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United States securities and exchange commission logo
August 10, 2022
Hui Jin
Chief Executive Officer
H World Group Ltd.
No. 699 Wuzhong Road
Minhang District
Shanghai 201103
People s Republic of China
Re: H World Group Ltd.
Form 20-F for the
Fiscal Year Ended December 31, 2021
Filed April 27,
2022
File No. 001-34656
Dear Hui Jin:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2021
Item 3. Key Information, page 4
1. Please disclose
prominently whether the contractual arrangements underlying the variable
interest entity (VIE)
model have been tested in court. Explain whether the VIE structure
is used to provide
investors with exposure to foreign investment in China-based
companies where Chinese
law prohibits direct foreign investment in the operating
companies, and disclose
that investors may never hold equity interests in the Chinese
operating company. Your
disclosure should acknowledge that Chinese regulatory
authorities could
disallow this structure, which would likely result in a material change in
your operations and/or
a material change in the value of the securities you are registering
for sale, including
that it could cause the value of such securities to significantly decline
or become worthless.
Provide a cross-reference to your detailed discussion of risks facing
Hui Jin
FirstName LastNameHui Jin
H World Group Ltd.
Comapany
August 10, NameH
2022 World Group Ltd.
August
Page 2 10, 2022 Page 2
FirstName LastName
the company and the offering as a result of this structure.
2. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs when
providing the disclosure throughout the document so that it is clear
to investors which
entity the disclosure is referencing and which subsidiaries or
entities are conducting the
business operations. Refrain from using terms such as we or
our when describing
activities or functions of a VIE. For example, disclose, if true, that
your subsidiaries
and/or the VIE conduct operations in China, that the VIE is
consolidated for accounting
purposes but is not an entity in which you own equity, and that the
holding company does
not conduct operations. Disclose clearly the entity (including the
domicile) in which
investors are purchasing an interest.
3. Please provide early in Item 3a diagram of the company s corporate
structure, identifying
the person or entity that owns the equity in each depicted entity.
Describe all contracts and
arrangements through which you claim to have economic rights and
exercise control that
results in consolidation of the VIE s operations and financial
results into your financial
statements. Identify clearly the entity in which investors are
purchasing their interest and
the entity(ies) in which the company s operations are conducted.
Describe the relevant
contractual agreements between the entities and how this type of
corporate structure may
affect investors and the value of their investment, including how and
why the contractual
arrangements may be less effective than direct ownership and that the
company may incur
substantial costs to enforce the terms of the arrangements. Disclose
the uncertainties
regarding the status of the rights of the Cayman Islands holding
company with respect to
its contractual arrangements with the VIE, its founders and owners,
and the challenges the
company may face enforcing these contractual agreements due to legal
uncertainties and
jurisdictional limits.
4. We note disclosure in the financial statements the Cayman Islands
holding company is the
primary beneficiary of the VIEs. However, neither the investors in the
holding company
nor the holding company itself have an equity ownership in, direct
foreign investment in,
or control of, through such ownership or investment, the VIEs.
Accordingly, please refrain
from implying that the contractual agreements are equivalent to equity
ownership in the
business of the VIE. Any references to control or benefits that accrue
to you because of
the VIEs should be limited to a clear description of the conditions
you have satisfied for
consolidation of the VIEs under U.S. GAAP. Additionally, your
disclosure should clarify
that you are the primary beneficiary of the VIEs for accounting
purposes.
5. We note your disclosure on page 8 that you, your subsidiaries, or the
VIEs are not
required to obtain from Chinese authorities such as the CSRS, CAC, or
any other
authority to operate your business and to offer the securities being
registered to foreign
investors. Please disclose how you reached such a determination (e.g.,
internal legal
analysis, opinion of external counsel or other advisor, etc.). To the
extent that you are
relying on the opinion of counsel, please name and file their consent.
Hui Jin
H World Group Ltd.
August 10, 2022
Page 3
Part I
Item 3. D. Risk Factors, page 8
6. Revise your risk factors to acknowledge that if the PRC government
determines that the
contractual arrangements constituting part of the VIE structure do not
comply with PRC
regulations, or if these regulations change or are interpreted
differently in the future, the
securities you are registering may decline in value or become
worthless if the
determinations, changes, or interpretations result in your inability
to assert contractual
control over the assets of your PRC subsidiaries or the VIEs that
conduct some of your
operations.
Item 5.Operating and Financial Review and Prospects
5.B. Liquidity and Capital Resources
Restrictions on Cash Transfers to Us, page 102
7. Provide a clear description of how cash is transferred through your
organization. Disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
Quantify any cash flows and transfers of other assets by type that
have occurred between
the holding company, its subsidiaries, and the consolidated VIEs, and
the direction
of transfer. Quantify any dividends or distributions that a subsidiary
or consolidated VIE
have made to the holding company and which entity made such transfer,
and their tax
consequences. Similarly, quantify dividends or distributions made to
U.S. investors, the
source, and their tax consequences. Your disclosure should make clear
if no transfers,
dividends, or distributions have been made to date. Describe any
restrictions and
limitations on your ability to settle amounts owed under the VIE
agreements. Provide
cross-references to the condensed consolidating schedule and the
consolidated financial
statements.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Babette Cooper at 202-551-3396 or Jennifer Monick at
202-551-3295 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Isabel Rivera at 202-551-3518 or Jeffrey Gabor at 202-551-2544 with any
other
questions.
FirstName LastNameHui Jin Sincerely,
Comapany NameH World Group Ltd.
Division of
Corporation Finance
August 10, 2022 Page 3 Office of Real
Estate & Construction
FirstName LastName