The chief executive officer of the bio company Oscotec, Kim Jung-keun, faces the possibility of failing to be reappointed. Kim is experiencing conflicts with minority shareholders as he pushes for the listing of the U.S. subsidiary Genosco. Recently, minority shareholders filed a provisional injunction requesting to access Oscotec's shareholder registry, and a court ruling was issued allowing this. The minority shareholders' coalition plans to secure more voting rights based on the shareholder registry to block Kim's reappointment at the shareholders' meeting in March.
The issue is that Oscotec has adopted a super-majority voting rule. The super-majority voting rule refers to a voting method that weights the quorum requirement for the shareholders' meeting more than what is stipulated in the Commercial Act. This is mostly for the purpose of defending management rights.
According to Oscotec's articles of incorporation, a resolution to dismiss a director by shareholder proposal requires approval from more than three-quarters of the total issued shares. However, for the reappointment of the CEO, the super-majority voting rule does not apply. Therefore, if minority shareholders are able to secure a majority vote from shareholders attending the meeting, it is expected that they can block the reappointment.
On the 26th, at the shareholders' meeting of Amicogen, another bio corporation listed on the Korea Securities Dealers Automated Quotations, the founder and largest shareholder Chun Yong-cheol, who held 12.6% of the shares, was dismissed. In the financial investment industry, there is a watchful atmosphere regarding whether angry minority shareholders will push to remove the CEO in a chain reaction.
On the 21st, Oscotec disclosed the rulings and decisions of lawsuits. According to the disclosure, the Suwon District Court ruled that it must allow the inspection and copying of the shareholder registry listed in the attached documents, submitted by 12 minority shareholders of Oscotec, including Kwak Byeong-cheol.
Minority shareholders are strongly opposing Oscotec's sudden push for the listing of its unlisted U.S. subsidiary Genosco. Genosco is the company that developed the candidate substance for lung cancer treatment, Lazertinib, which is the main component of Yuhan Corporation's lung cancer treatment 'Lazara.' Yuhan Corporation acquired the Lazertinib technology from Genosco in 2015 and developed Lazara, which received approval from the U.S. Food and Drug Administration (FDA) last year, increasing interest in its parent company Oscotec. In this context, when Oscotec announced its intention to proceed with Genosco's initial public offering (IPO) last October, there was backlash calling it a 'split listing.'
Minority shareholders have taken action against the push for Genosco's listing. According to the minority shareholder activism platform acT, as of the 27th, 1,700 shareholders have gathered 14.39% of Oscotec's equity. A representative from the minority shareholders stated, "After inspecting the shareholder registry, we plan to send out mail for the shareholders' meeting in March."
According to Oscotec's articles of incorporation, the case of the CEO's reappointment does not apply the super-majority rule. The matters to which the super-majority rule applies include ▲ dismissing two or more directors simultaneously ▲ dismissing or appointing a director through a shareholder proposal ▲ appointing new directors or dismissing existing directors due to hostile takeovers and mergers ▲ resolving to amend the preceding provisions of the articles of incorporation. In these cases, approval from more than three-quarters of the total issued shares is required.
If the proposal to dismiss CEO Kim is put to a vote, it will proceed under the super-majority rule, but the reappointment proposal will progress under regular voting. In addition to the four scenarios mentioned, other resolutions of the shareholders' meeting will be decided if a majority of the attending shareholders' voting rights and more than one-quarter of the total issued shares are in favor. Therefore, if minority shareholders secure a majority voting power from attending shareholders, the likelihood of passing the proposal against the reappointment will be high.
While CEO Kim's equity stake is only 12.46%, the minority shareholders hold more than that. To exercise voting rights at the shareholders' meeting, minority shareholders must have held their shares as of the end of December last year, and the equity ratio of minority shareholders meeting this condition is reported to be in the 13% range according to the minority shareholders' coalition.
A representative from the minority shareholders' coalition noted, "We expect to consolidate the minority shareholders' coalition equity to over 20% by the shareholders' meeting," adding, "In addition, we are working to increase friendly equity by contacting institutional investors and private equity funds."
However, it is expected to be difficult for minority shareholders to appoint a new director. The proposal to appoint a new director falls under the case of dismissing or appointing a director through a shareholder proposal, which is subject to the super-majority rule. Therefore, while minority shareholders may be able to block CEO Kim's reappointment, it will likely be challenging for them to seize management control.
Meanwhile, minority shareholders plan to file a lawsuit with the court to confirm the invalidity of the articles of incorporation, stating that the requirements for the super-majority rule specified in Oscotec's articles of incorporation are excessively high. They also intend to propose the deletion of the super-majority rule as an agenda item for next month's shareholders' meeting. A representative from the minority shareholders' coalition remarked, "In other companies, the conditions for the super-majority rule are about 60-70% of the total issued shares, but Oscotec's is set at 80%, which is excessively high." However, deleting the super-majority rule from the articles of incorporation is also subject to the super-majority rule. Therefore, amending the articles of incorporation for deletion is expected to be difficult.
The schedule for Oscotec's shareholders' meeting has not yet been confirmed, but it is expected to be around the end of next month. An Oscotec representative stated, "We will hold the shareholders' meeting in accordance with the law and its intent and aim to gather the opinions of the shareholders at the meeting."