This article was posted on Dec. 12, 2024, at 5:59 p.m. on the Chosun Biz Money Move (MM) website.
Recently, DI Dongil faced demands from minority shareholders for the dismissal of the audit committee. Given that 60% of the votes at the extraordinary general meeting supported the dismissal, and that the National Pension Service, a major stakeholder, sided with the minority shareholders, the company seems to have taken the situation seriously.
On the 12th, according to the financial investment industry, DI Dongil stated it would resolve the issue of the audit committee member holding dual positions by the first quarter of next year. Currently, the auditor of DI Dongil also serves as the secretary general of the Jeongheon Foundation, the company’s largest shareholder, and the company aims to eliminate this overlap to enhance management transparency and the independence of decision-making.
Previously, DI Dongil minority shareholders, including Shin Min-seok, former vice president of Radifangs, requested an extraordinary meeting to replace Auditor Kim Chang-ho. The minority shareholders planned to thoroughly examine the company’s financial situation after successfully replacing the auditor before proceeding to the next steps. They claimed that there were unclear aspects in the process of DI Dongil lending 9.6 billion won to the major shareholder Jeongheon Foundation over four years. They argued that DI Dongil decided to lend money without holding a board meeting and applied an excessively low interest rate for the convenience of the Jeongheon Foundation and the owner family. Furthermore, they claimed that Auditor Kim of DI Dongil played a leading role while holding the position of secretary general of the Jeongheon Foundation.
The resolution to dismiss the auditor was rejected at the extraordinary general meeting on the 25th of last month; however, 59.6% of the shareholders present cast affirmative votes, indicating agreement with the concerns raised by the minority shareholders. Dismissal of the auditor requires a special resolution at the general meeting, requiring a 66.7% approval rate to pass.
Notably, at the general meeting on this day, the National Pension Service, which holds 4% equity, also supported the dismissal of the auditor, backing the minority shareholders. The National Pension Service attended the meeting in person, without sending proxy managers, and voted in favor of both Auditor Kim’s dismissal and the election of the candidate proposed by the minority shareholder alliance, Cheon Jun-bum. The voting inclination of foreign institutional investors generally appeared to align with the minority shareholders, with around 600,000 out of a total of 640,000 votes supporting the minority shareholders’ proposals.
DI Dongil promised not only to resolve the dual position issue of the auditor but also to establish an audit committee. The company intends to form a committee consisting solely of outside directors by the first quarter of next year. Currently, DI Dongil has only one full-time auditor and lacks an audit committee, which requires a change in its articles of incorporation through a special resolution at the general meeting.
Shin Min-seok, who represented the minority shareholder alliance, said, “According to commercial law, companies with assets exceeding 2 trillion won must have an audit committee. However, DI Dongil does not yet reach that asset level, so it’s not mandatory to create one. Therefore, it will require a change in the articles of incorporation, and it remains uncertain whether the other shareholders will agree to this at the regular general meeting next year.”
Additionally, DI Dongil announced it would seek advice from external professional organizations to improve its internal accounting management system and expand the internal accounting management team while strengthening internal training. Currently, the internal accounting management team consists of one head and one member, but the plan is to increase the total number of members to three.
DI Dongil also introduced a shareholder return policy. It announced a stock dividend of 0.05 shares per share. Following being reported to the prosecution for violating accounting standards and facing substantial eligibility reviews for listing, DI Dongil had its stock trading suspended from the 21st of last month to the 11th of this month. On Dec. 12, as trading resumed, DI Dongil's stock price rose over 9% by the close.
Shin noted, “DI Dongil has historically provided 2.5% in cash and 2.5% in stock dividends in the past, so it appears that for now, they’ve only announced a stock dividend of 5%. There must have been dissatisfaction among shareholders during the suspension of trading, and this seems to be interpreted as a message to communicate more actively to reflect shareholders' demands in the future.”
Earlier, there were observations that DI Dongil, with a low major shareholder equity ratio and abundant assets, could become ‘the second Korea Zinc.’ The combined equity ratio of major shareholders, including the Jeongheon Foundation, Chairman Seo Min-seok, and President Seo Tae-won, is only about 19%. The eight minority shareholders who requested the extraordinary general meeting hold a total of 3.2%, while over 15% have gathered on the minority shareholder platform Act.
DI Dongil's real estate holdings in the metropolitan area are estimated to be worth over 2 trillion won. Notably, only the headquarters real estate near the Hyundai Department Store Trade Center is known to have a value of 800 billion won.