ARM has reportedly replaced Allen Wu, the CEO of its China subsidiary, with two co-CEOs, clearing the path for a planned initial public offering of shares in the company.
The move would end a two year dispute that has seen Wu maintain control of ARM China and take it in an increasingly independent direction (see Reports: ARM China makes independent move in autonomous driving). However, Wu continues to claim he remains in charge stating that he has not been replaced and that dealings are administratively flawed.
Wu is a controversial figure because in June 2020 Arm and other shareholders in Arm China voted 7:1 to replace him and he simply refused to leave office. His possession of the company seal, a key element in Chinese business law, allowed him to remain in place (see Report: VC dealings at heart of ARM’s China trouble).
ARM China is 47.3 percent owned by Cambridge-based Arm and 36 percent owned by Chinese private equity firm Hopu Investment Management.
Wu has had control of the company’s bank accounts and hundreds of millions of dollars of funds. There have been delays in sending license fees back to the UK parent and Wu has been using the funds to pay his legal fees in the fight against the major investors in ARM China, according to reports. Wu also hired security staff to exclude ARM Ltd. executives and members of the board of directors from ARM China premises, according to reports.
Unable to audit
As a result ARM has been unable to audit the financial dealings of its China operations, a situation that may have contributed to a failed bid by Nvidia Corp. to buy ARM from SoftBank Group (see ARM’s China struggle threatens $40bn Nvidia deal). The uncertain situation was also seen as significant hindrance to the plan to float ARM by way of an IPO.
Arm Technology (China) Co. Ltd. has now issued a statement that Liu Renchen and Chen Xun have been appointed joint CEOs and have completed the legally required industrial and commercial registration. Liu is reportedly the legal representative who reportedly has the power to obtain a new company seal, breaking Wu’s hold over the company.
Co-CEO and legal representative Liu is also deputy dean of the Tsinghua University Research Institute in Shenzhen, Co-CEO Chen is a managing partner of SoftBank Vision Fund. Liu’s position with the state-owned Tsinghua University may indicate that there is some sort of official approval of this resolution of the dispute.
The impasse was broken, reportedly, by ARM making moves to transfer its minority share in ARM to SoftBank. Once it passed below 10 percent it would no longer need to audit the subsidiary allowing the IPO to go ahead, according to a Financial Times report. However, the possibility of ARM effectively abandoning ARM China also raised concerns amongst Chinese authorities that ARM China would become distanced from the pipeline of ARM intellectual property, the report said.
The press release from ARM China reportedly said the company will now maintain close cooperation with ARM.
Meanwhile Wu continues to speak out against the appointment of co-CEOs. Wu has reportedly written to publications saying that he was never fired as the proposed firing was not ratified by the board of directors. Although ARM China has said it voted unanimously to appoint Lui and Chen as co-CEOs Wu has said that is not possible as no board meeting was held, and no such resolution passed.
Reports said that while some online databases show Lui as the new legal representative other still show Wu in that position. Wu also said that ARM China had not submitted the required application for a change of business registration data to the Market Supervision and Regulation Bureau of Shenzhen Municipality.
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