Arm Ltd said on Friday a change in leadership at its Chinese joint venture fully complied with local laws, after concerns were raised about the move at the Chinese unit.

Earlier on Friday, the SoftBank-owned UK-based chip designer said Arm China's board had voted unanimously to appoint Liu Renchen and Eric Chen as Arm China's co-CEOs, replacing Allen Wu.

The move was seen a major step towards resolving a two-year long dispute that had threatened to derail the UK-based chip designer's plans for a stock market listing.

However, later in the day Arm China said it opposed the move and that there were flaws in how its business registration documents were changed to remove Wu.

In a letter it posted to its official WeChat account that it said was signed by over 430 staff, Arm China said it would continue to see Wu as its leader.

A spokesperson for Arm said in response to the letter that the leadership change was done in full compliance with Chinese law.

"The relevant agency in Shenzhen has registered Dr. Liu as the company's legal representative and general manager, and duly issued a new chop and business license to Dr. Liu," he said, referring to legal steps that confer power to the new co-CEOs.

Arm China's business model, ecosystem and supply chain will not be affected by the leadership change, the spokesperson added.

Japan's SoftBank declined to comment. Arm China and Allen Wu did not immediately respond to requests for comment.

In February, SoftBank shelved its blockbuster sale of Arm to U.S. chipmaker Nvidia Corp valued at up to $80 billion, citing regulatory hurdles. Arm is now seeking a listing instead before March 2023.

The collapse of the Arm sale marked a major setback for the Japanese conglomerate's efforts to generate funds at time when valuations across its portfolio are under pressure.

The board of Arm China, a Shanghai-based joint venture between Arm Ltd and Chinese private equity firm Hopu Investment, tried to oust Wu in 2020, citing "conflicts of interest".

He refused to step down and continued to maintain control of the company, complicating Arm's efforts to audit the unit's financials, which is crucial to its planned IPO.

As recently as Thursday, Wu told Chinese media outlet ijiwei.com that Arm and SoftBank's efforts to remove him were illegal.

Liu is a vice dean at the Research Institute of Tsinghua University in Shenzhen, while Chen is a managing partner at the SoftBank Vision Fund.

Arm China, which generates revenue by licensing chip architecture to Chinese companies, was established in 2018 when SoftBank sold a 51% stake in Arm Ltd's Chinese subsidiary, Arm Technology (China) Co Ltd, to a group of Chinese investors. SoftBank had acquired Arm in 2016 for $32 billion.