In 2006, Zou Dejun began to look for opportunities to list his firm Dalian RINO Environment Engineering Science and Technology Co. Ltd. (Dalian RINO) on the US markets to access funding. Through a contact, Zou found a Nevada-based shell company, Jade Mountain Corporation, that was listed on the Over-the-Counter Bulletin Board (OTCBB) but which was largely inactive.

On 5 October 2007, the reverse merger between Dalian RINO and Jade Mountain Corporation took place through Innomind Group Ltd (Innomind), a single shareholder company. A share exchange transaction of 17,899,643 shares of common stock was issued to Innomind Trust, essentially giving Innomind control as the trust's beneficiaries were Zou and his wife, Qiu Jianping. When the reverse merger was completed, Jade Mountain changed its name to RINO International Corporation (see Figure 1 for the group structure).

RINO's only source of operating profits is through a contractual arrangement with the China-incorporated company Dalian RINO, which dictated that 100 per cent of Dalian RINO's profits was to be channelled into Innomind's wholly-owned subsidiary. The Chairman of RINO was

Qiu, while the CEO was Zou. Zou was also the CEO of Dalian RINO. Innomind's sole shareholder is a relative of Zou and Qiu.

Although trading on the OTCBB did bring in new capital, Zou had set his sights on a listing on NASDAQ. He took steps to ensure that RINO met NASDAQ's listing requirements. In 2008, Frazer Frost, a US-based audit firm and Rodman & Renshaw, an investment bank with experience in helping Chinese companies list on the NASDAQ, were hired. In July 2009,

RINO was successfully upgraded from the OTCBB to the mainboard of NASDAQ. In the first six months of its listing on NASDAQ, RINO raised about US$1 billion through share issues and stock warrants.

Question

What are the key corporate governance issues with RINO? List at least two key issues and discuss.