(Yicai Global) July 27 -- More trouble is brewing for embattled Xiabuxiabu Catering Management China Holdings after its former chief executive officer alleged improper practices at hot pot restaurant chain and called for an investigation by the Hong Kong Stock Exchange.

Zhao Yi, who was removed as CEO in May for failure to meet business objectives, said in a public letter dated yesterday that the Beijing-based company had not disclosed information to investors in a full and honest manner.

Xiabuxiabu’s shares [HKG:0520] fell 5.6 percent today to HKD6.38 (82 US cents) apiece, after plunging almost 14 percent yesterday to HKD6.70. The broader Hang Seng Index has also given up ground, losing 4.2 percent today.

As of the end of last year, Xiabuxiabu had 1,061 eateries. Net profit was badly hit by the pandemic, falling 96 percent year on year to CNY11.5 million (USD1.8 million) in 2020, according to the firm's earnings report published on April 27. 

In a filing from Xiabuxiabu yesterday, the board said that Zhao would also be removed as an executive director as her management style and philosophy are significantly different from those of the rest of the board. 

The shareholders will vote on the proposal at a meeting scheduled for tomorrow and Zhao will no longer hold any position at Xiabuxiabu if the move is voted through.

Zhao joined Xiabuxiabu as chief financial officer in 2012 before being promoted to CEO in 2019 to take charge of the plan to upgrade the chain's main brand. 

In the public letter yesterday, Zhao said there was inadequate supervision of Xiabuxiabu Restaurant Management, the company’s main business in Beijing, and said there were defects and risks in the Hong Kong-listed firm's corporate governance.

She also said President Ho Kuang-Chi controls procurement of mutton and beef and Xiabuxiabu pays high transaction fees to its wholly owned supplier.

Editor: Tom Litting