China Resources shareholders suing board

Minority shareholders of China Resources Power (CR Power) Thursday rounded on the company's board for a breach of duty in a 2010 acquisition of assets from a private company. CR Power has denied this accusation.

During a press conference in Beijing on Thursday, Beijing-based consulting firm Hejun Vanguard Group, representing the six minority shareholders, said CR Power had purchased overvalued assets from Shanxi Jinye Group for 12.3 billion yuan ($2 billion), almost twice the price raised by a previous bidder.

According to Li Su, founder of Hejun Vanguard Group, the shareholders had filed a lawsuit against 20 incumbent and former board members of the company at Hong Kong's high court on July 5.

In addition to overstating the value of the purchased assets, Li also accused CR Power of not publishing information about the deal on the website of the Hong Kong Stock Exchange. He added that the license of purchased coal mines had expired.

"By approving the transaction, they failed in their duties of integrity and responsibility as executives of a listed company," Chen Ruojian, a lawyer representing the minority shareholders, told the conference. He added that the transaction should be canceled and all money paid should be returned.

This came after Wang Wenzhi, a reporter with the Economic Information Daily, which is affiliated to the official Xinhua News Agency, leveled accusations against Song Lin, the chairman of CR Power's parent company China Resources Holdings. Wang wrote on his Sina Weibo, accusing Song of dereliction of duty and potential graft in the acquisition.

Song, who served as CR Power's board chairman in 2010, is among the board members being sued by the shareholders.

"The shareholders have no connection with the reporter. The conference was decided earlier," Li told the Global Times.

Li said they invited Wang to attend the meeting on Wednesday but Wang refused, saying his supervisors didn't want him to go. Calls to Wang from the Global Times went unanswered as of press time.

China Resources Holdings is a centrally administrated enterprise, and is ranked 187 in this year's Fortune 500 list.

The Communist Party of China Central Committee's disciplinary inspection authority said on Thursday they had received details about the case from Wang and would be opening an investigation, People's Daily Online reported.

A press officer with CR Power, who refused to be identified, told the Global Times that the company welcomed real whistle-blowing information from the public, but that it reserved the right to sue anyone it found to be slandering the firm.

She also referred the Global Times to a comment they issued in response to the accusations.

The statement said that the company didn't have to report the deal to the Hong Kong Stock Exchange as its equity in the acquisition was below the threshold above which filing is required. It added that the amount to be paid was set after negotiation with both sides, a sum that was in fact lower than the total appraised values.

"CR Power's response is nonsense and farfetched. They are purely deceiving the public," said Li.

"They have de facto control of the company, so they have to report to the stock exchange, no matter how many shares they own," said Li. "They don't dare to reveal exactly how they valued the assets."

Despite the involvement of disciplinary authorities in the case, Li said the shareholders are pinning their hopes on the Hong Kong judiciary, saying it should "bring them to justice."

Li also told the press conference that the shareholders hope the Hong Kong Stock Exchange will un-list CR Power due to its misconducts.