20-F/A: Zhongchao Amends 20-F on Corporate Governance

Zhongchao Inc. filed an amendment to its 2024 annual report to update its corporate governance disclosures, highlighting its intent to follow certain home country practices over Nasdaq rules.

Summary

• Zhongchao Inc. is filing Amendment No. 1 (Form 20-F/A) to its Annual Report on Form 20-F for the fiscal year ended December 31, 2024, originally filed on April 25, 2025.
• The sole purpose of this amendment is to update the disclosure in Item 16G of Part II, which pertains to Corporate Governance.
• As a Cayman Islands exempted company listed on the Nasdaq Capital Market, Zhongchao Inc. is a foreign private issuer and may follow home country corporate governance practices instead of certain Nasdaq Stock Market Rules.
• The company chooses to follow home country practice in place of several Nasdaq rules, including those requiring annual shareholder meetings (Rule 5620(a)), proxy solicitations (Rule 5620(b)), and shareholder approval for certain issuances of securities (Rules 5635(a), 5635(b), 5635(c), and 5635(d)).
• New certifications from the Chief Executive Officer, Weiguang Yang, and Chief Financial Officer, Pei Xu, are included, dated January 15, 2026.

Sentiment

Score: 4

Explanation: The filing is a routine regulatory amendment to corporate governance disclosures. The decision to opt out of several Nasdaq corporate governance rules, while permissible for a foreign private issuer, generally indicates weaker shareholder protections compared to companies fully adhering to Nasdaq standards, which could be viewed as a slight negative from a governance perspective.

Positives

• The company is fulfilling its regulatory obligations by filing an amendment to ensure accurate disclosure.
• The Chief Executive Officer and Chief Financial Officer have certified the report, affirming its accuracy and completeness based on their knowledge.

Negatives

• The company is opting out of several Nasdaq corporate governance rules, which may result in fewer shareholder protections compared to companies fully adhering to all Nasdaq requirements.
• Shareholders will not have the right to an annual meeting or receive proxy statements for shareholder meetings.
• Significant equity issuances, including those for acquisitions, changes of control, equity compensation plans, or large dilutive transactions, may occur without shareholder approval.

Risks

• Reduced shareholder protections due to the company's decision to follow Cayman Islands home country practices over specific Nasdaq corporate governance rules.
• Potential for significant dilution or changes in corporate control through equity issuances without the requirement for shareholder approval.
• Lack of annual shareholder meetings and proxy solicitations could limit shareholder engagement and oversight.

Management Comments

• Weiguang Yang, Chief Executive Officer, certified that the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made not misleading.
• Pei Xu, Chief Financial Officer, certified that the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made not misleading.

Industry Context

Foreign private issuers often leverage exemptions from certain U.S. corporate governance rules, allowing them to adhere to home country practices. While this provides operational flexibility, it can lead to a perception of weaker shareholder protections compared to domestic U.S. companies, potentially influencing investor sentiment and capital allocation decisions within the broader market.

Comparison to Industry Standards

• Compared to U.S. domestic companies listed on Nasdaq, Zhongchao Inc. deviates from standard corporate governance practices by opting out of rules requiring annual shareholder meetings and proxy solicitations. For example, companies like Apple Inc. (AAPL) or Microsoft Corp. (MSFT) fully adhere to Nasdaq's Rule 5620, ensuring regular shareholder engagement and transparent proxy processes.
• The decision to forgo shareholder approval for significant equity issuances (Rule 5635) contrasts with the practices of most U.S. listed companies, which typically seek shareholder consent for transactions that could significantly dilute existing ownership or alter control, such as major acquisitions or large stock option plans. This provides less oversight than seen in companies like Tesla, which regularly seeks shareholder approval for equity compensation plans and significant capital raises.

Corporate Governance

Stakeholder Impact

• Shareholders: May experience reduced protections and oversight due to the company following home country practices over certain Nasdaq corporate governance rules, particularly concerning shareholder meetings and approval for significant equity transactions. This could impact their ability to influence corporate decisions and protect against dilution.

Key Dates

Recommendation

The filing is an amendment to corporate governance disclosures, clarifying Zhongchao Inc.'s intent to follow certain home country practices over Nasdaq rules. While this is permissible for a foreign private issuer, it implies reduced shareholder protections, particularly regarding shareholder meetings and approval for significant equity issuances. There are no new financial results or strategic updates to warrant a change in investment thesis, thus a 'hold' recommendation is maintained, with investors advised to be aware of the governance structure.

Keywords

Zhongchao Inc., 20-F/A, SEC filing, Corporate Governance, Nasdaq, Cayman Islands, Foreign Private Issuer, Shareholder Rights, Equity Issuance, Amendment