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By John Helmer, Moscow

The share price of United Company Rusal, the state-controlled Russian aluminium monopoly, lost 3% in value in Hong Kong Stock Exchange trading on Monday on news that Barry Cheung, a prominent Hong Kong businessman, had resigned from the Rusal board as his own business collapsed, and that he was the target of a Hong Kong police investigation for fraud.

When Rusal wanted to promote Cheung’s importance in Hong Kong, it trumpeted the news among the press releases on the company website. Thus, in March of 2012, Rusal announced that the company “congratulates its Chairman Mr Barry Cheung for a successful campaign which helped Mr Leung Chun-ying (“CY Leung”) win the office of Hong Kong’s fourth Chief Executive in yesterday’s election. Mr Leung’s five-year term will begin on July 1, 2012. Mr Leung’s winning was the culmination of a long and active campaign supported by a highly professional campaign office headed by Mr Cheung.” A few weeks later, following voting at the Annual General Meeting (AGM) of shareholders, another Rusal press release announced that Cheung had been re-elected to a second term, and that he had convened a meeting of the new board.

That was the front door, so to speak. But Rusal put Cheung out the backdoor when his resignation was forced on Monday by the investigation of his affairs by the police and the Securities and Futures Commission, the Hong Kong market regulator. There is no Rusal press release, and no reference in the search box. Instead, this notice Rusal is required to file to the Hong Kong Stock Exchange appears among the regulatory notices under the Investors rubric. “The Board of Directors (the “Board”) of United Company RUSAL Plc (the “Company”) announces that Mr. Barry Cheung Chun-yuen (“Mr. Cheung”) has, with effect from 25 May 2013, resigned as an independent non-executive director of the Company (“INED”) and as a member of committees of the Board (including the Corporate Governance & Nomination Committee and Remuneration Committee of the Company) for the reason that he needs to focus on personal business matters. Mr. Cheung confirms that he does not have any disagreement with the Board and that there is no other matter relating to his resignation which needs to be brought to the attention of the shareholders of the Company. The Board would like to express its sincere gratitude to Mr. Cheung for his valuable contribution during his term of office with the Company.”

If the Rusal board’s executive directors – appointees of chief executive Oleg Deripaska — were obliged to resign on account of Cheung-type “personal business matters”, there might be a serious problem of filling a quorum. Measured by the size of Rusal’s indebtedness, its capital loss since listing, or the bottom-line operating losses (counted without the benefit of dividends from Norilsk Nickel), these directors’ Cheung-type “valuable contribution” would be difficult to find.

So who qualifies to fill Cheung’s shoes under the Rusal board table, and who will vote for him?

According to the Rusal announcement, “the Company will appoint a new independent non-executive director to replace Mr. Cheung as soon as practicable. Further announcements will be made as and when appropriate in accordance with the Listing Rules.” In fact, says a source close to Deripaska, the right to nominate a candidate for shareholders to vote as a replacement for Cheung belongs to Mikhail Prokhorov’s Onexim, which holds 17.02% of the company’s shares.

Asked to clarify its intention, Onexim spokesman Andrei Belyak said today there is no comment yet.

Last week, Onexim said it is delaying a decision on the vote of no confidence already proposed for the AGM on Cheung’s colleague, the former Hong Kong politician Elsie Leung. That move has been initiated by the SUAL shareholders, Victor Vekselberg and Len Blavatnik, who control 15.8% of Rusal. They have also proposed Dmitry Vasiliev as a replacement for Leung; read that story here.

Rusal’s notice to the Exchange intimates that it may find a loophole and avoid putting up a Cheung replacement for the AGM on June 14. Instead, the company thinks it can take a time-out for three months. “Under Rules 3.10A and 3.11 of the Listing Rules, the board of an issuer should be composed of at least one-third INEDs (“Composition Requirement”), and failing that an issuer is required, inter alia, to appoint a sufficient number of INEDs within three months. The Company was granted a waiver from strict compliance with these requirements as the percentage of INEDs (27.8%) was very close to the Composition Requirement. Once a replacement INED is appointed, the Company will once again have 5 INEDs out of 18 Directors.”

Whether the board is allowed to arrogate to itself the decision on whom to vote for, and when, should depend on the majority of shareholders voting not later than at the AGM in three weeks’ time. But who will have the right to cast votes then?

The Rusal website claims the current shareholding of Rusal comprises a control stake of 48.13% in Deripaska’s hands; a Glencore shareholding of 8.75%; Onexim and SUAL, which combined add up to 32.82%; and a free float purportedly of 10.03%. A very different tabulation of the shareholdings appears in a February 2012 report filed with the Jersey Financial Services Commission and the companies register in Jersey, the Channel Island jurisdiction where Rusal is legally registered.

According to that source, Deripaska’s EN+ holding had 38.01% of Rusal shares, 10% less than the company website is claiming. That bloc of shares, 10.04% to be precise, is identified in the Jersey records as belonging to the Russian state banks, VEB/VTB Capital.

If the state bank shareholding number is accurate, and if the other Jersey numbers continue to be more or less accurate, then a combination of Onexim, SUAL, the state banks, and the free float would add up to 52.89% — a clear majority. Enough votes to defeat Leung, appoint Vasiliev, block a three-month delay on Deripaska’s part, and vote on to the board an as yet unnamed independent instead of Cheung.

So how many shares do the state banks currently hold? This question was put to Vnesheconombank (VEB), VTB and Sberbank. VEB replied forthrightly that it does not hold Rusal shares. This corroborates press reports that the initial 3.15% stake which VEB bought as the principal anchor investor in Rusal’s initial public offering in January 2010 has been transferred to another state bank. Asked if it had acquired this bloc of shares, or any other Rusal shares, VTB replied: “we don’t comment on this issue”.

That leaves Sberbank. The bank began by acknowledging receipt of the question on May 22. Two days later, Alexander Mazunin, a Sberbank spokesman, said he is the responsible spokesman for the issue, and was forwarding it to “the person who could provide this information, but he needs some time for reply.” Four days later, Mazunin said client confidentiality applies. Sberbank is refusing to say how many Rusal shares it is holding – 3%, or 10%, or something in between — and keeping secret the number of votes it can cast at the AGM.

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