An Internet content provider's (ICP) license has become the focus of a dispute between Sina.com and its former president, chief executive officer (CEO) and board director Wang Zhidong, legal experts say.
Tuesday Sina's board of directors announced that Wang had been terminated from his positions after a "unanimous decision by the company's board of directors.''
It was the only official response from the company following Wang's press conference on Monday.
At the conference, Wang said he did not resign from the posts, but was betrayed at a board meeting held in the United States on June 1.
He said the board's decision was "illegitimate'' and he would take legal action if necessary.
Although much has been said of Wang's departure from Sina.com, the ICP license, which could be in Wang's name, is the key point of the conflict.
"Chinese corporate law does not allow the board of a limited company to fire its director, but Sina.com is a listed company on the NASDAQ and it is subject to the laws in the United States,'' said Basil Zhao, an attorney from the Lehman, Lee & Xu law firm in Beijing.
For Sina.com, the ICP license, which allows the firm to operate in China, is a more important matter to deal with.
According to China's laws, Chinese Internet companies cannot be listed on foreign stock markets and foreign capital cannot be used to provide Internet services in the country.
To get around this, Wang Zhidong and others founded Sina Internet Information Service Co Ltd (SIISC), which is a Chinese firm and was thus able to get an ICP license.
NASDAQ-listed Sina.com received revenues from SIISC by providing technical support and consultation.
"The report that Wang has 70 per cent of shares in SIISC and thus has the control of SIISC's board is wrong,'' said Yang Yiwei, another legal expert.
According to Yang, Chinese corporate law requires a limited company to have at least two shareholders in the company and each has one vote when making decisions, so it does not mean that Wang necessarily has the right to dispose of the license.
In addition, it has been reported that there is an agreement between Sina.com and SIISC which requires Wang to transfer the ownership of the ICP license to his successor if he leaves the company.
"Even if Wang Zhidong controlled the board of SIISC, he could not overthrow the contract between SIISC and Sina.com,'' Yang said.
However, some analysts have urged both parties to settle the dispute as soon as possible.
"It is a very difficult time for Sina.com and both Wang and Sina's management should make concessions for the good of the company,'' said Wang Ran, a senior Internet strategy analyst.
"The management team should be more concerned with operations than handling disputes,'' he said