China Shanshui Cement former directors fights off new board’s control with “illegal” acts

In another twist to a seven-month corporate control brawl, the new board of trouble-torn China Shanshui Cement Group said three of its former directors have “illegally retained” its principal Shandong subsidiary’s company seals, chops and books.

This resulted in the local government’s refusal to proceed with the new board’s application to change the subsidiary’s directors, dealing a blow to the Tianrui Group-led new board’s aim to gain control over the Shandong factory and headquarters that contributed two-thirds of its revenues, despite having taken over other factories.

“The former directors of Shandong Shanshui, namely Zhang Caikui, Zhang Bin and Huang Kehua, still illegally occupy the head office and five factories of Shandong Shanshui, and illegally retain the important documents, including but not limited to, seals, chops and books,” the new board said in a filing to Hong Kong’s stock exchange late Thursday.

Zhang Caikui is a company founder who was removed from the board by a shareholders vote in October. The entire board, including Zhang’s son Zhang Bin, was removed early December in another shareholders meeting.

Shanshui’s new board said in a separate exchange filing early Thursday that Hong Kong’s commercial crime bureau has taken up a report from the new board, regarding suspected “unlawful removal” of books, records, important documents and electronic data from its Hong Kong office shortly after the entire board was ousted.

It also claimed that the Shandong unit has reported that the unit’s former director Chen Xueshi on Sunday joined a group of gangsters to barge into the headquarters in Jinan, Shandong, destroyed properties and assaulted employees, adding they have been taken by police for questioning and normal production resumed.

In a separate exchange filing early Thursday, the new board said the Shanghai No1 Intermediate People’s Court had accepted a claim made by Fullgoal Fund Management against Shandong Shanshui for disputes relating to the trading of bonds. The first hearing in the case will be on January 20.

China Shanshui has defaulted on repayment of the 2 billion yuan bond that matured in November.

A statement was filed on Tuesday to Chinabond.com.cn – an information disclosure platform for mainland Chinese bond issuers – by the Shandong unit controlled by the Zhangs that warned it may default on another 1.8 billion yuan bond due to mature on January 21.