• Key Excerpts
  • VIE Structure
  • VIE Risks
  • VIE Revenue
  1. According to PRC laws and regulations, entities and individuals who establish private schools are commonly referred to as “sponsors” instead of “owners” or “shareholders.” The economic substance of “sponsorship” with respect of private schools is substantially similar to that of ownership with regard to legal, regulatory and tax matters. However, the differences between sponsorship and equity ownership can be found in the specific provisions of the laws and regulations applicable to sponsors and owners, such as provisions regarding the right to receive returns on investment and the right to the distribution of residual properties upon termination and liquidation. Each of our schools has been registered as a school that requires “reasonable returns.” Under PRC laws and regulations, although private education is mainly treated as a public welfare undertaking, sponsors of schools may choose to require reasonable returns from the annual earnings of the school after deduction of certain costs, expenses, donations, subsidies and required contributions to development funds. Hailiang Investment is the sponsor of each of the three schools we currently operate as registered pursuant to applicable PRC laws and regulations. For more information regarding the nature of schools requiring reasonable returns under relevant laws and regulations, school sponsorship and difference between sponsorship and ownership under relevant laws and regulations, see “—B. Business Overview—Regulations—Regulations on Private Education—The Law for Promoting Private Education (2003) and the Implementation Rules for the Law for Promoting Private Education (2004).”

Key excerpts from filing(s) - related to VIEs

PRC laws and regulations currently prohibit foreign ownership of companies and institutions providing compulsory educational services at primary and middle school levels, and restrict foreign investment in educational services businesses at the high school level.
Our PRC subsidiary, Hailiang Consulting, is a foreign owned enterprise and is currently ineligible to apply for and hold licenses to operate, or otherwise own equity interests in, our schools with K-12 educational programs.
We conduct our private education business in China primarily through contractual arrangements among (i) Hailiang Consulting, our operating subsidiary in China, (ii) our affiliated entities, including Hailiang Investment and the schools controlled and held by Hailiang Investment, namely, Zhuji Hailiang Foreign Language School, Zhuji Private High School and Tianma Experimental School, and (iii) the shareholder of Hailiang Investment, namely Mr. Feng, who is also the founder of our group.
We hold the required licenses and permits necessary to conduct our private education business in China through the schools controlled and held by Hailiang Investment.
We have relied and expect to continue to rely on the contractual arrangements with Hailiang Investment and its shareholder, Mr. Feng, our founder and our ultimate controlling shareholder, to operate our private education business.
Mr. Feng is the sole shareholder of Hailiang Investment. He is also the founder and ultimate controlling shareholder of our group. We cannot assure you that Mr. Feng will act in the best interests of our company.

Risks identified in filing(s) - related to VIEs

Our private educational service business is subject to extensive regulation in China. If the PRC government finds that the contractual arrangement that establishes our corporate structure for operating our business does not comply with applicable PRC laws and regulations, we could be subject to severe penalties.
The draft Foreign Investment Law proposes sweeping changes to the PRC foreign investment legal regime and will likely to have a significant impact on businesses in China controlled by foreign invested enterprises primarily through contractual arrangements, such as our business.
We rely on contractual arrangements with Hailiang Investment and its shareholder for our operations in China, which may not be as effective in providing control as direct ownership.
The shareholder of Hailiang Investment, namely Mr. Feng, our founder and our ultimate controlling shareholder, may not act in the best interests of our company.
Contractual arrangements between our affiliated entities and us may be subject to scrutiny by the PRC tax authorities and a finding that we or our affiliated entities owe additional taxes could materially reduce our net income and the value of your investment.
If any of our affiliated entities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity, which could materially and adversely affect our business, financial condition and results of operations.
If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.
PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our offering or other financing activities to make loans or additional capital contributions to our PRC subsidiary and affiliated entities, which could harm our liquidity and our ability to fund and expand our business.
Our affiliated entities may be subject to significant limitations on their ability to engage in the private education business or make payments to related parties and may otherwise be materially and adversely affected by changes in PRC laws and regulations.
Year Total Revenue VIEs Revenue Contribution of VIEs %
RMB (in millions)
2015 515 515 100%
2016 654 654 100%
2017 813 813 100%

Ownership and Voting power details

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