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Court upholds Hanwha stock sale

Sept 13,2017
The country’s highest court ruled in favor of Hanwha Group on Tuesday in a stock transaction case dating back to 2005, when the conglomerate’s board of directors agreed to sell shares of an affiliate to the chairman’s sons.

The Supreme Court upheld a decision made by an appellate court in 2015 that said there was no illegality in the transaction and no harm done to the company. The court added it saw no evidence that the sons had purchased the shares at a lower value.

The legal battle began in 2010 when a civic organization, Solidarity for Economic Reform, then led by current Fair Trade Commissioner Kim Sang-jo, and a group of minority shareholders accused Hanwha executives, including the chairman, of inflicting losses following a massive stock sale.

In 2005, Hanwha’s board of directors agreed to sell 400,000 shares, or 66.67 percent, of Hanwha Group’s IT affiliate, Hanwha S&C, to the chairman’s eldest son, Kim Dong-kwan, who currently runs Hanwha Group’s solar energy developer Hanwha Q Cells.

Chairman Kim Seung-youn also gave half of the 200,000 shares he had in Hanwha S&C to his two younger sons.

The value of the shares that the three sons bought has since doubled, and Hanwha S&C has become one of the conglomerate’s core affiliates.

The civic group and minority shareholders argued that the conglomerate’s board of directors sold its shares below market value so that the chairman’s sons could profit from them.

A lower court acknowledged that the board had undervalued its shares to facilitate transition of the conglomerate’s management to Kim’s sons and ordered Hanwha Group to pay 8.97 billion won ($7.95 million) to minority shareholders.

The conglomerate appealed the ruling, and the appellate court in 2015 ruled that the sale did not violate any laws and upheld the freedom of the company to make its own management decisions.

Kim Sang-jo, head of the civic group at the time, strongly criticized the court, stressing that the court’s decision would hold back progress in Korea’s corporate governance.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]