KOSDAQ-listed Genebiotech is pushing to make sweeping amendments to its articles of incorporation to expand the board's authority ahead of its annual general meeting of shareholders. With tensions rising in a dispute with second-largest shareholder Kim Seong-ho, the head of Renew Medical, who declared participation in management last year, the company has placed several agenda items on this year's meeting that focus on stabilizing management control. Genebiotech has also taken a hard line by refusing to accept many of the shareholder proposals submitted earlier by Kim, the second-largest shareholder.
◇ New provisions to cap the number of directors and mitigate liability spark debate over empowering the board
According to the Financial Supervisory Service's electronic disclosure system on the 19th, Genebiotech will hold its annual general meeting of shareholders on the 26th to address agenda items including amendments to the articles of incorporation, approval of limits on remuneration for directors and auditors, and shareholder-proposed items such as treasury share acquisitions and the implementation of interim dividends.
Market views are split on agenda items that would strengthen the board's authority through amendments to the articles. The proposed changes include updates reflecting recent revisions to the Commercial Act and provisions aimed at improving decision-making efficiency, such as transferring the authority to decide interim dividends from the shareholders' meeting to the board. Some, however, note that while these moves may bolster the board's independence, they could also limit the ability of ordinary shareholders to exercise direct rights through the shareholders' meeting.
While Genebiotech's existing articles did not cap the number of directors, an upper limit has now been set. The number of directors would be limited from the current "three or more" to "between three and five," and the ratio of outside directors would be adjusted from "at least one-quarter of all directors" to "at least one-third." Genebiotech currently has four directors, of whom three have terms expiring at the end of March next year.
The company described the purpose of the change as a "right-sizing to operate the board efficiently." But given that this agenda is being brought forward amid a management control dispute, some interpret it as a mechanism to make it harder for figures backed by the second-largest shareholder to join the board. In fact, following last year, Genebiotech also appointed a proxy solicitor earlier this month.
In addition, a new provision would exempt directors from liability for amounts exceeding six times their remuneration over the past year, unless the damage was caused by intent or gross negligence, and another newly added provision would allow the company to hold and dispose of treasury shares to achieve management objectives such as strategic alliances, mergers and acquisitions (M&A), business restructuring, and facility investments.
◇ First dividends in five years, but payout ratio trails KOSDAQ average
Shareholders are also unhappy with the size of the dividends. After not paying dividends for four consecutive years from 2022 to 2025 at its annual meetings, Genebiotech decided to pay a cash dividend of 50 won per share this year. The dividend yield, which reflects the dividend level relative to the current share price, is around 1.25%, which is low compared with the average dividend yield of 2.53% for KOSDAQ-listed companies that paid dividends last year.
Genebiotech's consolidated net profit last year was 3.8 billion won, up 24% from a year earlier, and operating profit was 3.9 billion won, up 2%. With short-term financial instruments and cash and cash equivalents amounting to 25 billion won, the dividend size is seen as insufficient relative to its cash capacity.
The second-largest shareholder's side said, "As the founder and largest shareholder, CEO Lee Chan-ho will receive 120 million won in dividends this time," adding, "Lee also serves concurrently as the head of Dawon Chemical, a 100% subsidiary of the company, so the amount of dividends received is far greater than other shareholders. While maintaining control, Lee is taking a high salary and appears indifferent to boosting the share price and shareholder value."
Genebiotech, a feed and animal medicine specialist founded in 2000, has been embroiled in a management control dispute since last year, when CEO Kim Seong-ho, a prominent individual investor in the domestic stock market, began increasing his equity. After becoming the second-largest shareholder, Kim declared participation in management and discussed a potential backdoor listing of Renew Medical, but it is known to have stalled due to differences with the company.
Then at the end of January, Kim sent a shareholder proposal calling for treasury share purchases and cancellations, the introduction of interim dividends and codification of a dividend policy, greater disclosure of management information, and procedures for reviewing M&A. Genebiotech accepted only the items on treasury share acquisition and interim dividends from the proposal. The company rejected the rest, saying it was already carrying them out faithfully and that they fell under "matters the company cannot implement," and refused to put them on the agenda.
◇ Second-largest shareholder: "We will respond by pushing to appoint new directors at an extraordinary shareholders' meeting"
The second-largest shareholder's side plans to respond by convening an extraordinary shareholders' meeting to appoint new directors, inspecting and copying accounting books, and securing white knights (friendly parties). A representative from the second-largest shareholder's side said, "We will convene an extraordinary meeting to appoint a director from a rival company to the Genebiotech board," adding, "Through an inspection and copying of accounting books, we will identify the CEO's salary and business expenses, and if excessive business expenses were used, we will hold the CEO accountable."
The second-largest shareholder's side is also continuing to buy equity. On the 16th, CEO Kim Seong-ho increased his stake in Genebiotech from 12.97% to 13.99%. Although there is still a gap with the 28.64% held by Lee Chan-ho and related parties, the side says it is offsetting the difference by securing white knights.
Genebiotech countered that the agenda items such as the amendments to the articles submitted to this annual meeting are "for management efficiency, not a defensive move to protect control," adding, "The second-largest shareholder has not previously requested the appointment of directors, and the shift of interim dividends to a board resolution was made to improve procedures."
The company added, "At the meeting on the 26th, we plan to inform shareholders of everything, including plans to enhance shareholder value, and the company believes that enhancing shareholder value is, of course, necessary."