Luckin Coffee Shareholders Vote to Remove Company’s Chairman

Charles Zhengyao Lu, the chairman and founder of Chinese startup Luckin Coffee Inc., has been ousted by shareholders of the company.

According to local media reports, his removal as chairman comes only days after surviving an effort by some directors to strip him of control.

21st Century Business Herald and Sina had reported that along with Zhengyao, three other board directors, including Sean Shao, were removed over the weekend. Ying Zeng and Jie Yang will be added as independent board directors.

The struggling company had let go of its CEO Jenny Zhiya Qian and COO Jian Liu, as well as other emplyees earlier this year as it was under investigation by Chinese and U.S. regulators. Fabricated transactions dating back as far as April 2019 had come to light.

According to Luckin’s Articles of Association, a director can be removed by shareholders or other board directors. Lu and others were removed in a bid to distance the company from the financial scandal and allow it to continue operating more normally.

Shares of the once popular stock has fallen 94% this year after the financial irregularities were revealed. The drop also wiped out a lot of Lu’s wealth as most of his fortune was tied to the stock.

The company, which was founded in 2017, recently said that its internal investigation concluded that net revenue last year was inflated by about 2.12 billion yuan ($300 million) while costs and expenses were boosted by 1.34 billion yuan. After the conclusion of the investigation, a majority of directors had requested Lu’s resignation.

The board said it fired the executives based on evidence showing their participation in the false transactions.

Disclaimer: We have no position in Luckin Coffee Inc – ADR (OTCMKTS: LKNCY) and have not been compensated for this article.