The latest announcement (on the 18th February) from Chinese company Naibu (NBU) is that the non-executive directors have been unable to obtain any information about the company’s trading position from the two executive directors (Lin Huoyan or Lin Congdeng). The former finance director, Zhen Li, resigned at the end of last year and the shares were subsequently suspended at the request of the non-executive directors on the 9th January pending clarification of its financial position.
It seems the two executive directors have simply gone AWOL and are not responding to inquiries. The non-executive directors have appointed KPMG to report on the financial position of the company but whether they will get any co-operation from the executive directors remains to be seen.
What’s the legal position here? In theory, the non-executive directors have a majority of the board and therefore could pass resolutions to remove the executive management , appoint others and take direct control of the business. At least that would be the case under normal UK company law. Whether that is enforceable in China may be another matter altogether.
But these events will certainly not enhance the reputation of AIM, and in particularly of Chinese companies listed thereon. Was adequate due diligence done on the background of the executive directors before the company listed would be one simple question to look into by AIM if they cared to do so.
This morning (19/2/2015) there was a surprise announcement that the Chief Executive of Majestic Wine, Steve Lewis, was stepping down and the suggestion is clearly that this is with immediate effect. Mr Lewis is praised for his work in the company in the last few years in the announcement, and the share price rose slightly on the morning of the announcement.
The company share price has been drifting down over the last few months – down from a high of 580p at the end of 2013 to about 330p now. Forecasts were revised down partly because of more investment in facilities while revenue and profits were flat.
Perhaps there will now be a change of strategy?