Yahoo Inc. (YHOO) said Thursday it was notified just two months ago that Alibaba Group had moved ownership of an online-payment unit to a separate entity in August last year without approval or knowledge of Alibaba's board or shareholders.

On Wednesday, when it released its first quarter results with the Securities and Exchange Commission, Yahoo said, "To expedite obtaining an essential regulatory license, the ownership of Alibaba Group's online payment business, Alipay, was restructured so that 100 percent of its outstanding shares are held by a Chinese domestic company which is majority owned by Alibaba Group's chief executive officer. Alibaba Group's management and its principal shareholders, Yahoo! and Softbank Corporation, are engaged in ongoing discussions regarding the terms of the restructuring and the appropriate commercial arrangements related to the online payment business."

Alibaba Group, owner of Alibaba.com, a leading online marketplace in Japan and China, said Thursday that it moved ownership of Alipay to an entity controlled by its Chief Executive Jack Ma in response to rules issued last year by the People's Bank of China that could potentially bar foreigners from owning controlling stakes in Chinese Internet-payment services.
Yahoo, however, clarified in a statement to investors on Thursday, "On March 31, 2011, Yahoo! and Softbank were notified by Alibaba Group of two transactions that occurred without the knowledge or approval of the Alibaba Group board of directors or shareholders. The first was the transfer of ownership of Alipay in August 2010. The second was the deconsolidation of Alipay effective in the first quarter of 2011."

As of March 31, Sunnyvale, California-based Yahoo owns 43% of Alibaba's common stock, with the investment worth $2.32 billion. Yahoo has one representative on the Alibaba board. Japan's Softbank, which has a 33% stake, also holds a seat. Alibaba controls the remaining two seats.

"Yahoo! continues to work closely with Alibaba and Softbank to protect economic value for all interested parties. We believe ongoing negotiations among all of the parties provide the best opportunity to achieve an outcome in the best interest of all stakeholders," the company said in its statement on Thursday.

The abrupt transfer of Alipay adds to straining relations between Yahoo and Alibaba. The two has in the past disagreed over censorship and business issues.

Alipay is a critical part of Alibaba Group's business. Handling more than 8 million transactions daily, it is the main payment platform for transactions on Alibaba's Taobao site, which has a majority share e-commerce transactions in China.

Yahoo originally acquired a 46% stake in Alibaba in 2005 in exchange for $1 billion in cash and giving up its China based operations to Alibaba. Under terms of the deal, Yahoo has had the right to name another director to Alibaba's board since last October, but hasn't made the election so far.

Yahoo invested in Alibaba hoping to benefit from rising Internet demand in the world's fastest growing economy. But the transfer of the Chinese online-payment unit raises concern that Alibaba Group will be worth less without the payment business.

Since Yahoo first reported the transfer early this week, its stock has fallen 13% on the Nasdaq Stock Market.