Virgin Australia did the deal last year. Credit:Tian Law The company started life in 1993 as a regional carrier, Hainan Airlines, and has morphed into global giant which claims assets worth $US150 billion ($188 billion), including a 10 per cent share in Deutsche Bank and a quarter of the Hilton hotels chain.



Despite frequent appearances in the world's business press over its large debt-fuelled acquisitions, little has been known about who ultimately controls HNA. And that's become a problem. In recent months, Bank of America has reportedly told its bankers to stop working on transactions with HNA because of concerns about its ownership structure and debt levels. Citigroup and Morgan Stanley meanwhile have avoided financing or advising HNA on new deals because the firms could not get approval from their internal "know your customer" committees, Bloomberg has reported. European regulators were reportedly considering a review of HNA's stake in Deutsche Bank, while America's foreign investment watchdog has delayed HNA's tilt for the hedge fund firm SkyBridge Capital.

Prime Minister Tony Abbott, Huang Gan, executive director of HNA Group, and Minister for Trade and Investment, Andrew Robb during a visit to Shanghai in 2014. Credit:Alex Ellinghausen Adding to speculation were claims by high-profile Chinese businessman turned fugitive Guo Wengui that high-ranking Community Party officials were secret HNA shareholders. Amid this mounting pressure, HNA sought to ease concerns about its ownership but managed to only fuel the intrigue. The company revealed a fortnight ago that two charities - one based in New York and one in China - owned 52 per cent of the company. Corporate filings in China had previously showed that an unknown Chinese businessman, Guan Jun, was HNA's top shareholder with a 29.5 per cent stake. But HNA's management played down his involvement, with its chief executive officer Adam Tan telling the Financial Times that Mr Guan's shares actually belonged to HNA, and that he had just "held the stake for us".

Mr Guan had donated his shares to the now-dominant charities, HNA said last month, without explaining why he held them in the first place. HNA said that of the remaining shares, two founders and co-chairmen held 14.98 per cent each, 10 other company officials owned a combined 17.5 per cent, and its airline subsiduary Hainan Airlines owned 0.25 per cent. How the charities are managed has not been revealed. Investment boon For Virgin Australia, HNA's investment has been a boon, opening a door for the airline to start flying to Hong Kong and form alliances with HNA's carriers.

But does it matter who ultimately owns 19 per cent of its shares and has nominated a director to its 12 member board? Virgin said its had strong corporate governance protocols to "ensure that the best interests of the company and all of its shareholders are upheld". Etihad, Singapore Airlines and Chinese carrier Nanshan each also own about a fifth of Virgin. "The Virgin Australia Group conducts due diligence on potential directors. We are confident that this due diligence practice and our broader corporate governance protocols ensure that the best interests of the company and all of its shareholders are upheld," a Virgin spokeswoman said. Alice de Jonge, a senior lecturer in law at Monash University Business School, said Australia's Foreign Investment Review Board would have had to assess HNA's investment in Virgin because it was above the monetary threshold for investments in transport companies.

The Treasury said it did not comment on FIRB decisions. Treasurer Scott Morrison has the discretion to discuss FIRB decisions but opted not to when contacted by Fairfax Media. A Treasury spokesman did point out that all applicants had to show who they were owned and controlled by. Dr de Jonge said FIRB would have only blocked HNA's investment if it deemed that it posed a threat to the national interest, and FIRB had the power to hold up the investment until it had enough information to make a decision properly. "If there were suspicious circumstances behind a lack of full information about the final controlling interests in HNA, for example, it could have been deemed so opaque that it was a threat to the national interest," Dr de Jonge said. "Obviously is has satisfied itself it's made a proper decision."

Loading However, Dr de Jonge said FIRB could unwind its approval if adverse information about HNA came to light, which would force HNA to sell its investment. Dr de Jonge said HNA's nominee on the Virgin board Nang Qi was subject to a legal responsibility to disclose any potential conflicts of interest to the Virgin Board in relevant circumstances.