SecProbe.io

CORRESP
1
filename1.htm

  CORRESP

     Simpson Thacher & Bartlett

     icbc tower, 35th floor

3 garden road, central

hong kong

___________

     telephone: +852-2514-7600

facsimile: +852-2869-7694

     Direct Dial Number

+852-2514-7620

     E-mail Address

ygao@stblaw.com

  JANUARY 10, 2025

CONFIDENTIAL AND VIA EDGAR

Division of Corporation Finance

Office of Technology

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Attention:   Ms. Anastasia Kaluzienski

		    Mr. Robert Littlepage

             Re:  Yalla Group Limited
                   Form 20-F for the Period Ended December 31, 2023
                   File No. 001-39552

  Ladies and Gentlemen:

  On behalf of our client, Yalla Group Limited, a company organized under the laws of the Cayman Islands (the “Company”), we respond to the comments contained in the letter from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), dated December 13, 2024 (the “December 13 Comment Letter”) relating to the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2023 filed with the Commission on April 23, 2024 (the “Annual Report”).

  Set forth below are the Company’s responses to the Staff’s comments in the December 13 Comment Letter. The Staff’s comments are retyped below in bold italic font for your ease of reference. The Company respectfully advises the Staff that where the Company proposes to add or revise disclosure in its future annual reports on Form 20-F in response to the Staff’s comments, the changes to be made will be subject to relevant factual updates and changes in relevant laws or regulations, or in interpretations thereof.

  Form 20-F for the Period Ended December 31, 2023

  Conventions that Apply to this Annual Report on Form 20-F, page 1

      michael j.c.M. ceulen

      marjory j. ding

      daniel fertig

      adam C. furber

      YI GAO

      MAKIKO HARUNARI

      Ian C. Ho

      JONATHAN HWANG

      aNTHONY D. KING

      jin hYUK park

      erik p. wang

      christopher k.s. wong

      resident partners

simpson thacher & bartlett, hong kong is an affiliate of simpson thacher & bartlett llp with offices in:

      New York

      Beijing

      boston

      BRUSSELS

      Houston

      LONDON

      Los Angeles

      Palo Alto

      SÃO PAULO

      TOKYO

      Washington, D.C.

     Simpson Thacher & Bartlett

     -2-

  1.We note from your disclosure on page 1 that you exclude Hong Kong and Macau from your definition of “PRC” or “China” for the purpose of your annual report. In future filings, please revise to remove the exclusion of Hong Kong and Macau from such definition. Clarify that all the legal and operational risks associated with having operations in the People’s Republic of China (PRC) also apply to operations in Hong Kong and Macau. In this regard, ensure that your disclosure does not narrow risks related to operating in the PRC to mainland China only. Where appropriate, you may describe PRC law and then explain how law in Hong Kong and Macau differs from PRC law and describe any risks and consequences to the company associated with those laws.

  The Company acknowledges the Staff’s comment and undertakes that, in future filings, the Company will revise its definition of “PRC” or “China” to remove the exclusion of Hong Kong and Macau, consistent with the proposed updated disclosures set forth on page 1 of Annex A (the added disclosure is underlined and the removed disclosure is crossed out in the 2023 Form 20-F).

  In addition, the Company will include disclosures to clarify whether the legal and operational risks associated with operating in the PRC also apply to operations in Hong Kong, without narrowing risks related to operating in the PRC to mainland China only. Where appropriate, the Company will also explain the differences between Hong Kong and PRC law and describe risks and consequences to the Company associated with those laws. The proposed revised disclosure is set forth from pages 1 to 3 of Annex A (the added disclosure is underlined and the removed disclosure is crossed out in the 2023 Form 20-F).

  The Company respectfully advises the Staff that the Company does not have any operations in Macau.

  Part I.

  Item 3. Key Information, page 3

  2.In future filings, at the onset of Part I please disclose prominently that you are not a Chinese operating company but a Cayman Islands holding company with subsidiaries based in China.

  The Company acknowledges the Staff’s comment and undertakes that, in future filings, the Company will disclose prominently that it is not a Chinese operating company but a Cayman Islands holding company with subsidiaries based in China. The proposed revised disclosure is set forth on page 3 of Annex A (the added disclosure is underlined and the removed disclosure is crossed out in the 2023 Form 20-F).

  3.We note your discussion of legal and operational risks on page 3 in Part I, Item 3. Please expand your discussion in future filings to clearly disclose these risks could cause the value of your securities to significantly decline or become worthless and 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

     Simpson Thacher & Bartlett

     -3-

  company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange.

  The Company acknowledges the Staff’s comment and will add the proposed disclosure and make corresponding revisions to certain disclosures in its future filings. The proposed revised disclosure is set forth from pages 3 to 7 of Annex A (the added disclosure is underlined and the removed disclosure is crossed out in the 2023 Form 20-F).

  4.In future filings, please provide a clear description of how cash is transferred through your organization. Disclose your intentions to distribute earnings. Quantify any cash flows and transfers of other assets by type that have occurred between the holding company and the subsidiaries, and the direction of transfer. Quantify any dividends or distributions that a subsidiary has made to the holding company and which entity made such transfer, and their tax consequences. Similarly quantify dividends or distributions made to U.S. investors, the source, and their tax consequences. Your disclosure should make clear if no transfers, dividends, or distributions have been made to date. Describe any restrictions on foreign exchange and your ability to transfer cash between entities, across borders, and to U.S. investors. Describe any restrictions and limitations on your ability to distribute earnings from the company, including your subsidiaries, to the parent company and U.S. investors.

  The Company acknowledges the Staff’s comment and will add the proposed disclosure and make corresponding revisions to certain disclosures in its future filings. The proposed revised disclosure is set forth from pages 7 to 11 of Annex A (the added disclosure is underlined in the 2023 Form 20-F).

  5.In future filings, please disclose each permission or approval that you or your subsidiaries are required to obtain from Chinese authorities to operate your business and to offer the securities being registered to foreign investors. State whether you or your subsidiaries are covered by permissions or approvals and whether any permissions or approvals have been denied. Please also describe the consequences to you and your investors if you or your subsidiaries: (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and you are required to obtain such permissions or approvals in the future.

  The Company acknowledges the Staff’s comment and will add the proposed disclosure and make corresponding revisions to certain disclosures in the section entitled “Part I. Item 3. Key Information” in its future filings. The proposed revised disclosure is set forth from pages 11 to 12 of Annex A (the added disclosure is underlined in the 2023 Form 20-F).

  Risk Factors, page 4

  6.In future filings, in your risk factor summary please disclose the risks that your corporate structure and having significant operations in China poses to investors. In particular,

     Simpson Thacher & Bartlett

     -4-

  describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in Risk Factors. 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 investor and cause the value of such securities to significantly decline or be worthless.

  The Company respectfully advises the Staff that, in future filings, it will discuss and enhance its disclosure to address the risks arising from its operations in China. The proposed revised disclosure is set forth from pages 12 to 13 of Annex A (the added disclosure is underlined in the 2023 Form 20-F).

  7.In light of recent events indicating greater oversight by the Cyberspace Administration of China (CAC) over data security, please add risk factor disclosure in future filings to explain how this oversight impacts your officers and directors and to what extent you believe that you are compliant with the regulations or policies that have been issued by the CAC to date.

  The Company acknowledges the Staff’s comment and will add the proposed disclosure and make corresponding revisions to certain disclosures in the section entitled “Risks Relating to Doing Business in Certain Countries and Regions” in its future filings. The proposed revised disclosure is set forth from pages 14 to 15 of Annex A (the added disclosure is underlined in the 2023 Form 20-F).

  8.We note your disclosure on page 27 that certain of your directors and executive officers reside within China, and a portion of your assets and the assets of those persons are located within China. In future filings, please identify any directors, officers, or members of senior management located in the PRC/Hong Kong. Additionally, please include a separate “Enforceability” section that addresses whether or not investors may bring actions under the civil liability provisions of the U.S. federal securities laws against you, your officers or directors who are residents of a foreign country, and whether investors may enforce these civil liability provisions when your assets, officers, and directors are located outside of the United States.

  In response to the Staff’s comment, the Company will identify the directors, officers or members of senior management located in the PRC or Hong Kong and included a separate “Enforceability” section as set forth from pages 15 to 17 of Annex A (the added disclosure is underlined and the removed disclosure is crossed out in the 2023 Form 20-F).

     Simpson Thacher & Bartlett

     -5-

  Consolidated Financial Statements
Note 11. Income Tax, page F-26

  9.We note “[b]ased on a review of surrounding facts and circumstances, the Group does not believe that it is more likely than not that its operations outside the PRC should be considered a resident enterprise for PRC tax purposes.” Please explain to us and disclose:

  •these facts and circumstances considered by management;

  •whether or not this issue has been considered by the PRC taxing authority; and

  •the financial ramifications if the Company were to be considered a resident enterprise for PRC tax purposes.

  Please provide us with the disclosure you will make in future filings.

  The Company respectfully advises the Staff that, in April 2009, the State Administration of Taxation, or the SAT, issued the Circular of the SAT on Issues Relating to Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a mainland China-controlled enterprise that is incorporated offshore is located in mainland China. According to SAT Circular 82, an offshore incorporated enterprise controlled by a mainland China enterprise or a mainland China enterprise group will be regarded as a mainland China tax resident by virtue of having its “de facto management body” in the mainland China only if all of the following conditions are met: (i) the senior management and core management departments in charge of daily production and operations are located mainly in mainland China; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in mainland China; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in mainland China; and (iv) at least 50% of voting board members or senior management habitually reside in mainland China.

  The Company is a company incorporated outside the mainland China and is not an offshore entity controlled by mainland China enterprises. As a holding company, its key assets are its ownership interests of its subsidiaries, and its key assets and operation are located outside the mainland China. As such, the Group does not believe that the Company meets all of the conditions above or is a mainland China resident enterprise for mainland China tax purposes. For similar reasons, the Group believes its overseas subsidiaries are not mainland China resident enterprises either.

  The Company will add the proposed disclosure in its future filings. The proposed revised disclosure is set forth from pages 17 to 18 of Annex A (the added disclosure is underlined in the 2023 Form 20-F).

     Simpson Thacher & Bartlett

     -6-

  10.Please discuss here and in MD&A the circumstances that resulted in the increase in deferred tax assets in 2023. Describe what is creating the increase in net operating loss carry forwards, including the impact of pricing of any intercompany transactions.

  The Company’s increase in deferred tax assets, which was primarily due to the increase in net operating loss carry forwards in 2023, was mainly derived from the losses made by the Company’s two mainland China subsidiaries in 2023. These two subsidiaries are mainly engaged in developing new games, which incurred design and labor costs. As the new games were still at an early stage without mature commercialization model, such games were loss making from the Group’s perspective and the amount was immaterial. These two subsidiaries did not incur any intercompany transactions related to the development costs of the new games for the year ended December 31, 2023.

  The Company will add the above disclosure in the MD&A and Consolidated Financial Statements in its future filings to the extent applicable.

  If you have any question regarding the Company’s responses to the Staff’s comments, please do not hesitate to contact