This article was published on the ChosunBiz MoneyMove (MM) site on Sep. 11, 2025, at 2:59 p.m.
Taekwang Industrial can proceed with issuing exchangeable bonds (EB) backed by its treasury shares after the court dismissed a request for an injunction filed by the second-largest shareholder, Truston Asset Management.
The court judged that it was difficult to conclude that Taekwang Industrial's EB issuance was carried out solely for the benefit of a specific shareholder. It also found no breach of directors' duty of loyalty to treat all shareholders' interests fairly. Truston is reportedly considering follow-up measures internally, including an immediate appeal of the injunction decision or filing a main lawsuit.
On the 11th, according to investment banking and legal sources, the Seoul Central District Court Civil Division 50 (Chief Judge Kim Sang-hoon) dismissed the injunction filed by Truston Asset Management the day before. Truston had applied for two injunctions against Taekwang Industrial's directors and Taekwang Industrial itself regarding the decision to issue treasury share-backed EBs. The court treated these as effectively a single case and made its ruling.
Taekwang Industrial argued that the funds raised through the EB issuance would not be used merely to defend management rights or expand friendly equity but would be used for various business purposes such as acquiring Aekyung Industrial, and the court accepted that argument.
Truston argued that Korea Investment & Securities, the entity targeted for EB issuance, had had a friendly relationship with Taekwang Industrial in the past and that Taekwang Industrial might later transfer equity to Korea Investment & Securities to defend management rights, but the court disagreed. The bench said, "At this stage, there are no objective and specific materials to support the alleged facts beyond the creditor (Truston)'s subjective suspicion, so it is difficult to conclude, based only on suspicion, that the EB would block Truston's management participation."
The court also ruled that decisions on the need for fundraising and the choice of fundraising methods belong to the board's business judgment in a joint-stock company. It recognized the "business purpose" of the EB issuance based on the facts that Taekwang Industrial's main businesses—petrochemicals and textiles—have deteriorated significantly in recent years, that Taekwang Industrial recorded losses from 2022 to 2024, and that the company has been reviewing new businesses such as cosmetics since September last year.
Truston is reportedly considering various options internally. The first option is an immediate appeal. An immediate appeal is an appeal filed within a week to challenge an injunction decision.
Truston is also said to be likely to file a main lawsuit. Since a claim to maintain an illegal act by directors is difficult to bring as a main lawsuit, it is reportedly considering filing a suit seeking confirmation of the invalidity of the EB issuance.
Meanwhile, Truston continues to monitor Taekwang Industrial's proposed acquisition of Aekyung Industrial. Taekwang Industrial, recently selected as the preferred acquirer for Aekyung Industrial, originally planned to present T2 Private Equity (PE) as the acquisition vehicle and to have T2 PE contribute the acquisition funds, but it changed the plan because of possible violations of the Fair Trade Act. T2 PE is an investment firm in which Taekwang Group affiliate T-CIS and Taekwang Industrial each hold 41% equity, and the former chairman Lee Ho-jin's eldest son and eldest daughter each hold 9%.
A legal source said, "T2 PE belongs to a large corporate group," and added, "Under the Fair Trade Act, if Taekwang Industrial were to invest in it, a board resolution and other procedures would be required, but we understand such procedures did not take place."
Taekwang Industrial has shifted to forming a consortium with T2 PE to jointly acquire the controlling equity of Aekyung Industrial. Truston says it will keep watching to see whether Taekwang Industrial actually follows through.