Hanjin KAL shareholder siege dealt a major blow

Only three days before the annual meeting of Hanjin KAL, a court ruled against a shareholder that is part of an alliance seeking to take control of the company. The decision makes the challenge more difficult than ever as it reduces the number of votes that the insurgents can cast.

The Seoul Central District Court ruled Tuesday that Bando Engineering & Construction can only cast 5 percent of the votes despite owning 8.2 percent of the company.

Bando failed to file the proper notification when it broke the 5 percent ownership threshold, the court found, and is thus capped at voting only up to that level.

The Capital Markets Act limits the voting right to 5 percent when a shareholder fails to properly disclose the reason for the equity transaction within five days of the purchase.

On Dec. 6, Bando announced the acquisition of 1.22 percent of Hanjin KAL, which owns 30 percent of Korean Air Lines, saying that the reason for the purchase was “simple acquisition.”

Hanjin KAL challenged the disclosure, saying that Kwon Hong-sa, the chairman of Bando, requested an honorary chairmanship when he met Hanjin KAL Chairman Cho Won-tae in December.

“The purpose of the acquisition changed as late as Dec. 16, and the need for filing the change arose,” the court stated.

Bando revised the disclosure on Jan. 10, stating that it wants to actively participate in board-level decisions and influence board composition.

With the court decision, the group of investors seeking to take control of the board will face challenges securing enough votes during the annual general shareholder meeting Friday.

The group, led by the Korea Corporate Governance Improvement fund and Cho Hyun-ah, sister of the chairman, was expected to control 31.98 percent of the stock, as some of its shares were purchased after the close of the shareholder list.

Given the court decision, they can only control 28.78 percent of the votes.

Assuming Delta Air Lines votes in favor of the chairman, the chairman’s camp is estimated to hold 33.45 percent of the stock.

The insurgents want to replace the board, oust the chairman and install professional management, ending the Cho family’s tradition of being both shareholders and managers.

The court also rejected a request to nullify the votes of the 3.79 percent Hanjin KAL shares owned by Korean Air Lines employees.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]