The disclosure that China Huishan Dairy’s founder pledged 71 per cent of his company’s shares for loans before the group’s stock collapsed has raised fears that more companies could be at risk if other large shareholders have followed his example.

Share-backed lending is common in Asia and a sought-after business in Hong Kong for banks keen to build deeper links with favoured tycoons, whose wealth is often tied up in their company’s stock. Private equity funds also regularly borrow against the value of their holdings in listed groups.

While the loans carry strict triggers and borrowers forfeit shares if they cannot meet margin calls promptly, the extreme nature of Huishan’s crash — the shares plummeted 85 per cent in 45 minutes before dealing was halted and are still not trading — means it is unclear whether Yang Kai might be forced to cede control of the group.