KT&G Board of Directors Responds "NO" to FCP Lawsuit Filing Request

Collecting Opinions from External Legal Experts
Disposal of Treasury Shares for Public Interest and Employee Welfare Improvement
"Legal Procedures and Disclosure in Accordance with Relevant Laws" Clarification

On the 7th, KT&G's board of directors announced that after internal and external reviews and discussions, they decided not to file a lawsuit in response to a letter from Agnes (FCP), a shareholder of the company with Cayman Islands nationality, requesting damages claims against current and former directors who decided to dispose of treasury shares to public interest corporations and others.

KT&G Headquarters Building Exterior

Earlier, FCP, which owns about 1% of KT&G shares, claimed that since 2001, current and former directors of KT&G's board had donated about 10 million treasury shares to foundations and funds free of charge instead of using them to enhance shareholder value by canceling or selling them, causing the company losses amounting to trillions of won, and recently requested to file a lawsuit against them.

In response, KT&G's Audit Committee held its first meeting on the 19th of last month and selected an external legal institution to objectively and professionally review the legal validity of FCP's lawsuit request. Subsequently, the committee received the external legal expert's review opinions during the second Audit Committee meeting held the day before and the fifth board meeting held on the day of the announcement.

The external legal expert reviewed that "the disposal of treasury shares is recognized as a business necessity for fulfilling corporate social responsibility, as well as for the social co-prosperity growth such as stabilizing the livelihood and welfare improvement of partner company employees." Furthermore, the expert stated, "Considering the scale and conditions of the contribution relative to the financial status, it is not deemed excessive, and all legally required procedures, including faithful board resolutions and transparent disclosure of the disposal facts, have been complied with." The expert also judged that "it cannot be seen as an attempt by management to maintain control rights."

Accordingly, KT&G's board of directors and Audit Committee explained that they decided not to file a lawsuit, referring to the external legal expert's opinion that the possibility of recognizing a breach of duty of care by the directors regarding the disposal of treasury shares is low.

Meanwhile, KT&G's board rebutted FCP's claims made through media interviews that the company disposed of treasury shares free of charge to nonprofit corporations and organizations without justifiable purposes to maintain management rights and control, and that it was difficult to ascertain through disclosure materials. According to KT&G, from 2002 to 2019, there were a total of 66 individual disclosures related to 21 treasury share disposals raised by FCP, and continuous disclosures have been made in quarterly, semi-annual, and business reports, as well as in large business group status disclosures.

Im Min-gyu, chairman of KT&G's board, expressed deep concern, stating, "Regarding the disposal of treasury shares, the company's image is being damaged by false claims and suspicions, which could ultimately harm the common interests of shareholders." He added, "Going forward, the board will continue to listen carefully to shareholders' opinions and do its best to increase KT&G's corporate value and maximize the interests of all shareholders."

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