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Shao Baiqing ("Mr. Shao") and Ace Lead Profits Limited ("Ace Lead"), collectively the third largest shareholder of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), have initiated legal proceedings against Hollysys in the Commercial Division of the Eastern Caribbean Supreme Court, Territory of the British Virgin Islands, on February 1, 2021. In these proceedings, Mr. Shao and Ace Lead seek to annul and reverse recent amendments to the Company’s memorandum and articles and to prohibit the Company from relying on those amendments to restrict in any way the rights or powers of the shareholders to amend the memorandum and/or articles. The proceedings also seek to prohibit future amendments by the Company of its memorandum and articles in a manner which would restrict the rights or powers of the shareholders, without the written consent of its shareholders.
Statement of the Consortium Regarding the Lawsuit
As stated in the January 13, 2021 press release issued by the buyer consortium consisting of Mr. Shao, Ace Lead, and CPE Funds Management Limited (the "Consortium"), the Consortium was appalled by the Company’s deplorable and coercive efforts acting against the best interests of the shareholders. For example, Hollysys (i) removed Mr. Shao (without cause and in violation of his employment contract) from his chairmanship from Ningbo Hollysys within one week after receiving the Consortium’s original acquisition proposal, (ii) rejected that original acquisition proposal without ever engaging with the Consortium, and (iii) adopted highly objectionable (likely illegal) amendments to its memorandum and articles to disenfranchise shareholders and entrench the Board. More recently, despite the compelling premium of our revised offer price of $17.1 per share, the Board of Directors has continued to claim that there is no need for the shareholders to "take any action at this time" and prescribed no timetable regarding their review of our revised proposal. We believe that, absent shareholders’ proactive and resolute actions to safeguard their interests, the Board of Directors will fail to fulfill its fiduciary duties. As such, Mr. Shao and Ace Lead, long-term shareholders of the Company, initiated the lawsuit against Hollysys, the first of its kind in the BVI involving a U.S.-listed Chinese company.
Shareholders will not sit idly by and watch while the Company perpetrates a fundamental shift of power under the Company’s constitution from its shareholders to the current five directors, while restricting the ability of shareholders to appoint or remove any director. Nor will shareholders tolerate any attempt by the Board of Directors to strip away basic shareholder rights, or allow the Board of Directors to arbitrarily target any shareholder who dares to challenge the sad state of the Company’s dismal stock price and declining financial performance. We encourage other shareholders to undertake active actions to demonstrate to the entrenched Board that "enough is enough," and that the shareholders deserve to realize immediate liquidity with a highly compelling premium for their shares.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210207005024/en/
Jinxiang Guo, Principal
CPE Funds Management Limited