Hungkuk Life Insurance Rights Issue 'Facing Setbacks'... Truston Sends Certified Letter to Taekwang Industrial Board

Pressure Ahead of the Board Meeting on the 14th: "Shareholder Derivative Lawsuit if Forced"

[Asia Economy Reporter Kwangho Lee] Truston Asset Management, which holds a 5.8% stake in Taekwang Industrial, has opposed Heungkuk Life Insurance's plan to participate in a 400 billion KRW paid-in capital increase. It has announced legal action against Taekwang Industrial.

According to industry sources on the 13th, Truston Asset Management sent a certified letter to the board of directors of Taekwang Industrial on the same day. The letter urged the board to make independent decisions prioritizing the company's interests rather than those of the major shareholder.

Truston Asset Management stated that it is considering strong legal measures such as provisional injunctions to suspend the effectiveness of board resolutions and confirmation of invalidity of board resolutions in anticipation of the board approving participation in the capital increase. Heungkuk Life Insurance has been pushing for a 400 billion KRW paid-in capital increase targeting Taekwang Industrial to repay RP issued to resolve the liquidity crisis triggered by the recent refusal of the call option.

A representative from Truston Asset Management said, "We understand that the agenda related to Heungkuk Life Insurance's proposed 400 billion KRW paid-in capital increase participation will be discussed at the Taekwang Industrial board meeting scheduled for the 14th," adding, "We sent a certified letter today urging the board members to make a fair decision."

The Taekwang Industrial board currently consists of five members: inside directors CEO Jin-Hwan Cho and CEO Cheol-Hyun Jung, and outside directors Daegun Kim, Jung-In Na, and Won-Jun Choi. Since this agenda falls under self-dealing under the Commercial Act, it requires approval from at least four of the five directors to pass.

In the certified letter, Truston clearly stated that this capital increase constitutes a prohibited credit extension under Article 542-9, Paragraph 1 of the Commercial Act. This regulation prohibits listed companies from purchasing securities with a financial support nature for major shareholders owning 10% or more of shares and their special related parties.

Truston explained that since Heungkuk Life Insurance is a special related party of Chairman Ho-Jin Lee, the largest shareholder of Taekwang Industrial, if Taekwang Industrial participates in Heungkuk Life Insurance's capital increase to provide financial support, it would constitute prohibited credit extension under Article 542-9 of the Commercial Act. Furthermore, directors who approve this capital increase will be subject to criminal penalties under Article 624-2 of the Commercial Act, and Taekwang Industrial will also be fined under Article 634-3. In such cases, legal procedures including shareholder derivative lawsuits will be pursued to hold the directors accountable.

Truston Asset Management also emphasized that Taekwang Industrial's participation in this capital increase may constitute unfair support of an affiliate under the Fair Trade Act. According to the Fair Trade Act, if a company that does not hold any shares in an affiliate participates in the affiliate's paid-in capital increase through a third-party allotment and acquires shares at a price so high that third parties would not subscribe, it constitutes unfair support of an affiliate.

The transaction terms of this capital increase have not yet been disclosed, but considering Heungkuk Life Insurance's urgent need for funds and the high market interest rates, if the new shares are not issued at a price significantly lower than the market price, the possibility of acquisition by an external third party is low.

A Truston Asset Management representative explained, "The Taekwang Industrial board should consider whether an external third party would invest under the same conditions when reviewing this capital increase," adding, "The Taekwang Industrial board, which lacks sufficient expertise in the life insurance business, is hastily reviewing this under external influences without deeply considering maximizing the company's interests."

He added, "The sudden push to participate in the capital increase just one month after Heungkuk Life Insurance's call option reversal incident was triggered prioritizes Chairman Ho-Jin Lee's interests over the company's."

Heungkuk Life Insurance is 56.3% owned by former Taekwang Group Chairman Ho-Jin Lee. The remaining shares are also held by Lee's family and affiliates such as Daehan Chemical Fiber, making it essentially a private company of Lee's family. In contrast, Chairman Lee holds 29.48% of Taekwang Industrial, and combined with family and special related parties, the stake reaches 54.53%, but Taekwang Industrial does not hold a single share of Heungkuk Life Insurance.

Taekwang Industrial abruptly postponed the board meeting and extraordinary general meeting scheduled for the day. Currently, the directors are coordinating to reschedule for the morning of the 14th.

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