Benzinga | Aug 18, 2021 06:01PM EDT

TAL Education Group Provides Update on Regulatory Development

TAL Education Group ("TAL" or the "Company") (NYSE:TAL), a leading K-12 after-school tutoring services provider in China, announced that the Beijing Municipality Government and the Beijing Municipal Committee of the Communist Party of China jointly issued the "Beijing Municipality's Measures to Further Reduce the Burden of Homework and After-School Tutoring on Students in Compulsory Education in Beijing" (the "Beijing Measures") on August 14, 2021, and published the full text of the Beijing Measures on August 18, 2021. The Beijing Measures were adopted to implement the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education, published in July by the General Office of the CPC Central Committee and the General Office of the State Council, and aims to ensure that "the excessive burden upon students from school homework and after-school tutoring, the education expenditures from their families and the burden on their parents' energy will be effectively reduced by the end of 2021, with significant impact achieved within two years."

With respect to after-school tutoring services, among other things, the Beijing Measures contain the following provisions:

* No new provider of after-school tutoring services on academic subjects in China's compulsory education system ("Academic AST") will be approved, while existing Academic AST providers will be subject to review and re-registration aimed at reducing their numbers by phases; the remaining Academic AST providers shall all be registered as non-profit; previously registered online Academic AST providers will also be subject to review and re-registration and the registration and ICP license of any unqualified online AST providers will be rescinded.

* After-school tutoring providers are strictly prohibited from providing Academic AST during any national holiday, weekend, winter and summer break period; there are further restrictions over when Academic AST can be offered during weekdays.

* Academic AST providers are prohibited from (i) offering classes over contents outside of or in advance of the school curriculum, (ii) offering classes based on any foreign curriculum, (iii) soliciting and recruiting school teachers by offering excessive compensation, or (iv) employing foreign personnel to carry out training activities from overseas. Non-Academic AST providers are prohibited from offering Academic AST classes.

* Prices for Academic AST will need to follow the guidelines from the government to prevent "any excessive charging or profit-seeking activity".

* Academic AST providers are prohibited from financing by way of listing its securities or conducting other capital market activities; listed companies may not invest in Academic AST providers through capital markets fundraising activities, and may not acquire assets of AST providers by paying cash or issuing securities; foreign capital is prohibited from controlling or participating in AST providers through mergers and acquisitions, entrusted operations, joining franchises, using variable interest entities or other structures.

* Enhancing oversight of AST advertising, including restricting the channels for deploying AST advertisements.

Certain other provinces and municipalities in China have reportedly adopted similar measures and the Company expects that additional provinces and municipalities may follow similar approaches. The Company's compliance with these measures will have a material adverse impact on its existing AST business, results of operations and financial condition. Specifically, in compliance with the Beijing Measures, the Company has stopped offering Academic AST classes over weekends, national holidays and the current school break period in Beijing. Historically, the revenues from Academic AST classes over these time periodsaccounted for the majority of the Company's total revenues. The Company will continue to proactively seek guidance from and cooperate with government authorities in Beijing and other provinces and municipalities in connection with its efforts to comply with the policy directives of the PRC central government and any related implementation rules, regulations and measures.