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Luckin chairman Charles Lu Zhengyao voted off board but retains control in firm

Written by Wency Chen Published on 

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Haode Investment Inc, an investment firm owned by Lu, still has 37.2% of aggregate voting power at the company.

Luckin shareholders have ousted Charles Lu Zhengyao, the firm’s controversial chairman, from the board along with three other directors during an extraordinary shareholder meeting in Beijing on Sunday afternoon, local media outlet Sina News reported. The result hasn’t been announced by Luckin officially.

However, the end of Lu’s chairmanship does not necessarily mean his control over the board was totally stripped. The Sunday meeting was proposed by Haode Investment Inc, an investment firm owned by Lu, which has 37.2% of the aggregate voting power.

Apart from Lu, the meeting sacked investor representatives Centurium Capital founder Li Hui, Joy Capital founder Liu Erhai, and independent director Sean Shao, who has been leading Luckin’s internal probe and confirmed the management’s USD 300 million-plus accounting misdeeds.

Meanwhile, Zeng Ying and Yang Jie—both nominated by Haode—will be added as independent board directors. Zeng is a partner at San Francisco-based Orrick Herrington & Sutcliffe LLP, while Yang is the vice dean of the China University of Political Science and Law’s business school.

On July 2, Lu survived a board vote to remove him, as the proposal wasn’t approved by the required two-thirds of directors, KrASIA reported. Three of its eight board members who are also executives of Luckin voted against Lu’s removal, the Wall Street Journal wrote, citing sources familiar with the matter. They are acting CEO Guo Jingyi, senior vice president Cao Wenbao, and vice president Wu Gang. Therefore, after the recent shakeup, the constitution of the board now consists of these three executives and two newly-added independent directors reportedly nominated by Lu.

There are more uncertainties ahead as court rulings on Lu-associated investors loom.

Lenders led by Credit Suisse Group AG, who provided a USD 533 million loan facility secured by Luckin shares in September, won court orders to liquidate shares held by Lu family-controlled Primus Investments Fund and Mayer Investments Fund, according to a Cayman Islands Court filing delivered on June 16.

Two related court hearings, on Haode Investment and ex-CEO Qian Zhiya-controlled Summer Fame Limited, are scheduled for July 6.

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