"Ban Do Kwonhongsa Chairman Demands Honorary Chairman Title of Hanjin from Cho Won-tae"...False Disclosure Controversy

No Voting Rights Granted for Bando's 3.20% Stake Upon False Disclosure Conclusion
Will the 1%p Narrow Margin Mark a Milestone?

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] It has been alleged that Kwon Hong-sa, chairman of Bando Construction, met with Cho Won-tae, chairman of Hanjin Group, last year and requested the honorary chairman position. During that period, Bando Construction disclosed the purpose of acquiring shares in Hanjin KAL as a 'simple investment,' raising controversy over whether this was a false disclosure.

According to the business community on the 16th, Hanjin KAL recently stated in its response to the provisional injunction lawsuit filed by Bando Construction affiliates (Daeho Development, Hanyoung Development, Bando Development) regarding the allowance of voting rights that Chairman Kwon met directly with Chairman Cho in December last year and effectively expressed his intention to participate in management by requesting to be appointed honorary chairman.

According to Hanjin KAL's response, Chairman Kwon met with major shareholders including Chairman Cho in August and December last year to demand management participation. Especially after disclosing the purpose of share acquisition as a simple investment in October last year, he reportedly mentioned ▲ appointment as honorary chairman of Hanjin Group ▲ appointment as registered executive and joint auditor of Hanjin KAL ▲ development of domestic and overseas real estate owned by Hanjin Group.

Subsequently, Bando Construction changed its investment purpose to 'management participation' in a disclosure in January this year and formed a 'shareholder alliance for the normalization of Hanjin Group (so-called three-party alliance)' together with former Korean Air Vice President Cho Hyun-ah and private equity fund KCGI, officially engaging in a management rights dispute.

On the 3rd, Bando Construction also filed a provisional injunction lawsuit against Hanjin KAL to allow voting rights. The three-party alliance explained that the purpose was to prevent situations such as the Hanjin KAL management suddenly refusing to recognize voting rights at the shareholders' meeting.

However, Hanjin KAL responded by saying this was "like a thief feeling guilty." Hanjin KAL pointed out, "Isn't it that Bando Construction filed the provisional injunction lawsuit preemptively to have their voting rights recognized after criticisms arose that their purpose of holding shares was a false disclosure?"

According to the current Capital Markets Act, if the purpose of holding shares is falsely reported, voting rights cannot be exercised for the portion exceeding 5% of the total issued shares that violate the law. If Bando Construction's disclosure is ruled as false, it means that voting rights for 3.20% of the 8.20% stake held by Bando Construction as of the end of last year could be restricted.

There is a similar case. Previously, consulting firm DM Partners purchased 11.87% of Korea Petroleum Industry's shares in 2007 and initially disclosed it as a 'simple on-market purchase,' but only after increasing its stake to 17.64% the following month did it disclose the purpose as 'management participation,' pursuing a hostile takeover. At that time, the Securities and Futures Commission judged that the initial 14.99% purchased by DM Partners was secretly accumulated for management participation purposes, constituting false reporting, and ordered the sale of those shares.

Meanwhile, if Bando's disclosure is concluded to be false, the three-party alliance's stake will decrease from 31.98% to 28.78%. On the other hand, Chairman Cho's side will increase to 36.50%, including 32.45% (major shareholder and related parties, Delta Air Lines), Korean Air's self-insurance and employee association (3.8%), and GS Caltex (0.25%).

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