CRP directors accused of lying about joint venture
Minority shareholders say letter to Shanxi authorities appears to understate holding as they accuse executives of failing in their duties
Minority shareholders of China Resources Power Holdings (CRP) have accused its directors of lying about the extent of its control over a coal joint venture, which was the centre of alleged breach of fiduciary duties by directors, the High Court heard.
Edward Chan, SC for six minority shareholders, told the court a letter supposedly written by CRP to Shanxi's Department of Land and Resources in 2010 said a wholly owned unit of CRP signed a "trust co-operation agreement" with Citic Trust in April 2010.
Under the agreement, Citic Trust holds a 31 per cent stake in China Resources Taiyuan (CR Taiyuan) on behalf of CRP.
Another letter supposedly written by Citic Trust to the department also said the stake was held on behalf of CRP, and that it could be transferred back to CRP within two years, Chan added.
"[CRP] said its [effective] interest [via various levels of subsidiaries] in the joint venture is only 25 per cent ... but we have discovered what was said by the company is false," Chan said.
By saying it only has 25 per cent interest, Benjamin Yu, SC for CRP, argued in October that it does not have control over the venture and its directors should not be directly held responsible for the joint venture's operation.
The letters bearing company chops and letterheads were obtained by the South China Morning Post in October.
"[CRP] hereby confirms, CRP's ... actual ownership in CR Taiyuan is 52.07 per cent," the letter supposedly written by CRP said. "[CRP] agrees to go through relevant legal procedures within two years to complete a title transfer of the shares held by Citic Trust on behalf of CRP."
The joint venture, China Resources Taiyuan (CR Taiyuan), is 49 per cent owned by CRP's indirectly held subsidiary Shanxi China Resources Liansheng Energy Investment (CR Liansheng), 31 per cent by Citic Trust and 20 per cent by Shanxi businessman Zhang Xinming's Shanxi Jinye Coal Coking Group.
The venture was formed in April 2010 for the purpose of acquiring an 80 per cent stake in a basket of coal mining and processing assets from Shanxi Jinye, which includes three mines, for 7.9 billion yuan.
The minority shareholders alleged that CRP directors should have sought to cancel the deal and get back 3.9 billion yuan paid, given that two of the mines' exploration permits had expired.
The shareholders are seeking to amend their claims against CRP's directors by including the new information, and other allegations expunged in October by Mr Justice Edward Chan on grounds that they were new matters not raised in the original claims and was an "ambush".
Yu argued against an amendment, saying Chan has failed to say when and how the new information was obtained, except that he obtained it from the media.