TWO months after running into contractual strife in China and seeking suspension of its shares, Hailian International is still trying to work out the depth of its financial and legal problems.
Hailian directors Tony Kiernan and Michael Knee went to China on a rescue mission early this month but shareholders are none the wiser as to how much value resides in the company.
The company’s problems flow from its decision to invest in Chongqing Hailian University in western China. Hailian disclosed in July that the cost of acquiring full title to the university land would be about $7 million higher than previously expected.
Its Chinese partner and largest shareholder, Professor Ling Xiao, is central to its problems.
Hailian said he agreed to payment terms without the advice or approval of the board and provided information that was “patently wrong and misleading”. Ling Xiao resigned from Hailian’s board of directors last month and advised that he would not cooperate in providing any financial or operating information until all payments were made on the land.
Messrs Kiernan and Knee went to China seeking court backing for a plan that included a full audit of the university’s accounts and the adoption of a legal mechanism to ensure that no liabilities or obligations could be incurred by the university without Hailian’s approval.
They have instructed Hailian’s auditors in Chongqing to commence an audit and Ling Xiao advised that he would cooperate with the auditors.
Hailian said it wants to clarify its future investment requirement before any funding arrangement can be completed.