THE trouble that Millennium & Copthorne New Zealand, a subsidiary of City Developments Ltd (CDL), has with a Chinese joint-venture (JV) partner has taken an ugly turn. Properties are said to have been sold by the partner unlawfully.
CDL shares ended 2.27 per cent lower at $11.22 yesterday despite an assurance on Monday that there was unlikely to be a material impact on its financials, as its effective interest was about US$10.2 million.
On Monday, CDL’s London-listed subsidiary Millennium & Copthorne (M&C) revealed that a Chinese joint venture was in trouble. The venture’s displaced legal rep-cum- chairman, Cheung Ping Kwong, had allegedly sold US$47.8 million of assets without permission.
These assets included a 100 per cent interest in West Coast Resort Hainan Hotel and an 80 per cent interest in a mixed-use development project in Dongguan.
The joint venture is 75 per cent owned by First Sponsor Capital Ltd (FSCL), which is 34 per cent owned by Millennium & Copthorne New Zealand, the New Zealand-listed unit of M&C.
Mr Cheung had management rights over the joint venture Idea Valley Group Ltd (IVGL), which he founded and in which he holds a 20 per cent stake.
But the IVGL board decided to remove Mr Cheung’s control of IVGL and his executive appointments last November due to his failure to meet certain conditions and his ‘management conduct’.
Mr Cheung, however, refused to comply and instead seized control of the company seals, denied access to IVGL accounts, and sacked various employees who were appointed by FSCL.
When this happened last month, the joint venture took further legal steps including putting up press notices in China to announce the sacking of Mr Cheung and to declare that the company seals under his control were void.
By April 12, the relevant Chinese authorities had registered the new seals for companies related to the joint venture and the change in legal rep to the chief financial officer of the JV.
According to the Financial Times (FT), Mr Cheung took issue with M&C for hurting his reputation and dismissed the dispute as ‘cultural differences’ in recent comments he made to the Chinese media.
Mr Cheung also insisted he was still the chairman and legal rep of the joint venture in an FT interview last month and that he could not have ’stolen’ the company seals because they had been in his possession since 2003.
Misuse of the company seals by an uncooperative legal rep is an increasing risk for foreign firms operating in China. Other SGX-listed companies like Falmac and Sino-Environment have also faced problems in effecting a removal of their legal reps.
M&C said the JV is seeking legal advice on the unauthorised asset sales and preparing to lodge a police report in China. It is also seeking to replace the seals for the remaining companies related to the JV. But such a regulatory filing would typically require the existing seals that are currently in Mr Cheung’s control.
Source: Business Times, 14 Apr 2010