CEO's removal and missing corporate sealsI have spent some time today looking at the the Board's actions regarding the removal of Mr. Yu and the fact that the Board is not in possession of the corporate seals or chops, as they are called.
In Chinese corporations the person deemed the legal representative and who also has possession of the chops can bind the company and has legal authority. When the person signs a contract and applies the seals it binds the company even if the individual has been fired, as is the case with Mr. Yu. Thus, getting your hands on the seals when you fire your legal rep is key.
The Board totally failed the shareholders in this matter! They should have ensured possession of the seals before taking any action against Mr. Yu.
Replacing the seals, or rendering them void, requires the original business licenses. We do not know if these are in the possession of the Board or Mr. Yu. Guess what. If your legal rep has the business licenses and the seals you have lost control of the company as it is almost impossible to replace the seals.
We do not know if the Board took prudent action to ensure they could secure control of the subsidiaries and legally remove Mr. Yu. If not, Mr. Yu's press release is 100% right. It is business as usual at Hanfeng and he is in control.
If the Board has the business licenses, it can replace the seals. Replacing the legal representative, Mr. Yu is a complicated matter, on the other hand. There is definitely lots of paperwork involved.
After all of this is said, WTF is the board trying to accomplish and why is this being kept from the shareholders?
Here is a link to how the seals are used and how to get it back when they are lost.
https://www.sinoblawg.com/?p=341
Here is a link to what is required to change your legal rep in China.
https://www.chinalawblog.com/2013/05/how-to-change-your-wfoe-legal-representative-it-aint-easy.html
I should add that we can at least be greatful that Hanfeng owns the China subsidiaries directly. Here is the story of Gigamedia who had a fight with their China based legal rep, but in their case they did not own the company directly but through a variable interest entity, called a VIE. They lost the company.
Gigamedia And The Perils Of VIEs. Dude, Where’s My Chop?https://www.chinalawblog.com/2011/06/vie.html