Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 3

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 3
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 of the VIE structure.

The VIE structure involves unique risks to investors
in the ADSs. It may be less effective than direct ownership in providing us with operational control over the Current VIEs and we may
incur substantial costs to enforce the terms of the arrangements. For instance, the Current VIEs and their shareholders could breach
their contractual arrangements with us by, among other things, failing to conduct the operations of the Current VIEs in an acceptable
manner or taking other actions that are detrimental to our interests. If we had direct ownership of the Current VIEs in China, we would
be able to exercise our rights as a shareholder to effect changes in the board of directors of the Current VIEs, which in turn could
implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current
contractual arrangements, we rely on the performance by the Current VIEs and their shareholders of their obligations under the contracts
to direct the Current VIEs’ activities. The shareholders of the Current VIEs may not act in the best interests of our company or
may not perform their obligations under these contracts. If any dispute relating to these contracts remains unresolved, we will have
to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings
and therefore will be subject to uncertainties in the PRC legal system.

We may face challenges in enforcing the contractual
arrangements due to jurisdictional and legal limitations. There are substantial uncertainties regarding the interpretation and application
of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect
to its contractual arrangements with the Current VIEs and their nominee shareholders through our Current WFOE. As of the date of this
annual report, the agreements under the contractual arrangements among our Current WFOE, the Current VIEs and their nominee shareholders
have not been tested in a court of law. It is uncertain whether any new PRC laws or regulations relating to Current VIE structure will
be adopted or, if adopted, what they would provide. If we or the Current VIEs are found to be in violation of any existing or future
PRC laws or regulations or fail to obtain or maintain any of the required licenses, permits, registrations or approvals, the relevant
PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures