Surge in Inquiries About 'Auditor Appointment' Measures Ahead of General Shareholders' Meeting

[Asia Economy Reporter Oh Ju-yeon] In March, ahead of the 2020 regular general meeting of shareholders (GMS), the issue of 'auditor appointment' is expected to emerge as a major topic during this year's super GMS season.

Locomotive, a company specializing in collecting voting rights, announced on the 28th that inquiries about auditor appointment measures increased by more than 40% in January compared to the same month last year. The company explained that this is due to facing the challenge of appointing auditors based on the '3% rule' at the regular GMS in March this year, which marks the third year since the abolition of shadow voting (proxy voting rights exercise).

A Locomotive official stated, "Considering that the auditor's term is usually three years, all auditors appointed in 2017, just before the abolition of shadow voting, are reaching the end of their terms and must go through the auditor appointment process." He added, "Most inquiries are about securing an additional 22% or more of voting rights due to the 3% rule that limits the voting rights of major shareholders."

According to the Korea Listed Companies Association, the number of listed companies with one or more agenda items rejected at the regular GMS increased more than twofold from 76 in 2018, immediately after the abolition of shadow voting, to 188 in 2019. Among the 238 agenda items rejected by these 188 companies, auditor (committee member) appointments accounted for 149 cases, representing 62.6%, the highest proportion.

Other rejected agenda items included amendments to the articles of incorporation (52 cases, 21.8%) and approval of executive compensation (24 cases, 10.1%). This year, it is expected that the number of listed companies failing to appoint auditors (committee members) at the GMS will increase to 238.

A Locomotive official explained, "Once the shareholder register is secured when major agenda items are scheduled, GMS planning should be completed, and preparations for the GMS must be finished by early February at the latest." He added, "Some companies respond complacently to voting rights collection, resulting in inquiries only in March, which sometimes leads to failure due to lack of time."

This content was produced with the assistance of AI translation services.