NVC Lighting says founder enters pledge deal without knowledge of board

NVC Lighting, one of China’s biggest lighting manufacturers, recently discovered its founder and former chief executive Wu Changjiang has made a pledge agreement of 23 million yuan (HK$29.2 million) without the knowledge of its board of directors, the Hong Kong-listed firm announced on Friday.

“The board is not presently aware of a fair and reasonable justification for the purported entering into of the agreement, nor has the board been provided with a proper explanation by Mr. Wu which indicates that the agreement is in the interests of the company or its shareholders. The company is taking steps to obtain more details on the circumstances in which the agreement was entered into, and is obtaining legal advice to protect its interests,” said NVC.

Wu was dismissed last August 2014. Police in Huizhou formally registered a case of “money embezzlement by Wu and others” on October 22. NVC announced in November that hundreds of millions of yuan were withdrawn from the company’s bank accounts in Chongqing without the board’s permission in relation to loan pledges entered into by Wu. In December, mainland media reported that Wu was under criminal detention in Huizhou, Guangdong province.

Wang Donglei, who is now chairman of NVC, had alleged that Wu embezzled about 400 million yuan from NVC’s bank accounts in the Chongqing branches of Industrial and Commercial Bank of China and China Minsheng Banking Corp, and an additional 173 million yuan from the Chongqing branch of Bank of China.

The company’s ongoing investigations have recently found that, in addition to other pledge agreements, Wu entered into the 23 million yuan pledge agreement dated 25 June 2014 purportedly on behalf of NVC Lighting (China), NVC’s China subsidiary, purportedly as security for a loan which appears to have been granted to a Chongqing lighting manufacturer, NVC disclosed.

The 23 million yuan pledge might possibly be related to 25.98 million yuan that was withdrawn from NVC’s bank accounts in Chongqing, where it is headquartered, NVC said.

Wang has further consolidated his position within the company. Wang has been re-designated from a non-executive to a director of the company since February 2, NVC said in a separate announcement on Friday.

Wang, who joined NVC in January 2013, is the founding chairman and controlling shareholder of Elec-Tech International, a Shenzhen-listed lighting manufacturer which is the biggest shareholder of NVC. Wang is the elder brother of Wang Dongming, an executive director of NVC and Elec-Tech.