Put Option Conflict Deepens... Affinity "No Impact from Arbitration" vs Kyobo Life "Ignoring Judicial Authorities"

Kyobo Life Insurance and Affinity Consortium Battle

[Asia Economy Reporter Oh Hyung-gil] The dispute over the put option between Shin Chang-jae, chairman of Kyobo Life Insurance, and the financial investor (FI) Affinity Consortium is heating up.

As the international arbitration dragged on due to the COVID-19 pandemic, the FI, who was indicted by the prosecution, denied the impact of the indictment and waged a public opinion battle, prompting Kyobo Life Insurance to respond by calling it "an attitude that disregards the authority of the judicial authorities."

Kyobo Life Insurance announced on the 19th through a press release that accountants belonging to Anjin Accounting Corporation were indicted on charges of inflating the value of Kyobo Life Insurance's stock (violation of the Certified Public Accountant Act).

Kyobo Life Insurance explained that the background for not conducting an IPO lies in low interest rates and strengthened regulations, and that the main cause of the damage caused by the put option dispute was the stock value evaluation deliberately inflated by Anjin Accounting Corporation.

Earlier, in April last year, Kyobo Life Insurance judged that certified public accountants belonging to Anjin Accounting Corporation intentionally calculated the per-share evaluation price to favor the FI and others, and reported them to the prosecution on charges of violating the Certified Public Accountant Act.

Subsequently, when the certified public accountant belonging to Anjin Accounting Corporation was indicted by the prosecution, the FI side distributed a rebuttal statement on the 21st.

The FI side released a statement titled "Six Misunderstandings and Truths about Kyobo Life Insurance's Put Option," arguing that the essence of the case was that Kyobo Life Insurance violated the promise to purchase FI's shares if it failed to conduct an IPO.

The FI side claims that the exercise of the put option is a follow-up measure based on the promise made by Chairman Shin Chang-jae and is based on the contract. They also expressed their position on the per-share evaluation amount of 409,000 won, which became the fuse for the put option dispute between Chairman Shin and the FI.

Kyobo Life Insurance claimed that the per-share amount was overvalued, but the FI side argues that the evaluation amount is not inappropriate and that the prosecution does not raise any issues. They also state that there is no problem because the price was calculated using the usual formula for evaluating corporate value.

In response, Kyobo Life Insurance released a statement titled "The Essence of the Prosecution of FI and Anjin Accounting Corporation" on the same day the FI's rebuttal was issued, countering their claims.

They explained that the core of the prosecution's indictment of the accountant belonging to Anjin Accounting Corporation was the guilty judgment on the fraudulent collusion between the FI and Anjin Accounting Corporation in the put option price calculation process. They argued that the delay in the IPO was due to low interest rates and strengthened capital regulations, facts well known to the FI side, which is a member of the board of directors.

In particular, on the 26th, as the prosecution's indictment was made public, a dispute over the "interpretation" of the indictment continued.

The prosecution viewed the case as a violation of the Certified Public Accountant Act under the "false reporting" clause. It is false that the accountant, while evaluating the corporate value, referred to the client's opinion in deciding the evaluation method and comparable companies but wrote as if the decision was made independently.

The FI side argued that coordination of opinions between the client and the accountant during the appropriate value calculation process is inevitable, and that there are few precedents of indictments on such matters.

Kyobo Life Insurance criticized the FI for arbitrarily interpreting and distorting the prosecution's indictment and misleading the essence regarding illegal matters. According to accounting standards, if opinions are coordinated between the client and the accountant, sharing or distributing the resulting output to third parties is prohibited.

Kyobo Life Insurance said, "If collusive acts such as deliberately preparing false reports to gain benefits are tolerated as a practice, the foundation of the capital market will be shaken," adding, "We hope this will be an opportunity to eradicate fraudulent collusion between clients and accounting firms that has been overlooked as a practice or customary."