralized cash management policy to direct how funds are transferred between HUYA Inc., its subsidiaries and the VIE to improve the efficiency and ensure the security of cash management. Our centralized cash management policy consists of a series of manuals and procedures on fund management, bank accounts management, financing activities and safe handling of cash and assets, which apply to all of our subsidiaries and VIE and its subsidiaries. The cash of our company is centrally managed by our finance department, and is deployed and applied to each operating entity based on the budget and operating conditions of the specific operating entity. Based on the specific amount of each transfer of funds and the use of funds, requisite internal approval from our finance department must be obtained prior to each funds transfer. The finance department will only allocate the cash to the operating entity after the application for cash requirement is approved by the responsible person in the finance department. Furthermore, the funds will be transferred in accordance with the applicable PRC laws and regulations, either through our cash pooling structure, intercompany loans, and deposits or entrusted loans, depending on the circumstances and taking the regulatory and taxation requirements into consideration. For more information relating to fund flows through our organization, see “Item 3. Key Information—Financial Information Related to the VIE (and VIE’s Subsidiaries)” and Note 1(d) to our audited consolidated financial statements included elsewhere in this annual report. Division of Corporation Finance Office of Technology Securities and Exchange Commission September 28, 2023 Page 4 Financial Information Related to the VIE (and VIEs Subsidiaries), page 8 4. We note your schedules labeled as “Selected Condensed Consolidated Statements of Operation Data”, “Selected Condensed Consolidated Balance Sheets Data” and “Selected Condensed Consolidated Cash Flows Data.” Please note that these schedules should be labeled as “Selected Condensed Consolidating Statements of Operation Data,” “Selected Condensed Consolidating Balance Sheets Data” and “Selected Condensed Consolidating Cash Flows Data.” In response to the Staff’s comment, the Company undertakes to label the condensed consolidating schedules to be disclosed under “Item 3. Key Information—Financial Information Related to the VIE (and VIE’s Subsidiaries)” in its future Form 20-F filings as “Selected Condensed Consolidating Statements of Operation Data,” “Selected Condensed Consolidating Balance Sheets Data” and “Selected Condensed Consolidating Cash Flows Data.” Summary Risk Factors, page 12 5. In your summary of risk factors, disclose the risks that your corporate structure and being based in or having the majority of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in the prospectus. For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in your operations and/or the value of the securities you are registering for sale. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In response to the Staff’s comment, the Company respectfully proposes to revise the referenced disclosure as shown below in its future Form 20-F filings (with deletions shown as strike-through and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure. Division of Corporation Finance Office of Technology Securities and Exchange Commission September 28, 2023 Page 5 Page 13: Risks Related to Doing Business in Mainland China … • Our mainland China operations are governed by PRC laws and regulations. The PRC government may have significant oversight and discretion over the conduct of our business, and may intervene or influence our operations as it deems appropriate to advance regulatory and societal goals and policy positions, which The significant oversight and discretion of the government of mainland China over our business operation could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The significant oversight and discretion of the PRC government over our business operation could result in a material adverse change in our operations and the value of our ADSs;” • Changes in the economic, political or social conditions or government policies in mainland China could have a material adverse effect on our business and operations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Changes in the economic, political or social conditions or government policies in mainland China could have a material adverse effect on our business and operations;” • Uncertainties with respect to the legal system of mainland China may adversely affect us. Since the PRC legal system may still be evolving, certain laws and regulations may evolve quickly with little advance notice, and the interpretation and enforcement of these laws and regulations may involve uncertainties and of mainland China could limit the legal protections available to you and us. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Uncertainties with respect to the PRC legal system and the interpretation and enforcement of many laws and regulations may involve uncertainties and limit the legal protections available to you and us;” and • The PRC government may exert more control over offerings conducted overseas by and/or foreign investment in our company, which could result in a material change in our operations and/or the value of our securities. Any actions by the PRC government to exert more oversight and control over offshore offerings could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. The approval of and filing with the CSRC or other government authorities of mainland China may be required in connection with our future offshore offerings and capital raising activities under law of mainland China, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The approval of and filing with the CSRC or other government authorities of mainland China may be required in connection with our future offshore offerings and capital raising activities under law of mainland China, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing;” and Division of Corporation Finance Office of Technology Securities and Exchange Commission September 28, 2023 Page 6 • The funds in our subsidiaries in mainland Ch