How a New Zealand Company had their Hotel stolen in China ?
Brian Gaynor wrote an article in the New Zealand Herald of May 29 and it was appropriately entitled “Red faces over debacle of stolen hotel ”
It concerns how Millennium & Copthorne Hotels New Zealand (MCK) lose a hotel. According to the paper the Hotel was not sold nor written off. It was stolen.
Millennium & Copthorne Hotels New Zealand (MCK) is NZ largest hotel owner-operator with 17 owned/leased/operated hotels and an additional 13 franchised properties in New Zealand In turn MCK is owned by M and C Hotels PLC which owns, asset manages and/or operates over 120 hotels in 19 countries around the world. The M and C Hotels is in turned controlled by City Development Limited, one of the largest realty estate company listed in the Singapore Stock Exchange. According to its website, CDL is managed by a “Kueh”, the family which is related to the Kueh of Hong Leong Group of Malaysia. The “Kueh “in Singapore is one of the richest families in the island.
To continue Brian’s story and here its gets interesting:
Details here :
“In September 2007 MCK announced it had agreed to invest in a joint venture with a Chinese property developer, Cheung Ping Kwong.
The structure was extremely complex with MCK owning 34 per cent of a vehicle that had a 60 per cent participation in the joint venture, with the other 40 per cent owned by Cheung.
Thus MCK effectively had a 20.4 per cent interest in the venture, with this investment worth $78.7 million at the end of last year. The 2007 stock exchange release said the “precise details of this investment were subject to confidentiality agreements”.
MCK’s December 2008 year annual report said the joint venture had acquired the majority sections of a strata-titled resort hotel in Hainan Island.
But buying remaining sections of the hotel was complicated “by various litigations” and the joint venture “has also taken legal action against the vendor and guarantors”.
The December 2009 year annual report noted further legal problems with the Hainan Island hotel. MCK dropped a bombshell on April 12 when it said Cheung had sold the hotel, with other joint venture developments, and pocketed all the money. The loss to the NZ Company is about $26.1 million.
In other words Cheung has effectively stolen $26.1 million from MCK.”
The Board was at a loss to explain what happened. Brian wrote “Chairman Wong Hong Ran and managing director BK Chiu stuttered and stumbled as they explained that a company’s seal or chop was the most important feature of a company in China, with its “judicial or legal person”. Under Chinese law that person, if he or she has access to the chop, has the power to bind a company without needing any other signature.”
Brian concluded “Chairman Wong must take a lot of the blame for the Chinese disaster as it appears he is chairman of the Hainan Island hotel and he shouldn’t have given Cheung the authority to be the “judicial person”. This is a NZ $26.1 million mistake I am sure Mr Kueh will be very angry with them.
Lesson to learn today: that in China the Judicial person and the “chop” are very powerful. With the stroke of his pen and the chop he can sell a Hotel. And there is nothing much anyone can do.
Filed under: Company, Small Business Issues | Leave a Comment