The number of disclosures on management control disputes at Korea's listed companies is likely to surpass 300 again this year, following last year. Disputes are occurring not only among small and mid-sized companies on the KOSDAQ market but also among large companies on the KOSPI market.
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) on the 10th, as of the 7th of this month, the number of "filings or applications for lawsuits, etc." disclosed by companies listed on the KOSPI, KOSDAQ and KONEX markets (including duplicates across corporations) totaled 296. That is an almost 50-fold surge compared with just 6 cases in 2013.
Disclosures on management control disputes hit an all-time high of 313 last year. With regular shareholders' meetings set for Mar. 2026, if additional lawsuits are filed by year-end, this year could surpass last year's record.
In particular, more than 30% (98 cases) of this year's management control dispute disclosures involved companies listed on the KOSPI market. The share of disclosures by KOSPI-listed companies has been rising, from 27.4% (73 out of 266 cases) in 2023 to 34.2% (107 out of 313 cases) in 2024.
Relatively larger corporations are also being drawn into lawsuits. YoulChon Chemical and Taekwang Industrial, which newly disclosed lawsuits related to management control disputes this year, each have a market capitalization of more than 800 billion won.
The Financial Investment Services and Capital Markets Act imposes disclosure obligations for lawsuits that fall under "management control disputes related to the appointment, dismissal, or execution of duties of executives." While disclosure forms have been tweaked over time, the market sees a trend of increasing management control dispute lawsuits.
Succession of management control following founders' retirement and the rise of activist funds are cited as reasons for the increase in management control dispute lawsuits.
Na Jeong-hwan, an analyst at NH Investment & Securities, said, "As attempts at hostile mergers and acquisitions (M&A) targeting Asian countries increase, Korea has also been steadily seeing more since 2019," and noted, "Moves to improve shareholder value and strengthen shareholder rights driven by the introduction of ESG (environmental, social and governance) and value-up programs can lead to management control disputes or attempts at hostile M&A."
Kwon Jae-yeol, a professor at the Kyunghee University Law School, said, "As in the cases of Hanmi Science and the Kolmar Group, a notable trend is the growing number of severe internal conflicts over succession even when the largest and second-largest shareholders are family," adding, "As succession issues become more pronounced going forward, management control disputes will only increase."
There are also projections that management control disputes could increase further, as the ruling bloc is pushing a third Commercial Act amendment centered on mandatory cancellation of treasury shares. Management teams have used treasury shares as a defense of management control, but that would no longer be possible.
While management control disputes can sometimes lift share prices in the short term, the prevailing view is that prolonged disputes can weigh on corporate value. Korea Zinc is a representative case. Korea Zinc's share price climbed to 2.4 million won in Dec. last year as the management control dispute peaked, but as the dispute continued and related bullish factors lost steam, it fell to 1,024,000 won as of the 7th of this month (closing price).