Luckin Coffee Inc. announced that it received a letter of resignation on Monday from independent directors Yang Jie and Zeng Ying, effective immediately. Meanwhile, the company also announced it will hold an extraordinary general meeting on Sept 2 to vote on the re-appointment of Sean Shao as a director of the company.
The personnel changes come roughly a month after Luckin’s shareholders voted to dismiss its then-chairman Lu during an extraordinary general meeting on July 5, as a result of the company’s internal investigation into financial fraud. Sean Shao was removed from the board with two other directors, while Zeng Ying and Yang Jie joined as new independent directors, nominated by Lu.
The company said two of its shareholders, Lucky Cup Holdings Limited and Fortune Cup Holdings Limited, which collectively hold no less than 10% of the aggregate voting power as of July 30, 2020, requested to reinstate Shao. Shao is the former chairman of the special committee established by the board.
“Pursuant to the Requisition, the Proposing Shareholders expect the reappointment of Mr. Shao as a director can assist with the full implementation of the remedial measures recommended by the Special Committee of the Board,” Luckin said in a statement.
China’s Ministry of Finance found Luckin booked 2.25 billion yuan ($322.60 million) of sales through fake coupons from April 2019 to the end of last year, the ministry said in a statement on Friday. It also found Luckin inflated its sales by 2.12 billion yuan during the same period. Costs were also inflated by 1.2 billion yuan and profits by 908 million yuan.
The ministry started to investigate Luckin in late April. It said it would now impose administrative penalties on Luckin, without giving any further details.
The State Administration for Market Regulation also said in a separate statement Friday that it would punish two of Luckin’s domestic subsidiaries and related third parties that helped Luckin with the fraud, without specifying the penalties.
These penalties come less than four months after Luckin disclosed the conclusion of its internal investigation into financial fraud where Luckin confirmed its 2019 net revenue was inflated by 2.12 billion yuan. The company has removed a number of top executives and dozens of employees during the investigation.