China Huishan Dairy Holdings Co. Chairman Yang Kai has lost his board of directors.Yang, the dairy tycoon who’s fighting for his company’s survival, is effectively now the only member of Huishan’s board after two executive directors resigned this week, adding to a flood of departures since the stock collapsed suddenly on March 24. Ge Kun, tasked with overseeing the company’s finances, is technically still a director but has been unreachable since at least March 21.
The board now lacks the minimum number of members to act for the company, Huishan said in a statement on Tuesday. That raises questions about the dairy producer’s ability to recover from a crisis triggered by Ge’s disappearance and the firm’s inability to pay its debt on time. It’s the latest in an unusual series of events that turned Huishan into a poster child for weak corporate governance and the dangers of leverage in China.
“I would question whether the directors should be resigning at a time like this,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management in Beijing. “This is really when the directors have a fiduciary responsibility to the shareholders to stay with it and to get to the bottom of the problems.”
A call to Huishan’s investor relations line in Hong Kong went unanswered. So Wing Hoi and Kwok Hok Yin resigned as executive directors, Huishan said. Kwok remains employed as a vice president responsible for the company’s dairy-ingredient business, while So resigned for health reasons and also ended his role as chief finance officer. Four non-executive directors resigned at the end of last month.
Ge remains “uncontactable,” the company added. Huishan said earlier it had filed a missing person report with the Hong Kong police.
“Mr. Yang Kai is taking such steps as practicable to identify suitable candidates to fill such vacancies on the board, but given recent events, he may not be able to find suitable candidates soon,” the company said.
Huishan hired Deloitte Advisory of Hong Kong this month to analyze its financial position. Trading in the stock remains suspended.