Imagination Technologies Group Plc’s CEO said that a Chinese fund and the company's asset manager requested to name Chinese members to the U.K. semiconductor designer’s board, in order to help the company expand in China.

Canyon Bridge Capital Partners, a private equity firm that acquired Imagination in 2017, used a fund that was almost entirely provided by state-backed China Reform Fund Management, Imagination Chief Executive Officer and Canyon Bridge partner Ray Bingham said in a hearing of the U.K. Parliament’s cross-party Foreign Affairs Committee on Tuesday.

The session focused on the importance of Imagination’s intellectual property to U.K. national security, the validity of claims that Imagination Technology would be moved abroad, and the role of the Foreign Office in preventing hostile foreign takeovers.

The chipmaker's executive said that the fund had made the request for board seats arguing it could provide directors who would be helpful in plans to expand in China.

China Reform’s view was “that they could be even more helpful in China if they could be closer to the action, if you will, closer to the board activities,” Bingham said. The conversations “started in the fall of 2019 the discussion carried on for some time.”

Canyon Bridge has been criticized for its role in China’s attempts to acquire overseas technology and boost its domestic semiconductor capabilities. The U.S. considers semiconductors vital to defense and has accused China of trying illegally get its hands on the technology.

Bingham was called before the committee, along with former Imagination executives, after Canyon Bridge briefly considered putting three China Reform staff on its board. He argued that the Chinese financial backers are not trying to take control of the company and the board nominations were designed only to help it.

The U.K. government followed up on opposition, leading the chipmaker to abandon the idea. Imagination Tech's CEO and chief technology officer was ousted, and U.K. lawmakers are now concerned that the fund plans to shift parts of Imagination’s business and sensitive technology from the U.K. to China.

Although China Reform provided 99% of the fund with the general partners providing the additional 1%, it has no say over the management or direction of the company, according to Bingham. China Reform is also not a direct shareholder of Imagination, he said.

“If you own 99% of an investment fund, I think you’d find that your influence is unlimited,” committee Chairman Tom Tugendhat said.

Former CEO Ron Black, when asked if he could discuss whether Canyon Bridge had ever mulled moving Imagination’s activities to China, said he was bound by a contract he signed when he joined the company and couldn’t answer.

Former Imagination Technologies CEO Sir Hossein Yassaie has told the British Parliament's Foreign Affairs Committee that the UK must introduce a framework to prevent asset stripping of homegrown tech businesses by foreign powers.

Ron Black said the UK's legislation to protect companies lacks measures found in other territories, most notably the US.

"A lot of times in business, things are not clear until post-facto. Until after it's happened," he said. "But it's almost always possible to know whether risks are increasing or decreasing. What is needed here is a risk assessment framework."