Companies

Jailed Gome founder responds to special general meeting results

(Xinhua)
Updated: 2010-09-29 08:59

BEIJING - Huang Guangyu, the jailed founder of China's largest appliance retailer Gome, issued a statement Tuesday night responding to the results of a special general meeting.

"We are pleased that the General Mandate has been revoked as we believe that it could and would have been used improperly by the Company to dilute the investment of the Founding Shareholders and all other existing shareholders," said the statement in the name of "The Founding Shareholders of Gome".

"While we are disappointed in the vote on our other proposals, the vote was close and we believe strongly in the long-term potential of Gome, and intend to remain active and involved shareholders," it added.

The Founding Shareholders remain resolute in their belief that without their contributions, Gome "has strayed from the path of profitable growth, resulting in deteriorating core competency and losing its industry leadership," it said.

"Nothing has changed about our concerns regarding the unrepresentative nature of the Board, and we reserve all our rights to take appropriate action to protect our interest and those of other shareholders," it said.

Vote amid power struggle

Gome unveiled results of special shareholders' general meeting in Hong Kong on Tuesday evening, which showed that nearly 52 percent of shareholders voted against the motion to remove current Gome Chairman Chen Xiao.

Secretary of Gome Board, Hu Jiabiao, said about 6.52 billion votes, or over 48 percent of total votes, were in favor of No 5 resolution, while more than 7 billion votes, or nearly 52 percent of total votes, were against the resolution.

No 5 resolution was proposed by Huang Guangyu (also spelt as Wong Kwong-yu) to remove Chen Xiao in a months-long power struggle.

Chen, 51, was appointed as Gome Chairman on Jan 16, 2009 shortly after being appointed as Acting Chairman on Nov 27 of 2008, after former Gome Chairman Huang was detained by Beijing police in suspect of illegal business dealings, insider trading and corporate bribery. In May this year, he was sentenced to 14 years in prison.

Huang, however, won in another important motion about an earlier general mandate permitting Chen-led director board to issue more shares, up to 20 percent at most. Some 7.42 billion votes, or nearly 55 percent, were in favor of it while the other 45 percent were against it.

The resolution, No 4, was also raised by Huang, who, along with his wife Du Juan, currently held 32.47 percent of Gome stake. Huang opposed any major move to issue more Gome shares since such deal might dilute his stake in Gome, which could erode Huang's controlling capability in Gome. The Huangs feared that they might lose their right to veto important company proposals if more Gome shares be issued.

No 4 resolution was the only motion, raised by Huang, which gained majority support in the voting at the special general meeting.

The other three motions raised by Huang were about removal of Sun Yiding from his duties as Gome Executive Director, nomination of Huang's younger sister Huang Yanhong as Executive Director, and nomination of Huang's confidant Zou Xiaochun as Executive Director.

Related readings:  Jailed tycoon loses battle for Gome  Gome shareholders reject move to oust chairman  Huang calls for shareholders' support to control Gome  Gome spat makes Chinese business cautious about foreign investment

The three motions raised by Chen had all won approval, in which Chen nominated three persons as non-executive Director of Gome.

Chen has about 1.25 percent of Gome's shares. Huang has been struggling to control the company since he was detained and jailed. He and the Chen-led board had been openly at odds with each other since May this year.

In a dramatic development of the power struggle, the Chen-led Gome board filed a writ of summons against Huang at HK's High Court last month, for Huang's alleged breach of fiduciary duties in early 2008 as a former board director.

The battle for corporate control has triggered heated discussions in China. Some experts justify Chen's taking over as a sign of progress in China's corporate system, while most Internet users and some businessmen say Chen betrayed his boss to steal the company.

Huang built Gome into China's biggest appliance retailer from scratch. He was listed by the Hurun Report as China's richest man in 2004, 2005 and 2008.

Shares of Gome, closing at HK$2.49 (37 cent) on Tuesday in Hong Kong, has dropped about 20 percent this year.