China Gas takes action after arrest of officials

China Gas Holdings yesterday terminated the services of managing director Liu Minghui and sought to remove executive president Huang Yong after their arrest by Shenzhen police for suspected embezzlement in a 2004 acquisition deal.

Liu, who is also a key shareholder with an 8.14 per cent stake, continues to be the company's executive director but the company said it was trying to get him to step down from that position as well.

China Gas last month said Shenzhen police had detained the two for investigation. Yesterday, it said it had not been able to contact Liu and Huang, who were being held at a detention centre in Shenzhen.

The Shenzhen Public Security Bureau has asked China Gas for documents related to the acquisition of Clever Decision, a holding company that owned and operated several gas distribution networks in Hubei province. In 2004, China Gas acquired these projects for HK$178 million.

Eric Leung, who has just been appointed joint managing director, said: 'As the Shenzhen PSB has not asked for more documents, our lawyer believes there is reason to link the investigation of Liu and Huang to the 2004 purchase.'

Leung said the worst-case scenario for the company was that 'the transaction is cancelled and we lose the HK$178 million we spent', stressing the loss would have little impact on the company, given its assets and market capitalisation.