Realization of management disputes with the 3% rule of audit appointment… Main gun

◆ The last 3% rule stock total ◆

The point of watching this year’s regular shareholders’ meeting is expected to be a vote in accordance with the amendment to the Commercial Act. The separate election system for audit committee members and the introduction of the 3% rule limiting voting rights of controlling shareholders to 3% when appointing audit committee members have become a means of disputes for management rights in companies with management rights disputes such as Kumho Petrochemical and Korea & Company.

Park Chul-wan, the nephew of Kumho Petrochemical Chairman Park Chan-gu and the largest individual shareholder (10%), appointed himself as an internal director based on the revised Commercial Act at the end of last month, replaced 2 to 4 outside directors, and 1 or 2 members of the audit committee. He asked for a replacement of the board of directors who were elected. In accordance with Article 542 of the Commercial Act, revised on December 29, last year, the’Separate Selection of Audit Committee Members’ was introduced so that at least one of the audit committee members is separately elected from the other directors from the director election stage. Kumho Petrochemical currently has 10 directors (3 inside directors and 7 outside directors), and 4 out of 7 outside directors are about to expire. When Park’s proposal is passed and a majority of the board of directors is secured, it will be possible to take over the board of directors. Park’s shareholder proposal has not been confirmed as an agenda for the board of directors, and the schedule for the general shareholders’ meeting has not been confirmed.

In the case of Korea & Company, which is in dispute over management rights between siblings, the `3% rule` is expected to act as a variable. With Korea & Company’s chairman Cho Yang-rae handing over the stake to the second son, Cho Hyun-beom, the eldest son, Vice Chairman Cho Hyun-sik and Cho Hyun-beom, are expected to compete for a vote. Vice-Chairman Cho Hyun-sik made a proposal to the shareholders to appoint Korea University professor Lee Han-sang as an audit committee member. In terms of the stake structure, CEO Hyun-beom Cho (42.9%) dominated the shares of vice chairman Cho Hyun-sik (19.3%) and the eldest daughter Cho Hee-kyung, chairman of the Hankook Tire Sharing Foundation (0.8%), who agrees with vice chairman Jo. The stake is limited to 3% each. According to the revised Commercial Act, when a listed company appoints an audit committee, the largest shareholder is not allowed to exercise voting rights on stocks exceeding 3%, including related persons.

There is also a prospect that both Kumho Petroleum and Korea & Company will be able to serve as a casting boat for the National Pension Service.

The three-party alliance (former Vice President Cho Hyun-ah, KCGI, Bando Construction), which had a management dispute with Chairman Cho Won-tae over Hanjin Kal’s management rights at the top of Hanjin Group, did not send out shareholder proposals at this shareholders’ meeting. Seems to be. However, Hanjin, the subsidiary, has made a proposal for shareholders to appoint outside directors and audit committee members by HYK Partners, a private equity fund manager, the second largest shareholder, using the revised Commercial Act.

In the case of LG, which is about to be separated from its affiliates, there is a possibility that the US-based hedge fund has used the’multiple representation litigation system’ of the revised Commercial Act as a weapon. The LG Group plans to deal with the agenda of establishing a new LG holding company at the shareholders’ meeting on the 26th, with advisor Koo Bon-joon separating five companies, including LG International, LG Hausys, Silicon Works, LG MMA, and Pantos. In response, a white box advisor, an activist fund known to hold 1% of the stake, opposes the division of the division. Whitebox’s shareholding ratio is far short of the requirements for passing the agenda (two-thirds of the stocks present and more than one-third of the stocks issued).

Under the `Multiple Representative Litigation System`, if a listed company holds a tenth of thousands of shares, the parent company’s shareholder can also file a representative lawsuit against the directors of its subsidiaries.In this case, a lawsuit for damages against the directors of subsidiaries such as LG Electronics and LG Chem Can be raised.

According to the Korea Corporate Governance Service, there are 206 listed companies that are affected by the separate election of audit committee members and a 3% restriction on voting rights (3% rule) at the shareholders’ meeting this month, and 352 audit committee members are expected to be replaced by expiration and resignation.

In addition, it is noteworthy whether the National Pension Service will exercise the stewardship code (institutional investors exercise voting rights) at the shareholders’ meeting. There is an opinion that it is necessary to exercise the voting rights of the National Pension for POSCO, which has a serious accident, and CJ Logistics, which has overworked a courier worker, mainly in the political world.

[노현 기자 / 강봉진 기자]
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