A rogue Arm CEO and a centuries-old law are causing a headache

If you thought a national security intervention was the top reason why Nvidia's purchase of Arm from Softbank may not go to plan, just wait until you hear this: Arm China's sitting CEO, Allen Wu, isn't meant to still hold the position he claims to hold. Wu was ousted from his position by Arm China's board back in June last year for conflict of interest, but has refused to hand over control ever since.

In fact, he's apparently said to still be holed up in his office to this day, nearly one year on from his dismissal.

So you've got a rogue ex-employee sitting in an office someplace but holding no real power, right? Nope. Wu has custody of Arm China's official seal stamp, and that's way more important than it may seem if you're not familiar with a centuries-old Chinese business practice. 

A stamp, also referred to as a company chop, can be required in China to give the final nod of approval in all matters of business. It can be legally binding, too. In this case, it's required to formally remove Wu from his position as legal representative of Arm China. The man with the stamp is not in the least bit interested in using it, at least for that purpose, and that's a big problem for Arm, and by extension Nvidia.

Nvidia hopes to ratify its purchase of Arm, a deal worth $40B, within 18 months of its announcement. That would see it close by March, 2022. If someone can wrest control of the seal away from Wu, that is.

As of January 2021, Nvidia had not formally filed for review of the deal in China, according to sources speaking with the Financial Times. That could see the deal delayed. Nvidia, Arm, and Softbank claim the deal will still be completed in the given timeframe, however.

There are a few other important details to note in this curious case: Arm China is a joint venture, co-owned by Chinese investment firms. Arm Ltd, headquartered in the United Kingdom, only holds a 49 percent stake.

Wu is reportedly using cash from Arm China's bank account to fund his legal battles with Arm and majority shareholder, Hopu Investments. Wu also fired three executives intended to replace him, who have since been reinstated by the board. Now Wu is suing the three men, and demanding they return company property, reports Bloomberg.
Arm China retains that Wu's position and use of company funds was within the laws of the Shenzhen, the area where Arm China is registered. And if that wasn't enough drama already, Wu has reportedly made $179 million from a personal investment in one of Arm's Chinese clients.

In an interview with Bloomberg Television, Arm's CEO reaffirmed an 18-month timeline for the sale to Nvidia to be ratified, but also admitted that the "leadership change in China" was "taking time to resolve."

The best bet for removing Wu is through a lawsuit in China, although that would likely take years to conclude.

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