Chinese retailer Gome Electrical Appliances filed legal action against former executive director, Wong Kwong Yu (Huang Guangyu), on August 5, 2010, and within hours Mr. Wong responded with proposals for the Gome board to cancel its recently passed general mandate and replace two board members.
It's just the latest twist in a rocky relationship between the huge Chinese appliance retailer and its former chairman, one of the richest men in China. Wong was accused of using Gome assets as personal assets, was convicted on several counts, including bribery and insider trading, and in May 2010 began serving a 14-year jail sentence.
Gome Electrical Appliances said its August 5 legal action comes as the result of a recent internal investigation and seeks compensation in connection with Mr. Wong's alleged breach of fiduciary duties as a director of the company relating to the repurchases of the company’s own shares in January and February 2008 and for breach of trust.
Gome filed a writ of summons against Mr. Wong for the breaches in Hong Kong court on August 5; by 7:30 that evening and again the following morning Gome received letters from Shinning Crown Holdings Inc., which is wholly owned by Mr. Wong and is a substantial shareholder in Gome. The letter proposed that Gome:
• cancel its general mandate, as passed at this year’s annual general meeting
• remove Chen Xiao as Executive Director and Chairman of the Board
• remove Sun Yi Ding as Executive Director while maintaining his operational role as a company vide president
The letters also proposed the nominations of Zou Xiao Chun and Huang Yan Hong as executive directors.
"The entire board is united in believing that this action is unwarranted, unwise, and unwelcome, and driven by the interests of just one shareholder," said Thomas Joseph Manning, an independent non-executive director of Gome. "The board is confident that the management team has been acting in the best interest of all shareholders."
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