Gome Escalates Dispute with Former Chairman

The dispute between Gome Electrical Appliances, China's leading home appliance provider, and its former chairman, Huang Guangyu, has escalated.

Yesterday, Gome stopped trading and announced it has brought a lawsuit against Huang, demanding compensation for losses incurred due to Huang allegedly diverting money from a Gome share buyback between January and February in 2008 to repay a personal loan. The lawsuit also accuses Huang Guangyu of breach of trust. 

Gome is responding to a provocation by Huang Guangyu. 

On August 4, Gome received a letter from the Shining Crown Holdings, a company owned by Huang Guangyu, which required the board of directors to stop issuing company shares and attributed the deterioration of Gome’s business performance to the current board of directors and its chairman: Chen Xiao. The letter requested the removal of Chen Xiao from his position of board chairman and executive director.

In the letter, Huang Guangyu nominated Zou Xiaochun and Huang Yanhong, the latter is Huang Guangyu's younger sister, to be the new executive directors of Gome.

In retaliation, Gome’s board of directors then made a resolution regarding Huang’s letter which stated the halt on issuing new shares and the removal of Chen Xiao from his position would cause great turbulence to the company’s stability and sustainable development, greatly restrict the flexibility of the company to raise new capital, harm

Gome's potential growth and create an inferior market position for Gome.

The board of directors also stated that Huang’s nominees for executive director lack the necessary experience and leadership required for the position.

Currently, Huang Guangyu and his wife are the largest shareholders of Gome stock, holding 33.98 percent of Gome’s shares. 

Huang and his wife must keep all of their shares; if they lose their position as largest shareholders, they will lose their right to speak to the board of directors.

Convicted for insider trading and currently serving a 14 year sentence, Huang has already been fined 600 million Yuan and has had assets worth 200 million Yuan confiscated. Furthermore, the Hong Kong Securities and Futures Regulation Commission froze 1.6 billion Yuan of Huang and his wife’s assets. Since he has been involved in insider trading, purchasers of Gome stock during Huang’s reign can ask for compensation.

It is uncertain whether or not Huang Guanyu has enough capital to compensate the shareholders, if he needs to sell his shares, his rants will no longer have to be heard by Gome’s board of directors.

Links and Sources
The Beijing News :国美电器起诉黄光裕并追偿
Economic Observer Online:国美翻旧账 将黄光裕告上法庭

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