The notice of the regular shareholders' meeting announced by DAEYU, a KOSDAQ-listed company facing delisting, has become a subject of controversy. The announcement stated that to ensure a smooth meeting, the chairperson could adjust the order and time of shareholders' speeches and could prohibit or cancel related remarks if directives were not followed, which is seen as unilaterally favoring the company.
While the role of the chairperson in maintaining order at the meeting, according to corporate law, does not pose legal issues, shareholders express concerns that specific sanctions such as adjusting the order, time, and frequency of speeches could limit their legitimate exercise of voting rights. DAEYU will face a showdown with minority shareholders over items such as the appointment of an auditor proposed by shareholders at the regular meeting on the 31st.
On the 13th, DAEYU published the notice for the regular shareholders' meeting, but unlike other companies, added additional guidance under the principles of the meeting. It stated: ▲ The chairperson can decide the order of speaking rights for shareholders and adjust the number of speeches and time for smooth proceedings ▲ Shareholders must request speaking rights from the chairperson, obtain permission, and then speak ▲ The chairperson may prohibit or cancel speeches that do not follow directives or disrupt proceedings. There is also language indicating that the chairperson may investigate entry qualifications or order exits. Such content was absent in last year's notice for the regular meeting.
The information provided falls under "maintaining order at the meeting" according to current law, so it is not legally problematic. Corporate law states that the chairperson of the shareholders' meeting has the role of maintaining order and organizing opinions, and may suspend speeches or order exits for those who intentionally disrupt proceedings.
However, as this regular meeting is taking place just before delisting, opinions emerge that it could be a strategy by the company to avoid fierce criticism from minority shareholders while winning votes. The DAEYU minority shareholders' alliance has claimed that there has been a lack of commitment to improvement plans, and conflicts with the company have intensified this year.
DAEYU's stock trading was halted in April 2023 due to the arrest of former CEO Kim Woo-dong and allegations of breach of trust. The Korea Exchange decided to delist DAEYU following consultations with the KOSDAQ Market Committee in August of the same year, but the decision was delayed by DAEYU's appeal and submission of an improvement plan. Subsequently, the exchange reaffirmed the delisting decision in January this year. DAEYU has filed for a temporary injunction to suspend the effects of the delisting decision and trading remains halted pending a court decision.
In this situation, last month, Jokwang I.L.I. suddenly announced a public purchase of 5.28% of DAEYU's shares. While claiming it was to provide minority shareholders the opportunity to sell at the pre-suspension share price as the largest shareholder, industry analysts have evaluated it as a strategy to secure the status and voting rights of the largest shareholder against the minority shareholders, who currently hold the largest stake in DAEYU. Following the public purchase concluded on the 11th, Jokwang I.L.I.'s stake in DAEYU increased from 22.05% to 27.33%. (Related article☞ The company held by a first-generation corporate hunter is going public to acquire its subsidiary that has been slated for delisting)
In December last year, DAEYU held an extraordinary shareholders' meeting and faced off against the minority shareholders' alliance over the board of directors and auditor appointment items, where the current management from Jokwang I.L.I. won. The minority shareholders' alliance claimed there were illegal activities such as embezzlement of proxies during the meeting process and filed for a temporary injunction to cease the execution of director duties and to confirm the invalidity of the meeting resolutions last month. According to the minority shareholder platform Act, the alliance has increased its stake from 22.66% at the end of last year to 27.73% as of the 14th of this month, surpassing Jokwang I.L.I.'s shareholding after the public purchase.
The minority shareholders' alliance plans to bring up items such as the concentrated voting system and appointment of a full-time auditor as shareholder proposals at the regular meeting scheduled for the 31st of this month. Some shareholders expressed concern that the presentation of legitimate opinions and exercise of voting rights could be blocked by the chairperson's discretionary judgment at this meeting. The minority shareholders' alliance noted, "At the shareholders' meeting, the chairperson has absolute power" and pointed out, "The company has used circumventing means by including 'the matter of deciding whether to appoint an auditor' in the agenda items for this meeting, which would lead to the automatic dismissal of the full-time auditor appointment proposal brought up as a shareholder proposal in case of disapproval."