New Oriental Education (EDU) Offers Details of Ongoing Corporate Structure Changes
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New Oriental Education and Technology Group Inc. (NYSE: EDU) announced that it has further strengthened its corporate structure by simplifying the shareholding structure of Beijing New Oriental Education & Technology (Group) Co., Ltd.
New Oriental China is a variable interest entity, or VIE, of the Company. Prior to the changes in the shareholding structure of New Oriental China that were initiated in December 2011, equity interests in New Oriental China had been held by eleven registered shareholders, including an entity controlled by Mr. Michael Minhong Yu, the founder, Chairman and Chief Executive Officer of the Company. These shareholders had entered into contractual arrangements to enable the Company to effectively control and be the primary beneficiary of New Oriental China. Except for the one shareholder, which is an entity controlled by Mr. Yu, all former ultimate shareholders of New Oriental China were former employees or shareholders of the Company who no longer work at the Company or ceased to have a meaningful stake in the Company. The Company believes that New Oriental China's equity interests should only be held by the shareholders whose interests are more closely aligned with those of the Company, and that the interests of Mr. Yu, who is the Company's founder, Chairman and Chief Executive Officer, are aligned with those of the Company, given the significant beneficial ownership Mr. Yu has in the Company and his continuing leadership position at the Company.
In light of the above and in an effort to further strengthen the Company's corporate structure and control over New Oriental China, the Company requested the ten former shareholders of New Oriental China to transfer all of their equity interests in New Oriental China to the one shareholder, which is an entity controlled by Mr. Yu, without consideration. These transfers began in December 2011 and were completed in January 2012 when the new shareholding structure was officially registered with the local administration for industry and commerce. Equity pledge agreements reflecting the new shareholding structure were executed in April 2012 and duly registered in May 2012. New Oriental China is now solely held by the entity controlled by Mr. Yu. Since 2005, this entity has been bound by the contractual arrangements it entered into with the Company's wholly-owned subsidiaries, which enable the Company to exercise effective control over and be the primary beneficiary of New Oriental China.
The aforementioned changes in New Oriental China's shareholding structure have had no adverse effect on the Company or its shareholders. They have not affected, and will not affect, the consolidation of New Oriental China in the Company's consolidated financial statements prepared in accordance with the U.S. GAAP throughout the period since 2005 and going forward.
The Company intends to continue to review and evaluate its corporate structure and make modifications to the existing contractual arrangements, if necessary and appropriate, for the purpose of enhancing the corporate structure and governance.
New Oriental China is a variable interest entity, or VIE, of the Company. Prior to the changes in the shareholding structure of New Oriental China that were initiated in December 2011, equity interests in New Oriental China had been held by eleven registered shareholders, including an entity controlled by Mr. Michael Minhong Yu, the founder, Chairman and Chief Executive Officer of the Company. These shareholders had entered into contractual arrangements to enable the Company to effectively control and be the primary beneficiary of New Oriental China. Except for the one shareholder, which is an entity controlled by Mr. Yu, all former ultimate shareholders of New Oriental China were former employees or shareholders of the Company who no longer work at the Company or ceased to have a meaningful stake in the Company. The Company believes that New Oriental China's equity interests should only be held by the shareholders whose interests are more closely aligned with those of the Company, and that the interests of Mr. Yu, who is the Company's founder, Chairman and Chief Executive Officer, are aligned with those of the Company, given the significant beneficial ownership Mr. Yu has in the Company and his continuing leadership position at the Company.
In light of the above and in an effort to further strengthen the Company's corporate structure and control over New Oriental China, the Company requested the ten former shareholders of New Oriental China to transfer all of their equity interests in New Oriental China to the one shareholder, which is an entity controlled by Mr. Yu, without consideration. These transfers began in December 2011 and were completed in January 2012 when the new shareholding structure was officially registered with the local administration for industry and commerce. Equity pledge agreements reflecting the new shareholding structure were executed in April 2012 and duly registered in May 2012. New Oriental China is now solely held by the entity controlled by Mr. Yu. Since 2005, this entity has been bound by the contractual arrangements it entered into with the Company's wholly-owned subsidiaries, which enable the Company to exercise effective control over and be the primary beneficiary of New Oriental China.
The aforementioned changes in New Oriental China's shareholding structure have had no adverse effect on the Company or its shareholders. They have not affected, and will not affect, the consolidation of New Oriental China in the Company's consolidated financial statements prepared in accordance with the U.S. GAAP throughout the period since 2005 and going forward.
The Company intends to continue to review and evaluate its corporate structure and make modifications to the existing contractual arrangements, if necessary and appropriate, for the purpose of enhancing the corporate structure and governance.
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