Millennium & Copthorne Hotels' operations in China have turned sour, after a joint venture partner seized control of the business, sold off assets and sacked employees.
The group released a statement yesterday saying it had encountered "certain difficulties" at its joint venture Idea Valley Investment Holdings.
It called on the Chinese authorities to step in after Cheung Ping Kwong, one of its partners, took control of the venture by "deceit". The company also accused him of using intimidation tactics to sell off a resort hotel on the west coast.
Mr Cheung was appointed chief executive of Idea Valley Group, which deals in the property markets in Guangdong and Hainan, following an agreement with the rest of the joint venture in 2007. Yet two years later, the board resolved to oust Mr Cheung, saying he had failed to meet the conditions outlined in the venture agreement, before going on to criticise his conduct.
The board also resolved to transfer the company seals to the chief financial officer. Chinese law gives company control to the affixer of the company seals with the legal representative's signature. Despite the board's resolution, Mr Cheung refused to comply, M&C's statement said, and "through deceit seized unilateral control of the company seals" last month. He took control of the company's offices and denied the joint venture – Idea Valley Investment Holdings – access to accounts, records, bank statements and other information.
Finally, Mr Cheung fired a number of appointments made by M&C's investment vehicle, including the chief financial officer, "without appropriate authority". The board removed Mr Cheung from his remaining appointments at the group and its subsidiaries, and voided the relevant seals.
Despite these moves, the venture found that Mr Cheung had sold off its interest in the Hainan Hotel Owning Company in the meantime. The statement said Idea Valley Investment Holdings had learnt that Mr Cheung had used "unconventional business practices (including intimidation and forceful tactics)" to seize the seals of the Hainan company. He also sold an 80 per cent stake in a mixed-use development project in Dongguan to a close associate.
Idea Valley said it was dependent on the Chinese government authorities to prevent loss and damage to its interests and is seeking legal advice on the assets that have been sold.
M&C's investment in the Chinese joint venture is valued at about $16.3m.