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VIENTIANE, 28 March. Onix Ltd, a company registered in Ukraine, may lose $40mn worth of investments through improper conduct on the part of Laos-based Lao Geo Consultant Company and MK-GROUP (company incorporated in Russian Federation) resulting in an unlawful dilution of Onix’ majority stake in Laos-based Dao Lao Co., Ltd., Onix’ press service reported on Thursday.
Onix Ltd acquired 60% in Dao Lao Co., Ltd in 2010. It has invested to date a total of $2mn into the company. The proceeds have been spent on geological exploration works in Lao People’s Democratic Republic under a Gold Prospecting and Exploration Agreement in Sanakham District, Vientiane, as signed between Dao Lao Co., Ltd and the Government of Laos. The present conflict prevents Onix Ltd from executing an option to sell its share in Dao Lao Co., Ltd to an investor, which can lead Onix Ltd to lose $40mn.
In 2012, suspicions of misappropriation of funds caused Onix Ltd to call off 2 out of its 4 representatives on the Board of Dao Lao Co., Ltd, Messrs Maxim Dyschyuk and Dmitry Andreychenko an replace them with a plenipotentiary representative who would have the exclusive right of signing all financial documents at Dao Lao Co., Ltd (including the approval of all banking transactions in accounts belonging to Dao Lao Co., Ltd). While this move on the part of Onix Ltd appears quite normal in light of international practice, it has given rise to a conflict between shareholders.
The reason for the present conflict is the intention of Lao Geo Consultant Company (holding 30% in Dao Lao Co., Ltd) and MK-GROUP (holding 10% in Dao Lao Co., Ltd) to dilute the shares of the other shareholders, thus acquiring control of the company.
On March 18, 2013, during a meeting of the Board of Directors, Mr Maxim Dyschyuk (representative of Onix Ltd), recalled from the Board by Onix Ltd, resigned as Director General of Dao Lao Co., Ltd and was illegaly replaced by Mr Panaousone Udompaseuth, a representative of Lao Geo Consultant Company.
Onix Ltd challenges the above-mentioned meeting of the Board as one conducted in breach of the Articles of Association of Dao Lao Co., Ltd for failure to meet effective quorum requirements (a minimum of 6 Directors required to attend) and honour the provision of the Articles of Association under which only a representative of Onix Ltd may be appointed Director General at Dao Lao Co., which renders the said decision to appoint a new Director General null and void.
On March 24, 2013 a General Shareholders’ Meeting was convened in further breach of the Articles of Association of Dao Lao Co., Ltd, at which Mr Panaousone Udompaseuth stated that the actual shares of individual shareholders in the capital of Dao Lao Co., Ltd differed from those specified in the Articles of Association. In particular, according to him, the actual share in Dao Lao Co., Ltd held by Onix Ltd is 24.99% rather than 60%, which implies loss of control of Dao Lao Co., Ltd by Onix Ltd.
Mr Panousone Udompaseuth is now threatening Onix Ltd with proceeding to sell its share in Dao Lao Co., Ltd unless the former transfers an amount of $5mn into the account of Dao Lao Co., Ltd without any possibility of controlling its use.
Despite this conflict, Onix Ltd reiterates its commitment to continue investing in Dao Lao Co., Ltd once its 60% share in the company is duly reinstated. Onix Ltd has successfully renegotiated agreements with contractors who are now ready to proceed to extensive geographical exploration and drilling works at the concession site controlled by Dao Lao Co., Ltd. This will create numerous jobs for Lao nationals. What is more, this project is viewed as a trial balloon by prospective Ukrainian investors contemplating projects in Lao People’s Democratic Republic.
Furthermore, upon successful resolution of the present conflict, Onix Ltd intends to take Dao Lao Co., Ltd public, which will attract international investors into Laos. The proceeds from the IPO will be invested into upgrading Laos’s infrastructure.
The Embassy of Ukraine to Thailand, which also represents Ukraine in Laos has presented a diplomatic note to the Government of Lao People’s Democratic Republic.
Also Onix Ltd has presented a letter to Prime minister of Lao People’s Democratic Republic to communicate its intention to seek remedies in connection with the present conflict before the Court of Arbitration of Stockholm and International Chamber of Commerce International Court of Arbitration in Paris.