Court Grants Injunction Prohibiting JB Financial and Finda from Exercising Mutual Shareholder Voting Rights

On the 26th, Jeonju District Court issued a ruling (Jeonju District Court 2024. 3. 26. Decision No. 2024Kahap10021) granting the provisional injunction to prohibit the exercise of voting rights on cross-shareholdings filed by Align Partners Asset Management against JB Financial Group and Finda. Align stated, "It has been confirmed through the court's decision that the exercise of voting rights on the cross-shareholdings formed between JB Financial Group and Finda is illegal."

On March 7, Align Partners filed a provisional injunction with Jeonju District Court requesting the prohibition of voting rights at this year's shareholders' meeting on the common shares of JB Financial Group held by Finda, arguing that these are cross-shareholdings subject to voting restrictions under the Commercial Act.

The court ruled, "The new technology investment association at issue, formed by JB Financial Group's wholly owned subsidiaries Jeonbuk Bank and JB Investment, is a partnership under the Civil Act or Commercial Act. Therefore, Jeonbuk Bank and JB Investment jointly own the shares of Finda in the form of co-ownership. As a result, JB Financial Group, the parent company, and its wholly owned subsidiaries hold more than one-tenth of the total issued shares of Finda, and the shares of JB Financial Group held by the debtor Finda have no voting rights."

Furthermore, the court stated, "It cannot be interpreted narrowly to exclude Article 369, Paragraph 3 of the Commercial Act as claimed by JB Financial Group," and "Such a narrow interpretation would open a way to easily evade the application of voting restrictions through indirect methods while effectively holding cross-shareholdings, thereby undermining the purpose of the cross-shareholding regulation."

Moreover, considering the shareholder status of JB Financial Group and the voting method to be applied at this shareholders' meeting, the court judged that it cannot be concluded that Finda's exercise of voting rights would have a negligible impact on the resolution of this shareholders' meeting. Based on concerns that allowing the exercise of voting rights could lead to additional disputes regarding the validity of future shareholders' meeting resolutions, the court accepted Align Partners' request for a provisional injunction to prohibit the exercise of voting rights.

This court decision is significant in that it is the first to impose restrictions based on Article 369, Paragraph 3 of the Commercial Act on cross-shareholdings, regarding JB Financial Group's act of acquiring shares through a partnership to evade the ownership restrictions on cross-shareholdings.

Align Partners stated, "This decision revealed that the current board of directors of JB Financial Group failed to prevent illegal transactions that distort the shareholding structure and has significant defects in terms of expertise and independence." They added, "To prevent further illegal acts such as the formation of cross-shareholdings for the management's entrenchment, an independent and professional new director who can monitor and play a role in management is necessary on the board." They also urged, "We ask for the active participation of JB Financial Group shareholders at the upcoming JB Financial Group regular shareholders' meeting, which is just two days away."

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