Luckin Coffee announced Thursday that Charles Lu will remain board chairman of the embattled Chinese beverage chain after a proposal to remove him from the position failed to get the number of votes needed to pass.
Why it matters: The struggle for control at the coffee chain after an investigation into its accounting fraud points to deep involvement from top management.
- Local authorities reportedly have found emails Lu, also known as Lu Zhengyao, sent to colleagues to instruct the fraud, which means Lu is likely to face criminal charges in China.
- The investigation into Luckin is attracting wide media attention, as well as intensifying scrutiny of a number of other US-listed Chinese tech stocks.
Details: The proposal to remove Charles Lu from his positions as a director and board chairman did not get more than the two-thirds of votes needed to pass the resolution during a board meeting held on July 2, according to a company statement.
- The board proposed removing Lu as a director and board chairman based on the recommendation of a special committee formed for the internal investigation, according to a Wednesday statement.
- Lu may still face a shareholder vote on resolutions that could remove him as a director during an extraordinary general meeting to be held on Sunday, where shareholders will also vote on whether to remove at least three other directors beside Lu, according to a Bloomberg report.
- The company’s former chief executive officer, Qian Zhiya, former chief operating officer, Liu Jian and certain employees reporting to them participated in the fabricated transactions, according to the statement.
- The company inflated its 2019 net revenue by approximately RMB 2.12 billion ($300 million), and boosted costs and expenses by RMB 1.34 billion, it said in the statement.
Context: Luckin Coffee fired CEO Qian Zhiya and COO Liu Jian from their positions in May.
- The company received a second delisting notice from Nasdaq in June for failing to submit the 2019 annual report, less than a month after receiving its first notice on May 19 for “public interest concerns” and “fabricated” transactions.
- Chinese car rental Car Inc may soon sever all formal ties to Lu, founder of Luckin, Car Inc, and Ucar.