Company: ZHIHF
Filing Date: 2025-04-15
Form Type: 20-F
Source: 0001410578-25-000729
Chunk: 48

Company: Zhihu Inc.
Filing Date: 2025-04-15
Form: 20-F
Item: Item 3
Chunk 48
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 April 2024, Beijing Radio and Television Station, or BRTS, completed its investment of RMB0.2 million in Zhizhe Tianxia to acquire 1% of Zhizhe Tianxia’s enlarged registered capital. BRTS is not a party to the contractual arrangements currently in effect among Zhizhe Sihai, Zhizhe Tianxia, and other shareholders of Zhizhe Tianxia. Therefore, although we still enjoy economic benefits and exercise effective control over Zhizhe Tianxia and its subsidiaries, we are unable to mandatorily purchase, or have BRTS pledge, the 1% equity interests in Zhizhe Tianxia in the same manner as agreed under existing contractual arrangements, nor are we granted the authorization of the voting rights of the 1% equity interests. We believe Zhizhe Sihai still controls and is the primary beneficiary of Zhizhe Tianxia for accounting purposes, as it continues to have a controlling financial interest in Zhizhe Tianxia pursuant to ASC 810-10-25-38A after the issuance of such 1% equity interests.

Our contractual arrangements may not be as effective in providing operational control as direct ownership and shareholders of the VIEs may fail to perform their obligations under our contractual arrangements.

Since PRC laws limit foreign equity ownership in certain businesses in China, such as provision of internet information services, internet culture activities, and internet audio-visual program services, we operate such businesses in China through the VIEs, in which we have no ownership interest and rely on a series of contractual arrangements with the VIEs and their respective equity holders to control and operate these businesses. Our revenue and cash flow from our such businesses are attributed to the VIEs. The contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs. Direct ownership would allow us, for example, to exercise our rights directly or indirectly as a shareholder to effect changes in the boards of directors of the VIEs, which, in turn, could effect changes, subject to any applicable fiduciary obligations at the management level. However, under the contractual arrangements, as a legal matter, if the VIEs or their equity holders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend significant resources to enforce those arrangements and resort to litigation or arbitration and rely on legal remedies under PRC laws. These remedies may include seeking specific performance or injunctive relief and claiming damages,