Sorbic's ex-CEO refuses to give back £8m

The deposed Chinese chief executive of Sorbic International, an Aim-quoted food additive business operating in Shandong province, has refused to hand over nearly £8m of the company's cash and is continuing to control its day-to-day operations.

Non-executive directors of Sorbic - one of about 50 Chinese companies quoted on the London Stock Exchange's junior market - tried to wrest control of the company from Wang Yan Ting, the group's chief executive, late last month. They removed him from office and replaced him as the company's legal representative in China.

But, on Thursday, the directors revealed that Mr Wang had taken the licences and official corporate seals that are essential to doing business in China, and refused to surrender them. Mr Wang has also transferred funds from company accounts - which held approximately £7.7m in cash at the end of March - and refused to return it, the company added.

Local police in China have refused to intervene, deeming the matter a commercial dispute. Trading in Sorbic shares was suspended on April 30 at the company's request.

It is the latest controversy to hit Aim, which has become home to hundreds of higher-risk companies from emerging markets seeking a more loosely regulated market, and has led some investors to repeat calls for the London Stock Exchange to beef up its regulatory oversight.

Sorbic is also the second Aim-quoted company to lose control of China-based executives in a matter of weeks.

At the end of April, Naibu Global, a sportswear manufacturer, began legal action to gain control of its Chinese operating subsidiary and associated bank accounts. Naibu's UK-based non-executive directors also terminated the contracts of Huoyan Lin, executive chairman and owner of 53 per cent of the company, and Congdeng Lin, vice-president of production, although they remain as statutory directors of the company for the time being.

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Problems at Sorbic International, which reversed into an Aim-quoted cash shell in 2010, first emerged in June last year when the food additive company said Mr Wang would not allow funds to be shipped out of China to repay £2.7m in loan notes, or meet the cost of its London listing. That was despite Sorbic holding £7m in cash.

John McLean, Sorbic's chairman, also chairs China Food Company, a soy sauce maker that joined the junior market in 2006 and whose shares were cancelled at the end of December after it failed to publish its accounts.

One institutional investor who had lost money in Naibu and preferred not to be named, said in February: "The LSE should never have allowed these Chinese companies to list. They tarnish the many simple, sensible stocks on Aim that are perfectly good investments".

The London Stock Exchange said: "We have actively briefed nominated advisers in the past on the specific need for extra due diligence to be carried out when considering Chinese companies for a listing."

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