China Online Education Group (C4G0) Risk Analysis

We are an offshore holding company conducting our operations in mainland China through our mainland China subsidiaries. We may make loans to our mainland subsidiaries subject to the approval from governmental authorities and limitation of amount, or we may make additional capital contributions to our mainland China subsidiaries. Any loans to our mainland China subsidiaries, which are treated as a foreign-invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our mainland China subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local branch of the SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by or filed with, as the case may be, the Ministry of Commerce or its local counterpart and the amount of registered capital of such foreign-invested company. See "Item 4. Information on the Company-B. Business Overview-Government Regulations-PRC Regulations-Regulations Relating to Foreign Investment." The difference between the total amount of investment and the registered capital for HelloWorld Online is approximately US$15 million. We may also decide to finance our mainland China subsidiaries by means of capital contributions. Our capital contributions to our mainland China subsidiary HelloWorld Online, foreign-invested enterprises that we believe do not fall within the scope of special administration measures for foreign investment admission, must be filed with the Ministry of Commerce or its local counterpart. See "Item 4. Information on the Company-B. Business Overview-Government Regulations-PRC Regulations-Regulations Relating to Foreign Investment." We cannot assure you that we will be able to complete the necessary registration on a timely basis, or at all. If we fail to complete the necessary registration, our ability to make loans or equity contributions to our mainland China subsidiaries may be negatively affected, which could adversely affect our mainland China subsidiaries' liquidity and its ability to fund its working capital and expansion projects and meet its obligations and commitments. SAFE Circular 19 came into force and replaced both SAFE Circular 142 and SAFE Circular 36 on June 1, 2015. SAFE Circular 19 continues to prohibit a foreign-invested enterprise from, among other things, using RMB funds converted from its foreign exchange capitals for expenditure beyond its authorized business scope, providing entrusted loans or repaying loans between non-financial enterprises. On June 9, 2016, SAFE promulgated SAFE Circular 16, which not only provides that, in addition to foreign exchange capital, foreign debt funds and proceeds remitted from foreign listings should also be subject to the discretional foreign exchange settlement, but also lifted the restriction, that foreign exchange capital under the capital accounts and the corresponding Renminbi capital obtained from foreign exchange settlement should not be used for repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party. The provisions prohibiting against a foreign-invested enterprise using RMB funds converted from its foreign exchange capitals for expenditure beyond its authorized business scope, however, survive SAFE Circular 16. Violations of these circulars could result in severe monetary or other penalties. These circulars may significantly limit our ability to use RMB converted from the net proceeds of our equity offerings to fund the establishment of new entities in mainland China by our mainland subsidiaries, to invest in or acquire any other mainland China companies through our mainland China subsidiaries, or to establish new consolidated VIEs in mainland China. In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, mainland China entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our mainland China subsidiaries or with respect to future capital contributions by us to our mainland China subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from our equity offerings and to capitalize or otherwise fund our mainland China operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

A series of circulars promulgated by government authorities require mainland China residents to register with qualified banks in connection with their direct establishment or indirect control of an offshore entity, for the purpose of international investment and financing, with such mainland China residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests, which is referred to in SAFE Circular 37 as a "special purpose vehicle." In the event that a mainland China resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the mainland China subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its mainland China subsidiaries. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. We cannot assure you that all of our shareholders or beneficial owners who are mainland China residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by foreign exchange regulations. Mr. Jack Jiajia Huang and Ms. Ting Shu, who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being mainland China residents have completed the initial foreign exchange registrations, amended their registrations to reflect our corporate restructuring in November 2014. In addition, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not be able to compel them to comply with all applicable foreign exchange regulations. The failure or inability of such individuals to comply with the registration procedures set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities, or obtain foreign-exchange-dominated loans from our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected. Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if we decide to acquire a mainland China domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Pursuant to the Advertising Practice Code and the Communications and Multimedia Act of Malaysia, online and offline advertising in Malaysia is subject to specific requirements such as cost labeling, website layout specifications and content localization. Our advertising materials, used across markets that we operate in, are subject to such laws and regulations and face scrutiny from consumer associations and relevant government authorities in Malaysia. We cannot assure that our advertising materials are always consistent with such specific requirements, which are changed from time to time, under Malaysian laws and regulations, or other requirements that may apply such as those on the portrayal of children and adolescents, religion, social behaviors and lifestyles in advertisements. There remains uncertainty on the regulatory standards for such content in online and offline advertising in Malaysia, which may render some of our advertising materials unsuitable for Malaysia. Our business operations and financial condition may be materially and adversely affected if we cannot carry out normal and consistent advertising activities in Malaysia.

We face risks as to the validity of certain contractual provisions within contracts between us and our Malaysian customers, as a result of which we may be unable to enforce such contractual provisions with customers in Malaysia. For instance, we use standard form contracts with our Malaysian customers, and we face certain risks as to the enforceability of contractual provisions within our contracts used in Malaysia, including, but not limited to, the choice of law, liquidate damages and refunds, and gift courses provisions. There remains uncertainty as to whether these contractual provisions are consistent and enforceable under the Consumer Protection Act or other laws and regulations of Malaysia. Additionally, Malaysian authorities and courts may deem our contractual provisions unfair under the Consumer Protection Act, resulting in voiding our contracts with Malaysian customers. Our business operations and financial condition may be materially and adversely affected if our Malaysian customers decides to file lawsuits against us on the validity and enforceability of such contractual provisions or if a Malaysia authority decides that these contractual provisions are unenforceable.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in certain jurisdictions where we operate. For example, in mainland China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside mainland China. Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no international securities regulator is allowed to directly conduct investigation or evidence collection activities within mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an international securities regulator to directly conduct investigation or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.

We conduct our operations in mainland China through our mainland China subsidiaries. Our operations in mainland China are governed by laws and regulations of mainland China. The mainland China government has significant oversight and discretion over the conduct of our operations in mainland China, and it may intervene in or influence our operations. For example, we divested our China Mainland Business in June 2022 and have since focused on our international business. However, there is no assurance that governmental authorities in mainland China would fully apprehend the impact of the divestiture of our China Mainland Business and our on-going operations and may consider that we are still subject to the Alleviating Burden Opinion. As a result, governmental authorities in mainland China may take actions against us, which could result in a material adverse change in our operation, and our ordinary shares and ADSs may decline in value or become worthless. Also, Chinese regulatory authorities could disallow our holding company structure, which would likely result in a material change in our operations and/or a material change in the value of our securities, including that it could cause the value of such securities to significantly decline or become worthless. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and foreign investment in issuers with significant operations in mainland China depending on the facts and circumstances. In the event that we are required to seek approval, permissions or other actions from mainland China's regulatory authorities in connection with our offerings that are conducted overseas and foreign investment in our mainland China subsidiaries, failure to comply with any legal and regulatory requirements of mainland China in relation to overseas securities issuance or foreign investment could significantly limited or completely hindered our ability to offer or continue to offer securities to investors or cause the value of our ADSs to significantly decline or become worthless. Therefore, investors of our company face potential uncertainty from actions taken by the PRC government affecting our operations in mainland China. In addition, to the extent cash or other assets in the business is in mainland China or a mainland China entity, the funds or other assets may not be available to fund operations or for other use outside of mainland China due to the imposition of restrictions and limitations on the ability of 51Talk Online Education Group or its subsidiaries to transfer cash or other assets. As of the date of this annual report, there is no equivalent or similar restriction or limitation in Hong Kong on cash or other assets transfers in, or out of, our Hong Kong entities, except for the transfer of funds involving money laundering and criminal activities. However, if restrictions or limitations were to become applicable to cash or other assets transfers in and out of Hong Kong entities in the future, the funds or other assets in our Hong Kong entities may not be available to fund operations or for other use outside of Hong Kong. There is no assurance that the ability of us, our subsidiaries and the former mainland China consolidated VIEs to transfer cash will not subject to further limitations or restrictions.

The legal system of mainland China is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value. The PRC legal system is evolving rapidly, and the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and rules involves uncertainties. Our mainland China subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign-invested enterprises as well as various Chinese laws and regulations generally applicable to companies incorporated in mainland China. However, since these laws and regulations are relatively new and the legal system of mainland China continues to evolve, the interpretations and enforcement of these laws, regulations and rules are subject to change. The timeline for amending or promulgating a law or regulation may vary widely. Besides, legislation or regulations, particularly in local applications, may be enacted without sufficient prior notice or announcement to the public. It is difficult to anticipate when rules or regulations in the jurisdictions where we operate may be amended or new rules or regulations may be enacted, and rules or regulations in the jurisdictions where we operate may be changed with little advance notice. Furthermore, in countries and regions that are divided into various provinces, municipalities or localities, different laws, rules, regulations and policies may have different and varying application and enforcement practices in different parts of that country or region. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since administrative and court authorities in mainland China have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we may enjoy than in more developed legal systems. Furthermore, the legal system of mainland China is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in mainland China may be protracted, resulting in substantial costs and diversion of resources and management attention. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in mainland China could materially and adversely affect our business and impede our ability to continue our operations.

Our business involves the broadcasting of online content in and from various jurisdictions, including Singapore, and would therefore be subject to applicable laws and regulations (including licensing requirements). For applicable laws and regulations in Singapore, see "Item 4. Information on the Company-B. Business Overview-Government Regulations-Singapore Regulations." If we are unable to comply with the broadcasting and online content laws and regulations, we could become subject to penalties, including fines, revocation of our licenses, blocking and/or takedown of our online content.

We provide our course offerings to our students in Hong Kong through our apps. The Education Ordinance sets out the requirements for schools and educational institutions in Hong Kong, including the curriculum, teacher qualifications, and student assessment. The Education Bureau may suspend or revoke the license of a school or educational institution that is found to be in violation of the Education Ordinance. In addition, the education content provided by an education company must be accurate and complete. Inaccurate or incomplete educational content may be in violation of the Education Ordinance and may be subject to fines or legal action. We are also subject to anti-discrimination laws when we provide our course offerings to students in Hong Kong. The anti-discrimination laws in Hong Kong require education companies to ensure that their educational content is accessible to all students, including those with disabilities. Failure to provide accessible content may be in violation of anti-discrimination laws and may result in legal action or reputational damage. Non-compliance with the regulations of Hong Kong may lead to a loss in business as a result of reputational damage or loss of trust from customers as we may be not seen as trustworthy or reliable and may struggle to attract and retain customers. Negative publicity or consumer backlash can make it more difficult for us to attract new customers or retain existing ones, as trust and credibility are important factors for students and parents to consider when selecting educational services. As a result, we may be forced to scale back our operations and even unable to operate in Hong Kong and our business operations and prospects may be adversely and materially affected.

The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval is obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations. The new rules for the filing-based administration of overseas securities offerings and listings by Chinese domestic companies released on February 17, 2023, or New Filing Rules, establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. According to the New Filing Rules, (i) an overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC; and (ii) the issuer or its affiliated domestic company, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering, issuance of convertible bonds, offshore relisting after go-private transactions and other equivalent offing activities. In addition, after a domestic company has offered and listed securities in an overseas markets, it is required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to, change of control and voluntary or mandatory delisting. However, from March 31, 2023, enterprises that have been listed overseas shall constitute existing enterprises and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct future offshore offerings or capital raising activities or are involved in other circumstances that require filing with the CSRC. On February 24, 2023, the CSRC, together with other government authorities, issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which became effective on March 31, 2023. According to the Archives Rules, domestic mainland China companies, whether offering and listing securities overseas directly or indirectly, must strictly abide the applicable laws and regulations when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority. Furthermore, the Archives Rules also provides that securities companies and securities service providers shall also fulfill the applicable legal procedures when providing overseas regulatory institutions and other institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest. For more details of the New Filing Rules, please refer to "Item 4. Information on the Company-B. Business Overview-Government Regulations-PRC Regulations-Regulations Relating to Overseas Listing and M&A Rules." Under the current PRC laws, rules and regulations, we are subject to the following test in determining whether we and our mainland China subsidiaries are subject to the filing procedures with the CSRC: (i) whether our mainland China subsidiaries account for more than 50% of our operating revenue, profits, total assets or net asset in our audited consolidated financial statements for the most recent completed fiscal year, and (ii) whether the majority of our senior management are Chinese citizens or domiciled in mainland China, or the key aspects of our business activities are conducted in mainland China, or our main places of operations are located in mainland China. Moreover, according to the applicable rules and regulations, the determination of the overseas offerings and listings by domestic companies will be conducted on a "substance over form" basis. As of the date of this annual report, based on the current status of our company and mainland China subsidiaries, it is the opinion of our PRC legal counsel, Shihui Partners that (i) our future offshore offering or listing in an overseas market are not subject to the filing requirements of the CSRC, including our follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities, and (ii) we are also not subject to the requirements of filing a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to, change of control and voluntary or mandatory delisting. However, there can be no assurance that the CSRC and other PRC government agencies would reach the same conclusion with our PRC legal counsel. In addition, we cannot assure you that any new rules or regulations promulgated in the future will not require us to seek approval from or fulfill the filing requirement or other procedures with the CSRC or other PRC government authorities in connection with our future offshore offerings and capital raising activities. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, are required for our offshore offerings or capital raising activities, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. In addition, there are uncertainties with regard to whether any report filed with the CSRC after the occurrence of certain material corporate events will be subject to any further action from the CSRC in the event that our future offshore offerings and capital raising activities are subject to the regulatory regimes of the CSRC or other PRC government authorities. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore, offerings, capital raising activities or certain material corporate events, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government authorization for our offshore offerings, capital raising activities or certain material corporate events. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our operating privileges in mainland China, delay or restrict the repatriation of the proceeds from our offshore offerings into mainland China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings or capital raising activities before settlement and delivery and further actions of the shares offered or take any actions regarding our material corporate events. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement, delivery and further actions may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings or capital raising activities, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.

Pursuant to Section 86 of the 1996 Employment Act of Malaysia, Article 13 of the 1997 Education Act of Malaysia, local advertising laws and other laws and regulations, licenses may be required for local educational institutions in Malaysia. One of our subsidiaries, 51TALK TRAINING SDN. BHD, provides local sales, customer service and other ancillary services for our online courses in Malaysia. The Ministry of Education of Malaysia has notified us that the ministry has no clear requirements or guidance on whether private companies offering online education need to obtain relevant licenses for local educational institutions. However, we need to continue to observe the legislative trends of the Ministry of Education to determine whether we need to obtain the licenses, depending on the status of our employees, business activities and online education model in Malaysia. The issue of whether we need to obtain certain licenses will be subject to the policies and guidance adopted by the Malaysian government, including the Ministry of Education. If a Malaysian regulatory agency is to determine that a license is required for our local operations, there is no assurance that we will be able to obtain such licenses under the laws of Malaysia. If we are required to obtain such a license, the law of Malaysia requires that citizens of Malaysia need to hold at least 20% equity in our Malaysia subsidiary, which may adversely impact our complete control of our operations. Delay in or failure to obtain such licenses may materially and adversely affect our business, financial conditions and result of operations.

The General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion on July 24, 2021, which sets out a series of operating requirements on after-school tutoring institutions. The Alleviating Burden Opinion and its subsequently adopted implementation measures prohibited our historically offered online tutoring services taught mainly by independently contracted foreign tutors to K-12 students in mainland China. In response to the regulatory developments in the private education sector in mainland China since mid-2021, we have divested our China Mainland Business and are completely focused on international markets. After the divestiture of our China Mainland Business, we started to offer English courses to students in countries and regions outside of mainland China. If students from mainland China wish to access our course offerings, they may register for our online or mobile platform and attend our courses from mainland China. For example, students may by-pass our geolocation settings to register for and attend our courses. There are no comprehensive methods to prevent students from mainland China to purchase and use our platform, and our ability to adopt technological safeguards are limited. If students from mainland China register for or use our platform for English courses, we and our operations may be deemed by the government authorities in mainland China to circumvent the restrictions on after-school tutoring taught by foreign tutors to K-12 students in mainland China.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas listings. The application of the M&A Rules remains unclear. The M&A Rules discussed in the preceding paragraph and recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a mainland China domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or mainland China time-honored brand. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the Ministry of Commerce when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council in August 2008 is triggered. In addition, the security review rules issued by the Ministry of Commerce that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national security" concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may expand our operations in mainland China through acquisition. Complying with the requirements of the above-mentioned regulations and other rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. Our ability to expand our operations in mainland China through future acquisitions would as such be materially and adversely affected.

The mainland China government imposes regulations on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of mainland China. We charge customers fees in local currencies in some countries and regions outside mainland China where we offer our course offerings, and a significant portion of our costs are incurred in the currencies of the countries and regions where we operate. As we primarily derive our revenue from our operations in countries and regions outside mainland China, we are more likely to rely on dividend payments or other distributions from our offshore subsidiaries, if our offshore subsidiaries decide to do so. Additionally, under our current corporate structure, our company in the Cayman Islands may also rely on dividend payments from our mainland China subsidiaries to fund any cash and financing requirements we may have, in the event that our mainland China subsidiaries have accumulated profits to be distributed after meeting their operational needs and legal and contractual requirements related to dividend distribution. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Therefore, our mainland China subsidiaries in mainland China are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. But 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 the repayment of loans denominated in foreign currencies. The mainland China government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.