Benzinga | Jul 26, 2021 06:03AM EDT

Youdao Says Receives Set Of Regulatory Guidelines Issued On Jul. 24 Requiring Online After-School Tutoring Institutions Register As Non Profits

Youdao, Inc. ("Youdao" or the "Company") (NYSE:DAO), a leading intelligent learning company in China, noted that the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a set of guidelines on July 24, 2021, aiming to ease the burden of excessive homework and after-school tutoring for students receiving compulsory education (the "Guidelines"). The Guidelines, among other things, require that all institutions offering online after-school tutoring on academic subjects in compulsory education be registered as non-profit organizations, obtain approval from the relevant regulatory authorities, and comply with various operational requirements with respect to class hours, faculty qualifications, tuition standards, advertising and others. In addition, the Guidelines prohibit all such tutoring businesses from raising funds through stock exchange listings or other capital-related activities. Foreign investments in school curriculum-based tutoring institutions through variable interest entity (VIE) arrangements, mergers and acquisitions or otherwise are also prohibited. Listed companies are banned from raising capital through equity offerings to invest in businesses offering tutoring on academic subjects in compulsory education. The Guidelines require that all businesses that have already violated these rules take corrective measures as appropriate.

Although the interpretation and implementation of the Guidelines remain uncertain, we expect the Guidelines to have material impacts on our K-12 course business, financial condition and corporate structure. As we are currently exploring measures to comply with the requirements in the Guidelines for our K-12 course business, we will continue to seek guidance from regulatory authorities to improve our operations in strict compliance with all laws and regulations, fulfil our social responsibilities, provide our users with high-quality, innovative products and services, and promote the long-term development of China's education industry.