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Hanjin Kal continues to fight against KCGI rights

Mar 18,2019
Only two weeks before an annual shareholders’ meeting, the battle between Hanjin Kal, Hanjin Group’s holding company, and activist fund Korea Corporate Governance Improvement (KCGI) is escalating.

Hanjin Kal on Sunday once again rebutted the KCGI’s claim that the company is violating shareholders’ rights.

The company said in a statement that it has the right to appeal against a court injunction in favor of KCGI, which claims that Hanjin is neglecting shareholders’ right to make proposals on appointments for outside directors.

“It is our legal management right to appeal to confirm whether the KCGI has the shareholder right to make proposals [on the appointment of outside directors and an accountant],” the company said in a statement.

The KCGI is the second-largest shareholder of Hanjin Kal with a 12.01 percent stake.

The activist fund is proposing appointing Seoul National University Prof. Cho Jae-ho and lawyer Kim Yeong-min as outside directors, and accountant Kim Chil-gyu from Echon & Co as an auditor of the holding company. When Hanjin Kal refused to include the three nominees as candidates, the KCGI took the issue to court and won an injunction earlier this month. Hanjin Kal appealed.

“We have inevitably put [the KCGI’s] proposal on the agenda conditionally for the shareholders’ meeting as the ruling from the Seoul High Court has been slower [than expected]. But once the court rules that the KCGI does not have the right to make shareholders’ proposals, it will be taken off the agenda,” the company said.

Hanjin Kal’s shareholders’ meeting is scheduled for March 29.

The statement came two days after the KCGI slammed the company’s decision to include the proposal as a “conditional item” on a provisional agenda, calling the move “unprecedented” and “abnormal.” Putting it up conditionally means that it will be taken off the agenda if the court rules in favor of the company ahead of the meeting.

The argument over the KCGI’s shareholder rights comes down to how long the activist fund has held its shares.

Citing Article 542 of the Commercial Act, Hanjin argues the KCGI does not currently have the right to make proposals because minority shareholders need to hold at least a 0.5-percent stake in a listed company for over six months to exercise their rights. All shareholders apart from the largest count as minority shareholders, says Hanjin.

The KCGI first acquired Hanjin shares in November and made its shareholder proposal on Jan. 31.

Hanjin Kal added in a statement that if the KCGI is allowed to make its proposals, the precedent could affect other listed companies and their management systems.

Regarding the KCGI’s claim that Hanjin Kal is violating shareholders’ right by not adopting electronic voting for shareholders’ meeting, Hanjin argued that the reliability of the system has not yet been approved by most conglomerates, adding that forcing a company to change its voting system is a violation of the authority of its board of directors.

BY JIN MIN-JI [jin.minji@joongang.co.kr]