CHA Biotech is facing increased friction with the shareholder alliance as it has decided not to allow electronic voting ahead of its regular shareholders' meeting at the end of this month. With a vote contest anticipated surrounding the concentrated voting system at this meeting, the shareholder alliance criticized the company's decision as a 'ploy' and is responding with a request for provisional injunction. The two sides have had conflicts in the past regarding capital increases.
According to CHA Biotech on the 21st, the company will hold its regular shareholders' meeting at 10 a.m. on the 31st at the International Conference Hall of the Gyeonggi Creative Economy Innovation Center in Seongnam, Gyeonggi Province. Notably, the company has decided not to implement the 'electronic voting and electronic proxy solicitation system.' This means that shareholders must attend the meeting in person to exercise their voting rights.
Previously, CHA Biotech had resolved through a board meeting in 2016 to permanently implement the electronic voting and electronic proxy solicitation system for all shareholders' meetings. Now, after 10 years, they have decided not to apply electronic voting.
CHA Biotech explained that due to the demands of minority shareholders, directors are expected to be elected through the concentrated voting system at this shareholders' meeting, but the Samsung Securities system they are using does not support this method. A CHA Biotech representative noted, 'There wasn't enough physical time to switch to the electronic voting systems of other institutions like the Korea Securities Depository' and added, 'We have decided not to accept electronic voting temporarily.'
The concentrated voting system grants voting rights equal to the number of directors to be elected per share held. If five directors are to be elected, each shareholder will have five voting rights for each share. The concentrated voting system is known to be favorable to minority shareholders as it enables 'block voting' for a single candidate.
The shareholder alliance views CHA Biotech's decision not to implement electronic voting as a ploy to prevent the introduction of the concentrated voting system.
If more than two-thirds of the attending shareholders agree to the amendments to the articles of incorporation presented by the company, the introduction of the concentrated voting system will be nullified, significantly reducing the chances of passing the board member appointments proposed by shareholders. The shareholder alliance argues that for CHA Biotech, low attendance rates from minority shareholders are advantageous, which is why they blocked electronic voting.
The equity that the shareholder alliance is expected to secure is around 10%. According to the shareholder alliance, the equity ratio could increase further if they receive delegations from minority shareholders who have gathered through platforms for shareholder action. As of the 14th of this month, the largest shareholder of CHA Biotech and related parties hold 29.48% of the equity.
The shareholder alliance filed a request for a provisional injunction to allow the exercise of voting rights at the Seoul Central District Court on the 19th, arguing that exercising voting rights through electronic voting should be possible. Yong-joo Lee, the representative of the shareholder alliance, stated, 'Electronic voting is also possible through the Depository or Act (the shareholder action platform)' and added, 'The company's insistence on only using Samsung Securities is a ploy to prevent the consolidation of minority shareholders through electronic voting.'
CHA Biotech and minority shareholders have had several conflicts. CHA Biotech announced in December last year that it had decided on a capital increase of 250 billion won, which is about 40% of its market capitalization. On the day of the announcement, the stock price plummeted by over 25%.
Shareholders express concerns that frequent capital increases have diluted the value of existing shareholders’ equity and lowered the stock price. After it was revealed that a significant portion of the funds secured from capital increases would be used for the initial public offering (IPO) preparation of its affiliate (CHA Healthcare), shareholder discontent has intensified.
In response to the shareholder alliance's demand for clarification regarding the exclusion of electronic voting, CHA Biotech stated, 'The board has decided on all matters related to the regular shareholders' meeting in compliance with the Commercial Act and the articles of incorporation.'