Jailed tycoon Huang Guangyu lost his battle to wrestle back control of Gome Electrical Appliances, China's second largest electronics retailer, in Hong Kong on Tuesday evening.

Shareholders voted against replacing Huang's successor and former protege, Chen Xiao, and another top executive, with Huang's sister and one of his lawyers.

Huang's resolutions to oust current chairman Chen and Vice-President Sun Yiding were both defeated by a vote of about 52 percent to 48 percent.

In total, four of the five motions raised by Huang were rejected but he turned the tables by 55 percent to 45 percent in a vote to revoke Gome's "general mandate" to issue new shares without first offering them to current shareholders, a move that could dilute his 32.47 percent majority shareholding in the company.

Huang is currently serving a 14-year jail term for insider trading, bribery and other crimes.

There was no immediate comment from Huang but a statement issued by a public relations firm on behalf of the "founding shareholders" noted the vote at the special shareholders' meeting on Huang's failed proposals was close.

They said they were "pleased to see the general mandate has been revoked".

Calling Gome's current board "unrepresentative", the statement said the company's new managers have "strayed from the path of profitable growth, resulting in deteriorating core competency and lost its industry leadership".

Huang has indicated that he might sell about 380 stores, out of Gome's 1,100, that he privately owns - a move that would undermine the company's dominance in the mainland market.

The Gome board called Tuesday's vote "a clear endorsement of the management's track record over the past two years".

The board added, however, that it is open to discussing company strategy with Huang.

Sang Baichuan, a professor at the University of International Business and Economics in Beijing, said that Chen's victory indicated that most shareholders were firm believers in the structure of modern corporate governance, which is vital if private Chinese companies want to compete globally.

Wang Ran, CEO of China eCapital, said in his blog that corporate governance must protect the interests of all investors, large and small.

The boardroom battle started in May 2010 when representatives of Huang vetoed a motion to elect three representatives onto the board.

In June 2009, US private equity company Bain Capital purchased $233 million in Gome bonds that were later converted into shares, giving it the right to appoint three of the company's directors.

Huang was concerned about the option plan proposed by Bain that could dilute his shares but his attempt in May 2010 to block the three directors was overruled by the board.

One week later, Huang was sentenced to 14 years in prison at a Beijing court. The ruling was upheld on Aug 31.

Chen Huanzhong, a partner at Global Law Office in Beijing, said that owners of private enterprises in China needed to realize that when they decide to float their companies they should be prepared to share the benefits with other investors.

Huang built the business up from scratch and at its peak his fortune was estimated at US$6.3 billion.

Born into poverty, Huang moved to Beijing from his hometown in southern China and built a fortune selling televisions, air conditioners, washing machines and other accessories of a modern, affluent lifestyle.

But his fortunes dipped after he branched into real estate and financial dealings.

(China Daily September 29, 2010)