Prosecution Indicts Deloitte Anjin and Others for Violations of the Certified Public Accountant Act Related to Kyobo Life Put Option Deal

Attention on Whether It Will Act as a Variable Even in ICC Arbitration Awards

[Asia Economy Reporter Ki Ha-young] The arbitration lawsuit between Shin Chang-jae, chairman of Kyobo Life Insurance, and the financial investor (FI) consortium is expected to enter a new phase as the prosecution has indicted executives of the Kyobo Life FI consortium and accountants from Deloitte Anjin.

According to the insurance industry and legal circles on the 19th, the prosecution has indicted accountants from Deloitte Anjin Accounting Corporation, who inflated the stock value of Kyobo Life, and FI executives without detention on charges of violating the Certified Public Accountant Act. The charges include allegations that they received illicit requests from the FI and performed services that may have inflated the exercise price of the put option (stock purchase right).

Chairman Shin (with a 33.78% stake) signed a shareholders' agreement with the Affinity consortium, which purchased Kyobo Life shares held by Daewoo International in 2012, including a put option right allowing each shareholder in the consortium to demand the purchase of their shares if Kyobo Life's initial public offering (IPO) was not completed by the end of September 2015. The Affinity consortium (with a combined stake of 24%) consists of private equity funds such as Affinity Equity Partners, Baring PE, IMM PE, and the Singapore Investment Corporation.

As Kyobo Life failed to conduct an IPO by the end of September 2015 due to low interest rates and strengthened regulations, the Affinity consortium exercised the put option in October 2018. At that time, accountants from Deloitte Anjin Accounting Corporation participated as the valuation agency for the put option price on behalf of the Affinity consortium, valuing Kyobo Life shares at 409,000 KRW per share. In contrast, Chairman Shin's side claimed a price in the 200,000 KRW range. Kyobo Life argued that the main cause of the company's damage from the put option dispute with the FI was the deliberately inflated stock valuation by Deloitte Anjin Accounting Corporation and filed a complaint against the certified public accountants of Deloitte Anjin in April last year for violating the Certified Public Accountant Act.

Industry insiders believe that the indictment of the certified public accountants from Deloitte Anjin will also act as a variable in the arbitration ruling. In March 2019, the Affinity consortium filed an international arbitration with the International Chamber of Commerce (ICC) Arbitration Court based on Deloitte Anjin Accounting Corporation's valuation report. Both sides are sharply divided over the appropriateness of the put option amount calculation.

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