Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 38

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 38
---
     
 ──────────────────────────────────────────────────────

  shutting down the servers or blocking the applications,  

  requiring us, the PRC subsidiaries to change their  
  corporate structure and contractual arrangements;   
 ──────────────────────────────────────────────────────

  restricting the right by us, the PRC subsidiaries to  

  taking other regulatory or enforcement actions that  

New PRC laws, rules and regulations may impose
additional requirements on us, our subsidiaries and the Current VIEs’ corporate structure and contractual arrangements. If any
of these penalties or requirements causes us and our subsidiaries to lose the rights to direct the activities of the Current VIEs or
their right to receive economic benefits, we will no longer be able to consolidate the Current VIEs’ financial results in our consolidated
financial statements, which could materially adversely affect our business, results of operations and financial condition.

We and the PRC subsidiaries rely on contractual arrangements
with the Current VIEs and the Current VIEs’ shareholders to operate their business, which may not be as effective as direct ownership
in providing operational control.

We and the PRC subsidiaries rely on contractual
arrangements with the Current VIEs and its shareholders to operate their business. These contractual arrangements may not be as effective
as direct ownership in providing us and the PRC subsidiaries with control over the Current VIEs.

Because we and the PRC subsidiaries do not have
a direct ownership interest in the Current VIEs, we consolidate our financial results by relying on the performance by the Current VIEs
and its shareholders of their respective obligations under the contractual arrangements with them. The shareholders of the Current VIEs
may not act in the best interests of us and the PRC subsidiaries, or otherwise fail to perform their contractual obligations.

We and the PRC subsidiaries may replace the shareholders
of the Current VIEs pursuant to the contracts with the Current VIEs and its shareholders. However, if any dispute relating to these contracts
or the replacement of the Current VIEs’ shareholders remains unresolved, we and the PRC subsidiaries must enforce their rights
under these contracts under PRC law and be subject to uncertainties in the PRC legal system.

Any failure by the Current VIEs or its shareholders to perform
their obligations under their contractual arrangements with Current WFOE would materially adversely affect the business, results of operations
and financial condition of us and the PRC subsidiaries.

If the Current VIEs or its shareholders fail
to