At a meeting on Nov 15, the board considered its combined financial position, including all of its subsidiary companies in China.
In an update to the Stock Exchange of Hong Kong, the board stated: “The combined net liabilities of such subsidiaries in the People’s Republic of China as at 31 March 2017 could have been RMB10.5bn (US$1.58bn). In view of this, the board has instructed the Cayman legal advisors of the Company to prepare the relevant documentation to place the company into provisional liquidation.”
“Such steps will take into account, as far as possible, options available to the company to preserve the assets of the Group,” it continued.
The announcement was endorsed by the sole remaining director of China Huishan Dairy from that time, chairman Yang Kai.
Yang was once the richest person in China’s north-east province of Liaoning.
A provisional liquidation is usually to protect a company’s assets from creditors, in view of restructuring. The company had said earlier this month that a debt restructuring proposal had been passed by a majority of its creditors.
The dairy giant’s abrupt fall from grace began, during the morning trading session of March 24. The China Huishan Dairy’s share price plunged to a low of HK$0.25 per share and closed at HK$0.42 per share.
This was a drop of about 85% of its price on the previous day. The company then requested a trading halt.
The Hong Kong securities authorities further suspended all trading of shares in the company shortly after.
Amid allegations of overstating its sales and undisclosed transfers, the company soon unravelled and almost its entire board of directors resigned or retired soon after the incident.
In June, China Huishan Dairy appointed new, non-executive, directors and reconstituted its board committees.
That month, the stock exchange also notified the company that the suspension of share trading would continue as it had not met key conditions. These include informing the market of all material information for the shareholders and investors to appraise the group, and to publish all outstanding financial results and address any audit qualification.
The company has since faced legal action or proceedings from various parties.
In September, the company said HSBC was demanding the immediate repayment of loans from the company following one or more counts of default. In a statement to the stock exchange, it said HSBC had terminated the company's banking facility and was asking for the immediate repayment of US$13.7 million.