Hwang Seong-taek, President of Truston Asset Management
[Asia Economy Reporter Park Soyeon] Truston, which sent a shareholder letter to BYC requesting access to the accounting books, has announced additional legal actions. Truston Asset Management, the second-largest shareholder of BYC, believes that most of the internal transactions with special-related companies of BYC’s major shareholder family from January 2016 to May this year did not follow the procedures stipulated by the Commercial Act.
Hwang Seong-taek, CEO of Truston Asset Management, recently told Asia Economy, "We plan to proceed with litigation if any illegal matters are found upon reviewing the accounting books." He added, "If any embezzlement or breach of trust by the management is discovered, we are also considering legal measures."
If additional issues are revealed during the accounting book review, it is interpreted that Truston intends to hold the management legally accountable for embezzlement and breach of trust, in addition to shareholder derivative lawsuits and reporting to the Fair Trade Commission. Since the company’s establishment in 1998, CEO Hwang has maintained the philosophy that active shareholder engagement is necessary for institutional investors to fulfill their fiduciary duties and contribute to corporate development. He has also worked to promote domestic activist funds, such as filing injunctions opposing Mando’s Halla Construction’s illicit support in 2013.
Earlier, Truston obtained court approval to review the minutes of BYC’s board meetings to verify whether contracts related to clothing product manufacturing and sales with special-related companies of the major shareholder family, which were judged to have adversely affected BYC’s performance, and contracts for headquarters building management services followed proper procedures. Truston claims that most internal transactions proceeded without prior approval from the board of directors.
According to the Commercial Act, when a company director conducts transactions with a company in which they own more than 50% of shares, prior approval from the board of directors is required. This is to review the appropriateness of the transaction. Failure to comply may result in liability for damages or criminal charges for breach of trust.
Following the review of BYC’s board meeting minutes, Truston plans to examine the accounting books to specifically identify any disadvantages suffered by the company. The right to request access to accounting books is a minority shareholder right exercisable by shareholders holding 3% or more of shares. Truston holds 8.96% of BYC shares, making it the second-largest shareholder.
Meanwhile, Truston Asset Management changed its investment purpose in BYC to management participation at the end of last December. Since then, it has been engaging in shareholder activities such as sending shareholder letters to enhance shareholder value by reducing internal transactions, expanding liquidity, and establishing a reasonable dividend policy. Truston’s targeting of BYC for active shareholder rights exercise is based on a systematic internal evaluation concluding that corporate value can be reassessed through ESG improvements. This is supported by strong fundamentals, including annual operating profits in the 20 billion KRW range and real estate assets estimated to have a market value exceeding 1 trillion KRW.
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