Jack Ma, China’s fifth richest man and co-founder of e-commerce giant Alibaba will be relinquishing his controlling rights of Ant Group, which owns the Alipay platform.
This is contained in a statement by Ant Group on Saturday, wherein the company announced further corporate governance optimization plans.
According to the statement seen by Investogist, the company stated that Ant Group had on 7th January 2023, received the “Notification on the Adjustment of the Upper-Tier Shareholding Structure” from Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, which provides that major shareholders of Ant Group and their beneficiaries intend to adjust the upper-tier shareholding structure of Ant Group, in order to further optimize corporate governance and to align the voting interests of shareholders with their economic interests.
The adjustment which ANT claims is being implemented to further enhance the stability of its corporate structure and sustainability will result in a change of the exercise of voting rights of Ant Group’s major shareholders, from Mr. Jack Ma exercising voting rights jointly with persons acting in concert, to each of ten individuals (including the founder, representative of our management and employees) exercising their voting rights independently.
“Acting in concert” describes a two or more investors coordinating with each other to achieve the same investment goal.
Ma currently indirectly controls the voting rights represented by 53.46% of Ant Group shares via Hangzhou Yunbo, an investment vehicle for Ma that controls two other entities.
Ant Group argued in its statement that “Hangzhou Junhan and Hangzhou Junao hold an aggregate of 53.46% of the shares of Ant Group. Hangzhou Yunbo Investment Consultancy Co., Ltd. (“Yunbo Investment”) is the general partner of both Hangzhou Junhan and Hangzhou Junao and is not entitled to any economic benefits from Ant Group.
“Mr. Jack Ma, Mr. Eric Xiandong Jing, Mr. Simon Hu and Ms. Fang Jiang hold 34%, 22%, 22% and 22% of the equity interests in Yunbo Investment, respectively. Pursuant to the existing articles of association of Yunbo Investment and the Concert Party Agreement, Mr. Jack Ma effectively can exercise control over the voting results of general meetings of Yunbo Investment for matters relating to the exercise of its rights as a shareholder of Ant Group, and therefore indirectly controls the voting rights represented by the 53.46% of the shares of Ant Group held through Hangzhou Junhan and Hangzhou Junao (each of which is controlled by Yunbo Investment).
“As a result, Mr. Jack Ma is deemed to be the control person of Ant Group prior to the Adjustment.”
The various agreements (“Termination Agreement for Concert Party Agreement”, “Equity Transfer Agreement with respect to Hangzhou Yunbo Investment Consultancy Co., Ltd.”, “Partnership Admission and Withdrawal Agreement with respect to Hangzhou Junhan Equity Investment Partnership (Limited Partnership)” and “Letter of Undertaking”) entered by the parties will mainly effect the following arrangements:
- Mr. Jack Ma, Mr. Eric Xiandong Jing, Mr. Simon Hu and Ms. Fang Jiang will terminate their acting-in-concert arrangement for the voting of shares of Yunbo Investment.
- Each of Mr. Eric Xiandong Jing, Mr. Xiaofeng Shao, Mr. Xingjun Ni, Ms. Angel Zhao and Ms. Minzhi Wu will hold 20% of the equity interests in Yunbo Investment through equity transfers.
- Yunbo Investment will withdraw from Hangzhou Junhan as its partner. Hangzhou Xingtao Enterprise Management Consultancy Co., Ltd. (“Hangzhou Xingtao”) will be admitted to Hangzhou Junhan to replace Yunbo Investment as the general partner and executive partner of Hangzhou Junhan. Each of Mr. Jack Ma, Mr. Cyril Xinyi Han, Ms. Yu Zhang, Mr. Chenli Huang and Ms. Yun Zhou will hold 20% of the equity interests in Hangzhou Xingtao.
- Upon the completion of the Adjustment, all shareholders of Yunbo Investment and Hangzhou Xingtao will undertake to independently exercise their respective rights (including voting rights), to not enter into any form of concert party arrangements with any other party and to not seek control over Ant Group alone or jointly with any other party.
The change will remove Ma’s control of the company, and leave him with a mere 6.2% of the voting rights, according to Bloomberg calculations.
The statement by Ant Group adds that as a result of the Adjustment, the shareholding structure of Ant Group will be more transparent and diversified, which will facilitate the steady development of the Company.
In recent years, China has been cracking down on both Alibaba and Ant Group, as well as a host of other Chinese tech giants, over violations of anti-monopoly legislation.
Ant Group, formerly known as Ant Financial, is an affiliate company of the Chinese conglomerate Alibaba Group. The group owns the world’s largest mobile payment platform Alipay, which serves over 1.3 billion users and 80 million merchants.
On 24 December, 2020, Chinese regulators launched an antitrust investigation into Alibaba, the country’s biggest e-commerce company. In April 2021, it slammed Alibaba Group Holding Ltd with a record fine of 18.23 billion yuan ($2.8 billion) in its anti-monopoly investigation that found the company abused its market dominance.
Ant Group has been forced to reorganize its operations and structure after Beijing called off its $37 billion initial public offering (IPO) in November 2020. Since then, regulators have been pressuring Ant to distance itself from both Alibaba and Ma and have been planning to turn it into a financial holding company regulated by China’s central bank.
Jack Ma has largely disappeared from the public view over the past two years after criticizing Beijing’s conduct with tech giants.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur