Management Battle Intensifies... Hanjin Requests FSC Investigation into Third-Party Alliance for Capital Market Act Violation

Hanjin "Bando Kwon Hongsah Demands Group Honorary Chairman Position" vs Bando "A Gesture of Consolation and Encouragement... Feeling Betrayed by Secret Recording"

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Ten days ahead of the Hanjin KAL shareholders' meeting, which is crucial for the fate of Hanjin Group, the conflict between Chairman Cho Won-tae and the shareholder coalition (the three-party alliance) aiming to normalize Hanjin Group has escalated to an extreme level. Amid a mudslinging battle over the background of the stake investment between Hanjin Group and Bando Construction, a member of the three-party alliance, Hanjin KAL has reported Bando Construction and the private equity fund KCGI to the Financial Supervisory Service (FSS) for alleged violations of the Capital Markets Act.

On the 17th, Hanjin KAL announced that it had submitted a request for investigation and disposition to the Corporate Disclosure Division of the FSS the previous afternoon, demanding an investigation into the three-party alliance's alleged violations of the Capital Markets Act. The alleged violations cited by Hanjin KAL include false disclosure (Bando Construction), violations related to solicitation of proxy voting rights, management rights investment, and regulations on executives and major shareholders (KCGI).

A Hanjin KAL official stated, "Such violations of the Capital Markets Act by Bando Construction and KCGI undermine the fairness and reliability of the capital market, disrupting market order," adding, "We cannot overlook the illegal acts of the three-party alliance that increase corporate operational instability and cause losses to general shareholders, and thus have requested a strict investigation by the FSS."

◆"Chairman Kwon Hong-sa of Bando Construction, who demanded honorary chairman position... false disclosure as simple investment" = First, Hanjin KAL claimed that Bando Construction made a 'false disclosure' regarding the purpose of acquiring shares and requested an order to dispose of 3.28% of the shares. Although the actual purpose was management participation, Bando Construction had disclosed the purpose of holding shares as 'simple investment' from October last year to January this year.

Hanjin KAL believes that during the period when Bando Construction disclosed the holding purpose as simple investment, it actually revealed an intention of 'management participation.' According to Hanjin KAL, Chairman Kwon Hong-sa of Bando Construction met with major shareholders of Hanjin Group, including Chairman Cho, in August and December last year, demanding ▲ appointment as honorary chairman ▲ appointment rights for Hanjin KAL directors or auditors ▲ development rights for group-owned real estate. Hanjin KAL explained that this violated the large shareholder reporting obligation under Article 147, Paragraph 1 of the current Capital Markets Act, which requires those holding more than 5% of shares to report their holding purpose to the Financial Services Commission and the stock exchange.

◆Targeting KCGI as well... "Five affiliated SPCs have potential legal issues" = Regarding KCGI, Hanjin KAL requested an investigation into the investment methods of its affiliated Special Purpose Companies (SPCs). KCGI holds 17.29% of Hanjin KAL shares (based on voting rights at the shareholders' meeting on the 27th) through six SPCs, including Grace Holdings.

Under the current Capital Markets Act, management participation-type private equity funds (PEFs) can jointly invest in more than 10% of management rights. However, Hanjin KAL interprets that SPCs must invest 'individually' because there is no provision allowing SPCs to invest jointly like PEFs.

Additionally, according to Article 249-13, Paragraph 5 of the Capital Markets Act, if an SPC fails to make a management rights investment of more than 10% within six months from the initial stock acquisition date, it must dispose of all shares within six months thereafter and report to the Financial Services Commission.

Accordingly, KCGI's affiliated SPC Emma Holdings, which holds 2.42% of Hanjin KAL shares, acquired its initial stake on February 28 last year. Since it has held shares for 12 months without management rights investment, Hanjin KAL claims this constitutes a violation of the Capital Markets Act.

Furthermore, Hanjin KAL accused KCGI of violating disclosure obligations related to solicitation of proxy voting rights, which require major shareholders, executives, and shareholders to individually report shares they own, and requested corrective measures and criminal complaints to investigative authorities.

The three-party alliance criticized Hanjin Group's actions as "irrational behavior." Chairman Kwon Hong-sa of Bando Construction also responded in a statement, saying, "The meeting with Chairman Cho was initiated by us to seek help following the sudden passing of the late Chairman Cho Yang-ho, and was intended as a gesture of consolation and encouragement," adding, "(Hanjin's claims) are based on secretly recorded and maliciously edited conversations of Chairman Kwon, leaving him speechless with a sense of betrayal."

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