Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 36

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 36
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isks Related to Our Corporate Structure

If the PRC government determines that the contractual arrangements
in relation to the VIE structure do not comply with PRC regulatory restrictions on foreign investment in certain industries, or if these
regulations or the way they are interpreted change, we, the PRC subsidiaries could be subject to severe penalties or be forced to relinquish
their interests in those operations.

We, the PRC subsidiaries and the Current VIEs
face material risks relating to our corporate structure. We are not a Chinese operating company but a Cayman Islands holding company
with operations conducted by their subsidiaries and through contractual arrangements with Current VIEs based in China, and this structure
involves unique risks to investors. The VIE structure provides investors with exposure to foreign investment in China-based companies
where Chinese law prohibits or restricts direct foreign investment in the operating companies, and investors may never hold equity interests
in the Chinese operating companies. The PRC government regulates telecommunications-related businesses through strict business licensing
requirements and other government regulations. If the PRC government deems that our contractual arrangements with the Current VIEs do
not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation
of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those
operations. Our holding company in the Cayman Islands, the Current VIEs, and investors of our company face uncertainty about potential
future actions by the PRC government that could affect the validity and enforceability of the contractual arrangements with the Current
VIEs and, consequently, significantly affect the financial performance of the Current VIEs and our company as a group.

Because we are an exempted company incorporated
in the Cayman Islands, we are classified as a foreign enterprise under PRC laws and regulations, and each of the PRC subsidiaries is
a foreign-invested enterprise (“ FIE”). To comply with PRC laws and regulations, we conduct our business in China through
the Current VIEs pursuant to a series of contractual arrangements among Current WFOE, the Current VIEs and its shareholders. See “ Item
4. Information on the Company - C. Organizational Structure - Contractual Arrangements with the Current VIEs and Their Shareholders.”
We, our subsidiaries and the investors do not have an equity ownership in, direct foreign investment in, or control through such ownership
or investment of the Current VIE